Making a fresh case for the Keystone XL pipeline, TransCanada asked the US State Department on Friday to consider the price disparity between international and domestic crudes that has emerged and persisted in the more than three years since the company proposed the project.
TransCanada said the up-to-$20/barrel premium for internationally benchmarked Brent crude over WTI has exposed Americans to high gasoline prices while discouraging domestic oil production amid a bottleneck in Cushing, Oklahoma.
The company said those new market dynamics amplify the original application's reasons for finding that the project serves the national interest.
"Providing pipeline access to the Gulf Coast for growing production for lower cost domestic and Canadian crude oil is part of the solution to addressing these issues of energy security, moderating gasoline prices, and encouraging domestic production," it said in the new application filed Friday.
APPLICATION IGNORES SHRINKING WTI-BRENT SPREAD
While TransCanada illustrated those price dynamics with an April 16 Brent premium of $18.32/b, it failed to describe how much the spread shrank the following two weeks.
On Wednesday, the front-month ICE Brent/NYMEX WTI spread narrowed to $12.98/b ahead of the reversal of the Seaway pipeline, which will soon move oil from Cushing to refineries in Freeport, Texas. Enterprise Products Partners said this week it remains on schedule to flip the direction of flow as early as May 17.
TransCanada first applied for a US permit to build Keystone XL in September 2008. That attempt died in January, when President Barack Obama said he would reject the application in the face of an impossible 60-day deadline imposed on the permitting process by pipeline supporters in Congress.
The second application assumes a new route through Nebraska that must be approved by that stat'se lawmakers. Republican Governor Dave Heineman's objections last year about the pipeline passing through the sensitive Sandhills region added fuel to opposition from farmers, environmentalists and others to delay the project.
TransCanada's latest application calls for a 36-inch-diameter pipeline running 329 miles from Hardisty, Alberta, to Monchy, Saskatchewan, where it would hit the US border. The next 850-mile section would run from Phillips County, Montana, to Steele City, Nebraska.
The $5.3 billion project would carry 830,000 b/d, spokesman Shawn Howard said.
TransCanada plans to build the $2.3 billion southern end, dubbed the Gulf Coast Project, from Cushing, Oklahoma, to Nederland, Texas, while it waits for the State Department permit for the section that crosses the US-Canada border. It expects to start construction on the 485-mile segment this summer and have oil flowing in the second half of 2013.
The company said it has long-term contracts with shippers to move more than 500,000 b/d of western Canadian crude on the pipeline, plus contracts for another 65,000 b/d to 100,000 b/d of Williston Basin oil from North Dakota and Montana that will flow into the system at the Bakken Marketlink.
The State Department did not give a new timeframe for deciding whether to give TransCanada a presidential permit, only referring to its earlier estimate of no sooner than the first quarter of 2013.
TransCanada wants to start construction that quarter and finish the project in late 2014 or early 2016.
OPPONENTS ASK STATE DEPARTMENT TO START FROM SCRATCH
Groups that raised the profile of the project to one of the top energy issues on Capitol Hill last year promised to keep fighting the pipeline.
Jane Kleeb, executive director of BOLD Nebraska, said the proposed routes still put key water resources in jeopardy.
"This pipeline not only still crosses the Sandhills and sandy soil, but it still crosses the Ogallala aquifer, which is the largest source of freshwater, not only in the United States, but around the world as well," Kleeb said in a conference call with reporters.
Susan Casey-Lefkowitz, international director for Natural Resources Defense Council, called on the State Department to perform a completely new environmental review.
"We are asking that they start from scratch," she said. "The first analysis was done by a contracting company that worked closely with TransCanada and had the best interests of TransCanada, rather than the American people, in mind when they did the analysis. That analysis was full of flaws, which we documented at the time in our comments."
The oil industry renewed calls on the Obama administration to act immediately.
"The anti-fossil fuels extremists opposed to the construction of the Keystone XL pipeline will look for any reason, no matter how baseless and absurd, to oppose the vital pipeline that would benefit millions of American consumers, create thousands of jobs and increase America?s economic and national security," Charlie Drevna, president of the American Fuel & Petrochemical Manufacturers, said in a statement.
