Even though Nebraska is finally on-side with TransCanada Corp.’s Keystone XL crude pipeline, experts say oil producers who would use the proposed Alberta-to-Texas line should keep their options open.
The big oil companies shouldn’t just rely on the planned megaproject as the only way to get the large amounts of oilsands crude coming from northern Alberta to markets in the next few years, the experts said Tuesday.
While the refining centres in the U.S. Gulf Coast are key, getting Canadian crude to the energy-hungry markets in China and other Asian countries is important as well, said energy consultant Lance Mortlock.
As well, finding markets by using rival pipelines, truck, rail or other means also provides more options.
“Dependence on one customer is a risky strategy in any industry that you look at, because if that customer changes its buying habits, you are exposed tremendously to those changes,” said Mortlock, with Ernst & Young’s oil and gas practice in Calgary.
Responding to news last week that the State Department would delay its decision on Keystone XL until early 2013, several Canadian politicians — from the federal natural resources and finance ministers to the premier of Alberta — stressed the need for a West Coast outlet so Canadian oil can be shipped by tanker to the U.S., China or other parts of Asia.
“We need to be careful that we move quickly, but at the same time do the due diligence around the environmental impacts,” Mortlock said. “But if we move too slowly then we may miss the boat. We need to be careful of that.”
Enbridge is planning to build a line between Alberta and the northern B.C. port of Kitimat, though that proposal has run into vehement opposition. Thousands of people are set to speak at National Energy Board hearings beginning in January, signalling the regulatory process could drag on.
American environmentalists admit TransCanada made a major concession by rerouting its proposed Keystone XL pipeline, but insist they’ll keep trying to prevent the controversial oilsands project from ever being built.
After months of standing by the chosen route, Calgary-based TransCanada did an about-face on Monday, offering to skirt the Sandhills area of Nebraska — home of a massive aquifer that provides drinking water to millions on the Great Plains.
The move comes four days after the U.S. State Department said it was deferring a decision on the pipeline pending another look at alternate routes. but that has hardly shut down a coalition of American environmental groups that have come together in passionate opposition to the project.
“We’re very glad the Sandhills are safe; now we just have the atmosphere of the entire planet to worry about,” said Bill McKibben, a leading U.S. climate change specialist and one of the masterminds behind the environmental movement’s opposition to Keystone.
Not only is oilsands production expected to rise in the years ahead as operators such as Imperial Oil, Canadian Natural Resources and Cenovus undertake major expansions to their projects.
But output is also growing in the Bakken region. The Bakken is an oil-rich zone that underlies parts of Saskatchewan, Montana and North Dakota.
An outlet for oilsands and Bakken crude to the Gulf would supplant oil the United States imports from overseas, thereby improving the bottom line of North American producers.
And two U.S. senators who have been among the project’s most vocal critics — Republican Mike Johanns and Democrat Ben Nelson — quickly changed their tune Monday after TransCanada agreed to find a new route.
“It certainly appears to me common sense has prevailed,” Johanns said.
“I’m optimistic this could be a pathway to responsible completion of the pipeline so we can begin transporting more energy from a friendly ally and decrease our dependence on countries which may not share our values.”
Susan Casey-Lefkowitz, the international director for the Natural Resources Defense Council, said the aquifer was only one player in a vast cast of potential pipeline victims.
“It’s a major concession from TransCanada, and a pretty big victory for the people of Nebraska, but the Sandhills is just one piece of a much larger story in this pipeline,” she said.
Casey-Lefkowitz said the pipeline was singled out by design by environmentalists in the aftermath of failed federal climate change legislation last year. They looked at various controversial energy production methods, including so-called fracking to extract natural gas, strip mining and mountaintop removal to extract coal.
“We actually took on the fight against the tarsands as part of a bigger campaign against these new, dirtier sources of fuel,” she said. “Energy companies weren’t going after these sources of fuel even 10 years ago because it was too expensive. But now it’s like a gold rush, and the people who are paying the price are the homeowners, farmers, ranchers, residents. And so we have to fight these very destructive types of energy production.”