Like a lot of other dramatic bluster coming south out of Canada this winter, the Keystone XL pipeline stands poised for its big approval fight this month.
Advocates claim it will put Montana in the mix for North American energy independence.
Opponents say it will allow the most polluting oil on the planet to contribute to global warming while putting water supplies at risk.
The U.S. Senate fell one vote short of approving Keystone during its lame-duck session last month, even though President Barack Obama threatened to veto the measure.
But what if it doesn’t matter?
While the Keystone project has held the headlines for the past five years, two other trans-boundary pipelines have neared completion with more capacity than it promises. And Canadian firms have designed two more that could cut Americans out of the debate entirely.
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“Products find their ways to markets, if not south, then east or west,” University of Montana Bureau of Business and Economic Research director Patrick Barkey said last week. “Even if Keystone had been developed, they (oil companies) would be sniffing around for more capacity in coming decades. That’s why the debate over Keystone becomes a little more symbolic than practical.”
Both Democratic Sen. Jon Tester and Republican Sen. Steve Daines have declared their intention to get Keystone XL approval early in the 2015 Senate calendar. Rep. Ryan Zinke pledged to introduce similar legislation when he’s sworn into the House of Representatives on Jan. 6. Incoming Senate Majority Leader Mitch McConnell, R-Kentucky, promised it would be the first bill the chamber considers.
The project became a federal fight because the U.S. State Department has authority to approve boundary-crossing infrastructure. The line crosses four states besides Montana.
Canadian analysts consider the tar-sand deposits in northern Alberta to be the third-largest oil deposit in the world, after Saudi Arabia and Venezuela. But the oil must be essentially strip-mined from sand deposits and treated with steam or centrifuges to remove bitumen, which resembles tar at room temperature.
Alberta lacks the refinery capacity to turn that much bitumen into fuels like gasoline or diesel, so it’s been developing ways to ship it to more developed areas in the United States.
TransCanada’s Keystone XL pipeline would move petroleum from the tar-sand deposits of northern Alberta south through northeast Montana and the Bakken Formation oil fields to Steele City, Nebraska. Existing pipelines would move the crude oil from there to refineries on the Texas Gulf Coast.
Keystone XL would have a capacity of around 830,000 barrels a day along its 1,179-mile span, including 100,000 barrels coming from Bakken suppliers. That would boost Montana’s access to refinery buyers.
“That’s why we think Keystone is still a viable project,” said Dave Galt of the Montana Petroleum Association. “I still support it.”
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Much of the state’s oil now rides rail cars west to the Port of Vancouver in Washington. And that rail option has seen growing interest, according to UM's Barkey.
“Four or five years ago, a lot of people in the transportation business thought rail was the last resort – what you did when you couldn’t do anything else,” Barkey said. “But in the last few years, some peculiar things have happened. Some big differences have opened up in the prices refineries will pay for crude. A Southern California refinery might be willing to pay enough of a premium that it’s actually worth it to have it railed out there.
"Pipelines are more efficient and safer, but they only go to one place. Rail gives you the freedom to exploit price differentials that open up across markets. And the delay of Keystone has made rail a strategic option, not just an option of last resort.”
About 20 trainloads of petroleum a week come through Montana to the Vancouver depot. Proposals to expand Pacific Coast oil facilities could boost that to 137 trains a week by 2020, according to the Washington Department of Ecology.
But TransCanada is also working on a $1.9 billion line between Pontiac, Illinois, and Cushing, Oklahoma, that would accomplish the same goal of getting Alberta petroleum to Texas refineries.
That pipeline crosses mainly private land entirely within U.S. borders, so the federal government has little involvement. It could move up to 880,000 barrels a day, more than Keystone XL’s proposed capacity. It won a legal fight in August and has nearly finished construction.
Meanwhile, TransCanada competitor Enbridge claims to operate the world’s longest crude oil and liquids delivery system.
It has 15,795 miles of pipeline in North America, which carry 2.2 million barrels of oil and other liquids daily. That includes 53 percent of Canadian petroleum bound for the U.S. market – about 15 percent of total U.S. crude oil imports.
Enbridge claims to be the largest pipeline operator in both the Canadian tar sands and the Bakken Formation on the U.S.-Canada border.
And it has a project to switch oil from Enbridge’s existing Alberta Clipper pipeline to Line 3 in Grenta, Manitoba, before it leaves Canada, and then switch it back 20 miles south inside North Dakota. The oil would then go to Superior, Wisconsin. Also known as Line 67, it won U.S. federal approval in 2009. It roughly equals the Keystone XL capacity and is already running.
Enbridge also hopes to complete its $6.5 million Northern Gateway pipeline that runs “1,177 rational and respectful kilometers” from Bruderheim, northeast of Edmonton, roughly due west to the port of Kitimat on a deep fjord east of Prince Rupert. Kitimat’s marine terminal would handle about 220 ships a year.
The Northern Gateway pipeline design uses old roads, clear-cuts and other disturbed areas for 70 percent of the route, according to Enbridge. However, it has hit strong opposition from Canadian Indian tribes and environmental groups.
And TransCanada has still another pipeline proposal running east out of Alberta to refineries in Canada’s eastern provinces. It’s reportedly going to cost about $12 billion.
Timing is another factor.
Several energy industry analysts have wondered if the drop in oil prices below $60 a barrel would hinder related building projects. Platts.com writer Janet McGurty reported on Dec. 30 that while a lot of Bakken crude oil should become available in 2015, exploration is expected to slow down in the coming year.
That “could stifle the growth of new infrastructure projects in both pipeline and rail,” the article stated.
The current price drop likely will prune out some of the get-rich-quick oil explorers but not affect the bigger companies. And it’s the international players who build pipelines.
“When prices start changing, that would have some impact on the project as well,” said Jim Halvorson, of the Montana Board of Oil and Gas. “But pipelines make money regardless what the final price of the product is."
