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TransCanada Splits Keystone XL Pipeline Project

TransCanada Corp. on Monday notified the U.S. State Department that it intends to file in the "near future" a Presidential Permit application for a cross-border permit for part of the original $7 billion, 1,700-mile Keystone XL oil pipeline project running from the U.S.-Canada border in Montana to Steele City, Nebraska. The Calgary-based pipeline company said it eventually would file a supplement to the new application with an alternative route in Nebraska.

TransCanada also told the State Department that the Cushing, OK, to U.S. Gulf of Mexico (GOM) coast part of Keystone XL would be developed as an independent project, noting that it has "its own independent value to the marketplace" and would be constructed as a stand-alone Gulf Coast Project, apart from the Presidential Permit process. The company would focus on building the Gulf Coast Project first.

At an estimated cost of $2.3 billion and still needing regulatory approvals, the Gulf Coast Project could be operable by mid- to late next year, TransCanada said.

A Pew Research Poll last week showed that a majority of Americans (66%) think the federal government should approve Keystone, with only 23% saying they opposed the project. The same poll found that the pipeline project, however, was not a major issue for the general public, with 37% of those polled saying they had never heard of the project and another 40% saying they had only heard a little bit about it.

In acknowledging TransCanada's refiling plans, specifically the Gulf Coast Project portion, White House Press Secretary Jay Carney on Monday said President Obama "welcomes" the news and looks forward to "working with TransCanada to ensure that it is built in a safe, responsible and timely manner, and we commit to take every step possible to expedite the necessary Federal permits."

With regards to the northern portion of the project, Carney took a shot at the GOP, noting that "House Republicans forced a rejection of the company's earlier application in January, by not allowing sufficient time for important review or even the identification of a complete pipeline route. But as we made clear, the President's decision in January in no way prejudged future applications. We will ensure any project receives the important assessment it deserves, and will base a decision to provide a permit on the completion of that review."

The Obama administration in mid-January denied the controversial oil pipeline proposal on the recommendation of the U.S. State Department, saying that it was not in the national interest to build the 1,700-mile link from Alberta to the GOM, while noting that the rejection was not on the project's merits, but rather on the lack of time due to a 60-day limit established by Congress (see Shale Daily, Jan. 19).

Officials for the project sponsor indicated they hoped to get an expedited processing of the new filing for the border crossing permit due to the fact that more than three years of review were put into the first Keystone XL project application, and much of the work is applicable to the scaled-down project. TransCanada reiterated that it will work collaboratively with the state of Nebraska in determining an alternative route for the pipeline to avoid the Sandhills region of the state.

"Our application will include the already reviewed route in Montana and South Dakota," said TransCanada CEO Russ Girling, who called the previous environmental work on the Keystone project "the most comprehensive process ever" for a cross-border pipeline. Because of the past work, Girling said he "would expect our cross-border permit should be processed expeditiously and a decision made once a new route in Nebraska is determined."

In splitting up the former project, TransCanada indicated it is responding to the bottlenecks that are building up in the heartland of the U.S. Lower 48 where domestic oil production from the shale plays is growing significantly in Oklahoma, Texas, North Dakota and Montana. The Gulf Coast Project is aimed at addressing this situation. Producers need more pipeline capacity, the Canadian infrastructure company said.

"The Gulf Coast Project will transport growing supplies of U.S. crude oil to meet refinery demand in Texas," Girling said. "Gulf Coast refineries can then access lower-cost domestic production and avoid paying a premium to foreign oil producers. This would reduce the United States dependence on foreign crude."

TransCanada contends that the Obama administrative has left the door open for a Presidential Permit and also for support of the Gulf Coast Project. Both projects are in the national interest by allowing for increased backing out of foreign imports and creating jobs and economic stimulus in the United States. The Gulf Coast Project promises to create up to 4,000 jobs, TransCanada said.

"The U.S. manufacturing sector would continue to experience the economic benefits of the project[s], as TransCanada has contracts with more than 50 suppliers across the United States," a TransCanada spokesperson said.

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