TransCanada challenges EPA’s comments on Keystone XL SEIS

Feb. 11, 2015
TransCanada Corp. responded to the Feb. 2 comment letter from the US Environmental Protection Agency on the US Department of State’s final supplemental environmental impact statement (SEIS) for the Keystone XL crude oil pipeline.

TransCanada Corp. responded to the Feb. 2 comment letter from the US Environmental Protection Agency on the US Department of State’s final supplemental environmental impact statement (SEIS) for the Keystone XL crude oil pipeline (OGJ Online, Feb. 3, 2015).

“TransCanada disagrees with any suggestion that the [DOS] has not fully and completely assessed the environmental impacts of Keystone XL,” said Russ Girling, TransCanada’s president and chief executive officer.

“We also reject the EPA’s inference that at lower oil prices, Keystone XL will increase the rate of oil sands production and greenhouse gas emissions,” he said. “This conclusion is not supported by the conclusions drawn in the final SEIS or by actual market prices and production rates since TransCanada first applied for Keystone XL in 2008.

“Nevertheless, we will assist [DOS] in reviewing the issues raised by the EPA related to current low oil prices and their impact on greenhouse gas emissions associated with the pipeline should [DOS] determine that further review is required,” said Girling.

The EPA noted in its letter that “until ongoing efforts to reduce greenhouse gas emissions associated with production of the oil sands are more successful and wide spread, the [final SEIS] makes clear that, compared to reference crudes, development of the oil sands crude represents a significant increase in greenhouse gas emissions.”

TransCanada says a more meaningful comparison should be to the heavy crude oils from Mexico, Venezuela, and Saudi Arabia that Keystone would actually displace rather than a comparison to a basket of “reference crudes” that includes predominantly light, low-GHG crudes. The oil that would flow through the pipeline to Gulf Coast refineries will be both from the light oil plays in the Bakken and also heavy oil from the Canadian oil sands.

Economic impact

The EPA also argued that the final SEIS concluded construction of Keystone XL could change the economics of oil sands development and result in increased production and GHGs if oil prices remain low.

TransCanada says the statement does not accurately reflect DOS’s conclusion that “the dominant drivers of oil sands development are more global than any single infrastructure project. Oil sands production and investment could slow or accelerate depending on oil price trends, regulations, and technological developments, but the potential effects of those factors on the industry's rate of expansion should not be conflated with the more limited effects of individual pipelines,” DOS said.

TransCanada notes that oil production in both Canada and the US is forecast to continue to increase and much of the rising production is being transported by rail. Rail loading capacity in western Canada has increased from 200,000 b/d in 2013 to a projected 1 million b/d by yearend. In the US, Bakken rail movement of crude oil increased from 200,000 b/d in 2008 to 800,000 b/d in 2014, the company says.

The final SEIS concluded that the oil sands would be developed regardless of whether the pipeline was built. EPA wrote in its letter, “given the recent variability in oil prices, it is important to revisit these conclusions.”

TransCanada emphasizes that short- and medium-term fluctuations in oil prices do not significantly impact whether the oil sands will be developed, pointing out that when the company filed its initial presidential permit application for the project in 2008, oil prices were in the $40/bbl range. Since then, prices have ranged between $39-110/bbl.

“Even with price volatility, oil has been making its way to market,” Girling concluded. “Oil sands and US Bakken production are both up by 1 million b/d since 2008. So it is clear that building or not building Keystone XL will not cause production to go up or down nor does the pipeline significantly exacerbate the problem of GHG emissions.”