House Keystone XL hearing reveals growing depth of disagreement

A hearing on US Rep. Lee Terry’s (R-Neb.) bill to congressionally authorize construction of the final portion of the proposed Keystone XL crude oil pipeline revealed how wide the gap has grown between the viewpoints of the project’s proponents and opponents.

Proponents reiterated that US failure to authorize construction would force Alberta oil sands producers to pursue other export routes. Opponents maintained that oil sands development economics have grown so expensive that the permit’s denial would significantly slow down—and possibly even halt—further oil sands development there.

A senior US House Energy and Commerce Committee member also warned that congressional approval of HR 3 could result in legal challenges that would delay the project’s construction longer than letting the US Department of State’s review of Keystone XL’s revised application proceed.

“This bill would circumvent the established process and open the projects to a plethora of lawsuits,” warned US Rep. John D. Dingell (D-Mich.). “Instead of legislative approval where it’s not needed, this committee should be focusing on steps to make certain this project moves forward without creating more opportunities for litigation.”

Terry said his bill is definitely necessary. “Not until Congress became involved 2 years ago did the administration even begin to move on this,” he said in his opening remarks at the Apr. 10 hearing by the committee’s Energy and Power Subcommittee. “Here we are, April 2013, still mired in the process. My bill would put an end to that.”

TransCanada applauds bill

In his testimony, Alexander Pourbaix, oil and pipelines president at TransCanada Corp., Keystone XL’s developer, said the company supports Terry’s bill. “We believe the legislation contains a number of important findings that highlight and confirm the importance of the project to the energy security and economic well-being of the United States,” he told the subcommittee.

Two other witnesses backed the project. “Canadians are perplexed about this country’s hesitation about approving this project,” said Keith Stelter, president of Delta Industrial Valves Inc. “As a member of the private sector, when products are in demand and the technology is there, we’ll run forward with it…. Canadian oil sands production won’t go away if this project isn’t approved.”

David Mallino Jr., legislative director at the Laborers International Union of North America, said, “For laborers in America, this isn’t just a pipeline. It’s a lifeline. Thousands of pipeline laborers are out of work. This pipeline would be built with the best trained construction workers in the world.”

But two more witnesses said a US decision to allow the final 800 miles of the Keystone XL project to be built would not be worth the potential environmental costs. Denying permits, on the other hand, would limit, and possibly even stop, Alberta oil sands producers’ plans to triple their output by 2030, they indicated.

“Alternative pipeline and rail tar sands transportation proposals will not allow for the same level of tar sands production expansion,” said Anthony Swift, an energy policy analyst at the Natural Resources Defense Council.

Unfavorable economics

“Pipelines to the west and east coasts are stalled by entrenched public and First Nations opposition,” Swift explained. “Tar sands bitumen is significantly more expensive to move by rail than Bakken shale crude. Producers would have to move it longer distances, and not be able to put as much in a car.”

Mark Jaccard, a professor in the School of Resource and Environmental Management at Simon Fraser University in Vancouver, BC, said, “Notably, the lowest cost and highest volume method of transporting oil sands product is via pipelines, yet the other two major proposed pipelines from the oil sands—both of them crossing British Columbia—are unlikely to be approved. Denial of Keystone XL and both of these two pipelines will definitely slow development of the oil sands.”

US Rep. Henry A. Waxman (D-Calif.), the full committee’s ranking minority member, said it costs $35/bbl to move oil sands by rail, compared with $8-15/bbl by pipeline.

“I would disagree with that characterization,” responded Pourbaix. “The reason we’ve seen so much rail transportation out of the Bakken is that there was no rail capacity.” He added that he speaks almost daily with senior executives in Alberta’s oil sands production community, “and they are moving to develop more rail capacity at about $15/bbl to move bitumen to the Gulf Coast—but at about twice the risk of a pipeline.”

The TransCanada official said the company also has successfully won legal battles against the project already. “I don’t have the exact number, but opponents have come to the conclusion that delay means denial,” he told the subcommittee. “To this date, we’ve won every one that’s been filed against. I anticipate there will be many more.

“Our opponents believe their focus on delays will lead us and the project’s proponents to give up,” Pourbaix said. “It’s nothing new. They have brought these suits in all major pipeline projects. We’ve succeeded in all these cases. If we get the presidential permit, we expect to be sued.”

Contact Nick Snow at nicks@pennwell.com.

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