TransCanada Corp. subsidiaries TransCanada PipeLines Limited (TCPL) and TransCanada Keystone Pipeline GP Ltd. (Keystone) have filed an application with the National Energy Board (NEB) seeking approval to transfer a portion of TransCanada’s Canadian Mainline natural gas transmission facilities to the Keystone Oil Pipeline project for the purposes of transporting crude oil from Alberta to refining centers in the U.S. Midwest.
First announced in February of 2005 (see Daily GPI, Feb. 10, 2005), the US$2.1 billion Keystone Oil Pipeline project includes the construction of a 2,960-kilometer (1,830-mile) pipeline with a nominal capacity to transport approximately 435,000 b/d of crude oil from Hardisty, AB, to U.S. Midwest markets at Wood River and Patoka, IL. TransCanada said the pipeline can be expanded to a nominal capacity of 590,000 b/d with additional pump stations.
The Canadian portion of the project involves the construction of 370 kilometers (230 miles) of new pipeline and the conversion of 860 kilometers (530 miles) of existing TransCanada Canadian Mainline facilities from natural gas to crude oil transmission service. The conversion will take place on one of seven gas pipelines in TransCanada’s Canadian Mainline right-of-way across the western provinces to export points in central Canada. The U.S. portion of the project includes 1,730 kilometers (1,070 miles) of new pipeline construction. The project is driven by a combination of increasing oilsands production, persistent spare capacity on TransCanada’s gas lines, and expectations that both trends will continue.
“The Keystone Oil Pipeline project is an innovative and cost-competitive proposal to transport a significant amount of new Canadian crude oil to key U.S. markets in late 2009,” said TransCanada CEO Hal Kvisle. “Crude oil shippers have recognized the value of our proposal by committing to long-term transportation contracts. The conversion of a small segment of our extensive natural gas pipeline system to crude oil transmission service maximizes the use of an existing asset while maintaining sufficient capacity on our Mainline system to serve forecasted demand for gas transportation.”
In January 2006, TransCanada announced it had secured firm, long-term commitments from shippers for transportation of 340,000 b/d of crude with an average duration of 18 years (see Daily GPI, Aug. 10, 2005; Feb. 3). Shippers have also expressed strong interest in a proposed extension of the Keystone Oil Pipeline south to the refining hub of Cushing, OK. The company said a binding open season will be held on the Cushing Extension later in 2006.
As part of the transfer application from gas to oil, TCPL is also seeking approval to reduce the Canadian Mainline rate base by the net book value (NBV) of the transferred facilities and Keystone is seeking approval to add the NBV of the facilities to the Keystone Oil Pipeline rate base. The transfer application is the first of two major regulatory applications required to obtain approvals necessary to construct the Canadian portion of the Keystone Oil Pipeline. Keystone will apply to the NEB for a certificate of public convenience and necessity to construct the required new facilities later this year once environmental assessment work is completed during the summer.
Earlier this year, TransCanada also filed with the U.S. Department of State an application for a Presidential Permit authorizing the construction, operation and maintenance of the cross-border facilities associated with the proposed Keystone Oil Pipeline. The pipeline will also require approvals from a variety of U.S. agencies at the state and local levels. TransCanada said it hopes construction can begin in late 2007, with commercial operations to commence by the fourth quarter of 2009.
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