In the latest chapter of the Keystone XL (KXL) pipeline saga, a coalition of three major U.S. business entities and 168 business leaders from across the country penned a letter to President Barack Obama last week urging him to approve construction of the highly-debated pipeline.
Those involved with this request include the National Association of Manufacturers (NAM), the U.S. Chamber of Commerce, the Business Roundtable, and an eclectic group of executives from companies such as AT&T, Boeing, Honeywell, Motorola, MeadWestvaco, Tishman Speyer, Siemens, Waste Management, Volvo, and Tyco to name a few. The message of their letter is clear: Approve the Keystone XL pipeline as a “… signal to the world that the necessary ingredients for a strengthened U.S. recovery are in place and bolster the foundations of U.S. competitiveness and energy security.”
In an article from Oil and Gas Journal, NAM President Jay Timmons reiterated the message in the letter:
It is about the impact that approval or denial of this project will have on the economy in general, including on laborers, manufacturers, small and large businesses and communities throughout the supply chain. As these executives made clear, it is about sending investors a signal that America is open for business.
Of the four phases comprising the Keystone Pipeline, only one – Phase III, the 1,179 mile line from Hardisty, Alberta to Steele City, Nebraska – otherwise known as Keystone XL, remains in question. As the map indicates below, Phases I and II have been fully completed, while Phase IV is currently 95 percent complete according to Reuters Canada. TransCanada – the owner of the pipeline – intends to start using it by the end of 2013. Phase III would serve as an “express lane” of sorts for the entire Keystone Pipeline, crossing through Montana and South Dakota and establishing a direct path between Alberta and Nebraska.
The debate continues regarding whether Phase III is needed from an economic standpoint, as well as what the best option is for the environment. Economically, one option that is softening the demand for KXL is the recent surge in railway transit for shipping oil out of Western Canada. “If Keystone does not get approved, the rail capacity is going to be there,” stated Phil Skolnick, Managing Director and Senior Oil and Gas Analyst at Canadian financial firm Canaccord in the Financial Post last month.
Canaccord estimates around 130,000 barrels of Canadian oil currently move by rail, which is a fraction of the volume Keystone XL could transport. Skolnick believes the gap can be closed if needed, “We see rail being at least able to do 465,000 [barrels]…actually, it will have the ability to do even more than that.” He added that Keystone XL is designed to transport 465,000 barrels per day (bpd) of raw bitumen. On a related note, Reuters reports the first crude-by-rail train terminal is scheduled to open at Bruderheim, Alberta in November, which will be able to transport 100,000 bpd by this time next year.
Carrying oil sands from Alberta by rail rather than by pipeline is a real conflict for environmental advocates. On one hand, developing rail transport could possibly squash Keystone XL, yet greenhouse gas emissions are bound to be much more prevalent for the former. To put the emissions in perspective, the Association of Oil Pipe Lines (AOPL) explains that it would take a 225-car train to arrive and unload every day to replace a 150,000 bpd pipeline. Even after including the environmental ramifications of installing and maintaining a pipeline, the overall emissions numbers still appear in favor of a project like KXL.
In terms of spills, studies show the differences between the two types of transport are negligible.Bloomberg reports that rail transport encounters 2.7 times more accidents than pipelines, but the spills are typically much smaller. Both industries are highly regulated, and deliver well over 99 percent of products without incident – but as any environmentalist is quick to mention, any spill is one too many.
With the squabbling within Congress on raising the nation’s debt ceiling and the government shutdown, Keystone XL would be one of the few things President Obama could make waves with unilaterally for the time being. But for now, all interested parties – including an increasingly-impatient Canadian Prime Minister who “won’t take ‘no’ for an answer” – will continue to await the President’s decision.