As TransCanada Corp. pursues various parts of the spurned Keystone XL oil pipeline project, shippers who hold long-term firm contracts equating to 850,000 b/d are continuing to stick with the C$7 billion, 1,700-mile pipeline project, TransCanada CEO Russ Girling told an institutional investment conference in British Columbia (BC) Thursday.
The Obama administration on Wednesday denied the controversial Keystone XL oil pipeline proposal on the recommendation of the U.S. State Department, saying at this time it is not in the U.S. national interest to build the 1,700-mile link from Alberta, Canada to the Gulf of Mexico (see Shale Daily, Jan. 19).
The shippers' continuing interest is evidence from the market "that this project is very much needed," said Girling, speaking to the CIBC World Markets' 2012 Whistler (BC) Institutional Investors Conference a day after the U.S. State Department denied Keystone XL a presidential permit declaring the project in the national interest of the United States. The action does not preclude a refiling, and TransCanada immediately began that process.
"The overwhelming energy security, economic and job-creation benefits of this project also clearly indicate that this project is in the national interest of the United States. Those [criteria] were not the reasons for denial of the permit [Wednesday], and therefore, I believe, it will ultimately be approved," Girling said.
The whole list of shippers for the project has not yet been made public, but sources at TransCanada have said that among the group are units of Conoco, Valero and Marathon.
During the question session following his talk, Girling was asked about the project's contracts with shippers and whether they were less secure as a result of the U.S. setback. He reiterated that producers and refiners who have signed deals are all still contractually committed to the project.
"All these shippers look at all of their alternatives and determine which ones will achieve their needs," said Girling. All the major permitting and pre-construction work on Keystone XL is "pretty much done," with most of the environmental work and all the right-of-way work, engineering and land procurement essentially complete. "Of all the alternatives, I would say that our project is still the farthest along in the process.
"When the shippers would no longer be able to support the project, TransCanada would no longer pursue it. At the current time, all the shippers are indicating the project is still very important to them. The project hasn't been denied on its merits; it was clearly a process issue [too short a timeline imposed by Congress], so our intent is to make adjustments, get back in the process and get this thing done."
Girling indicated that the pipeline company is close to agreeing with Nebraska officials on an alternate route that would avoid the state's environmentally sensitive Sandhills area. Once that agreement is in place a public process would begin that could take another six months.
"The only outstanding issue [in the overall project environmental review] is with Nebraska," he said, noting that he doesn't think a whole new environmental review needs to be done. "Over the last six to eight weeks we have met with the Nebraska Department of Environmental Quality and discussed various corridors that would go around the sensitive areas, and we are coming very close to a decision as to which corridor would be the best. We're taking our lead from them as to what is 'best.'"
Girling reiterated that even with the added environmental work on the alternate route through Nebraska, he thinks a first quarter 2013 target for a new State Department determination is achievable. He also held out the possibility that TransCanada will build the project in segments (Bakken link to Cushing, OK; Cushing to Texas; and the Houston lateral), "if that is what the company and the shippers ultimately believe is the right thing to do."