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Canadian oil could reach Texas by summer if Keystone alternative found
By Tim Eaton
AMERICAN-STATESMAN STAFF
Published: 10:38 p.m. Thursday, Jan. 26, 2012
President Barack Obama might have rejected the enormous Keystone XL pipeline, at least for now, but that doesn't mean heavy crude from Canada won't be flowing into Texas' refineries later this year.
TransCanada Corp. — the Canadian company that proposed building the $7 billion, 830,000 barrel-a-day pipeline — has some ideas that could lead to moving oil from the oil sands region in northern Alberta, Canada, to the Gulf Coast of Texas without the blessing of the president, the company said.
"We are still very much committed to building this pipeline," TransCanada spokesman Terry Cunha said in an interview with the American-Statesman.
But building the full Keystone XL pipeline could take a long time. So in the meantime, TransCanada is talking about alternatives.
One possibility of getting bituminous sands — a substance made of clay, sand, water and heavy black viscous oil that is sometimes referred to as "tar sands" or "oil sands" — to refineries in Houston and Port Arthur involves building only the southern stretch of the proposed Keystone XL.
Cunha said the company is in preliminary stages of planning a new pipeline from Cushing, Okla., where an existing TransCanada pipeline ends, to the Texas coast.
A pipeline that doesn't cross an international border doesn't need a presidential permit, the U.S. State Department said.
TransCanada isn't the only company looking to pipe Canadian heavy crude to Texas.
A competitor, Enbridge Inc., already is working in on a plan to bring oil from Canada as early as June, oil executives said. Enbridge and its American partner, Enterprise Products Partners, are hoping to use an existing patchwork of pipelines to push Canadian oil sands to refineries in Freeport, Houston and Port Arthur.
Rick Rainey, an Enterprise spokesman, said "quite a glut" of Canadian tar sands oil and regular crude oil from different regions of the U.S. is backing up in Cushing, a hub where several pipelines now end, including one that belongs to Enbridge.
Both Rainey and Oklahoma regulators said there are just too many pipelines into Cushing and too few going out.
The Enbridge/Enterprise partnership is seeking an almost perfunctory permit from the Federal Energy Regulatory Commission to reverse the flow of a 36-year-old pipeline that has always pushed oil from the Texas Gulf coast to Cushing.
The Seaway Crude Oil Pipeline has mainly been used to carry both heavy and light crude from offshore drilling rigs and from Central and South America. Only relatively minor alterations will be needed to allow it to carry Canadian oil sands oil south, Rainey said.
If all goes as expected, Canadian oil could be running through Texas by June 1, bringing 150,000 barrels a day to the Gulf coast, Rainey said. By the end of 2012, it should be able to handle much more oil.
"We expect roughly 400,000 barrels to be fully contracted," Rainey said.
In the future, Enbridge and Enterprise could secure enough commitments from shippers of oil to allow them to build a parallel pipeline, which would greatly increase capacity for Canadian oil to Texas. Rainey declined to say how much.
Obama's signature was needed for TransCanada's much bigger Keystone XL pipeline — it would have the capacity for 830,000 barrels a day versus Seaway's 400,000 barrels a day — because it was slated to cross an international border. But the work-arounds being discussed by TransCanada and Enbridge don't involve crossing an international border.
The pipelines won't need state approval, either.
The Oklahoma Corporation Commission, which regulates the oil and gas industry, has no permitting authority with interstate pipelines, said commission spokesman Matt Skinner.
Similarly, in Texas, the oddly named Railroad Commission, which oversees the oil and gas industry, confirmed in a written statement that it "does not issue construction permits for interstate or intrastate pipelines to be built. The Railroad Commission also has no authority over the routing or siting of intrastate and interstate pipelines, and has no safety jurisdiction over interstate pipelines such as a pipeline that would be built from an adjacent state into Texas."
Obama's rejection of TransCanada's proposal to build Keystone XL this month was seen as a highly political move that drew sharp criticism from Republicans. Mitt Romney, the GOP presidential front-runner, accused Obama of putting politics ahead of policy by pandering to environmentalists in an election year. Romney and other Republicans have touted the Keystone XL pipeline as a massive job creator that would help wean the U.S. off dependence on Middle Eastern oil.
Also, Romney charged, rejection of the Keystone XL would prompt the Canadians to try to sell their oil to China.
Many of the opponents of the pipeline complained about the potential environmental harm of building a pipeline over the sensitive Ogallala Aquifer in Nebraska. With about 3.3 billion acre-feet of water, the Ogallala is one of the largest aquifer systems in the world, stretching across eight states.
But the presidential rejection wasn't a total denial. The administration will allow TransCanada to apply for another permit with an altered route that avoids Nebraska's Sandhills, the environmentally sensitive area of porous land atop of the Ogallala.
The hopeful executives in Canada said they plan to reapply with the U.S. government after this fall's elections.
But in the meantime, the Canadian companies are facing a new batch of critics — this time in Texas. An unusual coalition of property rights activists has teamed with groups that often are on the other end of the political spectrum: environmentalists. The groups are working on plans together to fight pipeline development in Texas.
Property rights advocates have been a powerful force in state politics and were instrumental in defeating the Trans-Texas Corridor, the statewide network of toll roads backed by Gov. Rick Perry that many feared would have required taking over private property.
Now the libertarian-leaning conservatives are led by former Republican gubernatorial candidate Debra Medina, who also was an outspoken critic of the toll road plan. Medina is protesting TransCanada's ability to condemn private landowners' property for the pipeline route. She said a quick search a few counties' records revealed 22 eminent domain disputes with TransCanada, though she suspects many more exist in other counties along the 18-county route in Texas.
Medina said she has always been pro-business but that "taking private property from landowners is not playing nice."
Some Texas environmentalists began working against the XL pipeline last year.
Trevor Lowell, environmental program coordinator at the Texas office for the consumer watchdog group Public Citizen, said he helped strategize opposition to the Keystone XL pipeline last summer.
Canadian protesters have long said they are concerned about the vast water resources needed to extract the oil sands, pollution associated with oil sands refining and the strip mining necessary to get the oil out of the earth.
Lowell said he shares the concerns of the Canadian protesters. Even worse, he said, piping Canadian heavy crude to Texas would represent surrender in the battle to curb global warming.
Like many Nebraskans who fought TransCanada, Lowell has concerns about groundwater. In Nebraska, it was about the Ogallala. In Texas, Lowell's concern is the Carrizo-Wilcox Aquifer, which extends from the Rio Grande Valley to parts of Arkansas and Louisiana and supplies water to 60 Texas counties.
Lowell said he also worries about the chemicals in the pipe that would help move oil sands. He believes benzene, a known carcinogen, is one of those chemicals. He pointed to several pipeline leaks over the years by the companies.
Most of the accidents, he admitted, were small, but some were major — such as in Michigan, where an Enbridge pipeline broke and spilled 19,500 barrels of crude oil into the Kalamazoo River system. The Environmental Protection Agency detected heightened levels of benzene at the site.
"This is really toxifying the water and even toxifying the air," Lowell said.