US delay of Keystone pipeline could kill the project - sources

11 November 2011 20:45  [Source: ICIS news]

WASHINGTON (ICIS)--The US government’s decision to delay approval of the Keystone XL oil pipeline for another year could well be the death knell for the huge project, industry and environmental sources said on Friday.

Charles Drevna, president of the National Petrochemical & Refiners Association (NPRA), said he could not say whether the project leader, Canadian energy firm TransCanada, might now abandon the multi-billion dollar plan.

“One thing I can guarantee, though, is that Canada will produce the oil in those oil sands regions, and they will sell it, if not to US refiners on the Gulf Coast then to elsewhere in the world,” he said.

In an announcement on Thursday, the US Department of State (DOS) said it had decided that additional studies were needed before it could give final approval to the 2,800-mile project.

The Keystone XL pipeline would have carried crude oil from Alberta Province to US refineries in Illinois, Colorado and Texas.

The department had earlier issued an environmental impact statement (EIS) approving the project, and a final go-ahead was expected before the end of this year.  But the department said on Thursday it did not expect that its new review of the project would be completed before the end of the first quarter of 2013.

In the meantime, however, TransCanada and other Canadian firms that are heavily invested in the Alberta oil sands may want to conclude long-term sales contracts for the oil with other potential customers, especially in Asia.

Canadian pipeline firm Enbridge has already proposed building a separate pipeline, called the Northern Gateway, to move the Alberta oil sands crude to an export terminal at Kitimat in British Columbia to serve the Asia market.

Drevna said if over the next year or so Canada moves ahead to secure sales contracts with Asian and other world customers for the Alberta oil sands crude, then there would be little incentive to go forward with the $13bn (€9.6bn) Keystone XL project.

“If that scenario plays out, then that’s the end of the Keystone pipeline,” he said.

“If that assumption is correct – that the Canadians get buyers for most if not all of the Alberta supply – then one can deduce that there would be no need for the Keystone pipeline,” he said.

Drevna said NPRA was greatly disappointed in the department’s decision because “a lot of our members were counting on it a whole heck of a lot," referring to the pipeline project and the crude oil feedstock that it would have delivered to US refiners.

He accused the administration of President Barack Obama of substituting political science for real science, contending that the White House purposely postponed a decision on the pipeline until after the November 2012 national elections to avoid alienating the president’s environmental constituents.

“It is one thing to have an administration like this one that is anti-oil and anti-natural gas and refining, but to turn their backs on the American consumers and workers is just unconscionable,” he said.

Construction, operation and maintenance of the Keystone XL pipeline was expected to create tens of thousands of jobs in the US.

The environmental group Friends of the Earth (FOE) said in statements that they also think the additional one-year delay in the Keystone project could bring an end to the undertaking altogether.

FOE spokesperson Kim Huynh hailed the department’s decision as a “game-changer”, saying that the delay “will potentially end this dirty and dangerous tar sands pipeline”.

FOE president Erich Pica said the State Department’s delay “is a major accomplishment for the climate movement”.

“Hopefully the announcement [of the delay] will halt TransCanada’s pursuit of this pipeline,” Pica added.

($1 = €0.74)

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy

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