Revising route could kill Keystone XL: TransCanada – Nathan Vanderklippe (Globe and Mail – November 2, 2011)

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CALGARY— As Nebraska considers the first attempt to divert the Keystone XL project, TransCanada cautioning that any change to the pipeline’s route stands to delay its construction by as much as three years.

It’s the sternest warning yet from TransCanada, which has spent 38 months battling through a lengthy environmental review process on Keystone XL. The $7-billion pipeline would carry crude from the oil sands and northern United States to refineries on the Gulf Coast, and is a major plank in industry plans for expanding Canadian oil output. TransCanada has spent $1.9-billion to secure land and equipment for the project. It has readied itself to begin construction in the new year, in the belief that the State Department will grant its blessing in December.

But Nebraska, where the pipe would cross a delicate ecosystem called the Sand Hills, is contemplating new rules that could dramatically unsettle TransCanada’s plans. On Tuesday, state legislators met briefly to table “Bill 1,” which would give the state authority to change the pipeline’s route.

TransCanada and the speaker of the Nebraska Legislature, a lawyer, have questioned whether such a law can be drafted without falling afoul of U.S. Constitution restrictions on impeding interstate commerce. TransCanada has also questioned whether sufficient political support exists to even pass something like Bill 1.

Nebraska Governor Dave Heineman, however, has called on legislators to look for a way past the tricky legal issues. Additional oil pipeline-siting bills are expected to be introduced this week and the discussion is expected to be rapid. The state speaker’s office said Bill 1 will be sent to a committee Nov. 7; it could return for full legislative debate as soon as Nov. 9.

For TransCanada, which reported an 11-per-cent rise in year-over-year quarterly earnings Tuesday, that raises the critical question of whether such a law would kill Keystone XL.

On Tuesday, chief executive Russ Girling said the consequences would be severe, and suggested a legal battle would ensue. If a route change away from the Sand Hills is ultimately mandated, the company will be forced to file an amended environmental impact review, which stands to take as long to press through the U.S. regulatory system as the original application.

“If the route is arbitrarily moved to another location, we would suspect that we would have to restart (the review),” Mr. Girling said on a conference call Tuesday.

Such a delay could prove difficult to recover from. Refineries that have signed long-term contracts on Keystone XL are expecting the product it carries to fill the void left by contracts for Venezuelan and Mexican crude that will expire in 2012 and 2013. If Keystone XL can’t be built quickly, those refiners may turn instead to supplies that can be brought in by tanker.

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