Keystone may be revived after U.S. election: Canada

Reuters News
Posted: Feb 13, 2012 3:43 PM
Keystone may be revived after U.S. election: Canada

NEW YORK (Reuters) - The finance minister for Canada's top oil producing province of Alberta said he expects the Canada-to-U.S. Keystone XL pipeline project to be "revived" following U.S. presidential elections this year.

In an interview on Monday, Ron Liepert said he thinks government approval for the $7 billion pipeline to ship around 830,000 barrels per day of oil sands crude from Alberta to South Texas could come following elections on November 6.

But he said Keystone's delays, and the possibility it will not be built, are already prompting Canada to seek new options to export its crude, including shipping it to Asia via the West Coast, or to the U.S. Eastern Seaboard via a Canadian pipeline reversal.

"We believe Keystone will be revived and approved after the presidential election," Liepert told Reuters. "But it's not a sure thing."

U.S. President Barack Obama put a hold on the Keystone XL project in January, saying the administration needed more time to assess the environmental impact of the proposed line before granting a presidential permit needed to build it.

Prior to a deal between the company and Nebraska's government, Keystone XL was slated to bisect the Ogallala aquifer in Nebraska which provides the water to irrigate huge areas of farmland in the U.S. Midwest. Environmentalists opposed the line due to the potential for oil spills and because production of Canadian oil sands crude is more carbon intensive than lighter crudes.

Proponents say Keystone XL would quickly increase U.S. oil supplies from a top trade partner and neighbor, cutting U.S. reliance on crude from OPEC and other overseas suppliers.

Obama has not rejected Keystone XL altogether, and TransCanada, the company planning to build it, has said it plans to apply for another permit.

"Keystone is the project that makes the most sense but we can't put all our eggs in one basket," Liepert said.

Canada is also seeking to build a pipeline to the West Coast and ship crude cargoes to Asia by tanker, although the plan has met with resistance from environmentalists and Native Canadian groups who live along the pipeline's proposed path.

Canadian Prime Minister Stephen Harper visited China this month, in part to discuss crude exports to Asia.

"There's going to be a big push because Asia has been investing heavily and wants the crude to head there. And I think Canada's federal government is committed to making that happen," Liepert said.

Alberta's plans to extract oil sands crude includes a boost in output of up to 5 million bpd by 2020, from around 2 million bpd now.

Some proponents of Keystone XL believe the Obama administration caved to political pressure from environmental groups during an election year. A largely Republican group of U.S. lawmakers has been seeking to introduce legislation that would require Obama to make a final decision on Keystone before presidential elections.

Another proposal that could allow Canada to export more crude to the United States would be for Alberta to send more oil to Eastern Canada -- including through a pipeline called Line 9 and run by Enbridge -- and later load it into southbound oil tankers or pipelines bound for the U.S. Eastern Seaboard, Liepert said.

Line 9 currently runs westward from Montreal to Sarnia, Ontario, but Enbridge has applied to partially reverse the pipeline.

"This is another idea being discussed, and the pipeline reversal is almost a given," Liepert said.

The proposal has also met resistance from environmental groups worried it would lead to more Canadian exports of oil sands crude.

Several refineries on the U.S. Eastern Seaboard have been shuttered in the past year, making the region less thirsty for crude imports.

(Reporting By Joshua Schneyer. Editing by Scott Haggett and Jim Marshall)