CALGARY—TransCanada Corp. says its customers are still “100 per cent” behind its proposed Keystone XL oil pipeline despite dimming prospects that shovels will be hitting the ground any time soon.
Company spokesperson Shawn Howard says there’s even a waiting list should more room come available on the proposed US$5.4-billion pipeline, which would enable oilsands crude to flow to the United States Gulf Coast, a lucrative market where refineries are thirsty for that heavy product.
“We announce and advance privately-funded projects like Keystone XL by understanding what the best business and market decisions are, not short-term political calculations. We will do the same here,” he said in an email following the news that the Obama administration is unlikely to decide on the project until next year at the earliest.
The U.S. regulatory process for the contentious project is in its sixth year.
TransCanada had hoped a legal dispute over the pipeline’s route in Nebraska would not further hold up a decision at the federal level, but the State Department last week said it needs more time to make a recommendation in light of the uncertainty.
“Energy infrastructure projects like Keystone XL are designed to meet a need—and that need has not has changed,” Howard added, noting the U.S. continues to import eight to nine million barrels of Canadian oil daily.
While Canadian oil companies may still support the project, they’re not putting all of their eggs in the Keystone XL basket.
Most are hedging their bets by committing to ship their crude on multiple proposed pipelines, as well as moving it to market by rail.
“The market’s going to continue to do what it’s been doing the last three years,” said Reynold Tetzlaff, national energy leader at PwC Canada. “The market continues to basically do a workaround where they use rail more; there have been some pipelines that have been reversed in the U.S. and some pipelines that have been added at a smaller scale.”
With the 830,000-barrel-per-day Keystone XL proposal stymied, outlets to the Gulf Coast refining hub have opened over the past few years.
The Seaway pipeline between the Texas coast and a major oil storage hub at Cushing, Okla., has been reversed and expanded by Enbridge Inc. and Enterprise Products Partners LP, shipping about 400,000 barrels per day since early 2013.
The companies aim to more than double that in the coming months.
Meanwhile, TransCanada started up its own Cushing-to-Texas pipeline in January, with the expectation of shipping an average of 520,000 barrels a day in its first year of operation.
The Gulf Coast line was originally pitched as part of the Keystone XL project, but the Obama administration rejected it a few years ago citing environmental concerns in Nebraska.
The company decided to break the project up into two parts, going ahead with the southern leg first, as it does not cross an international border and therefore did not need the federal go-ahead to proceed.
The Gulf Coast line links up with TransCanada’s existing Keystone system, which has been delivering crude to the U.S. Midwest since 2010 and to Cushing since 2011.
“The market access situation is absolutely improving,” said Lanny Pendill, an energy analyst at Edward Jones.
“There’s no question about it. Rail has played a big role to date, and rail will continue to fill the void in the mid-term.”
But he said Keystone XL is still needed because it’s the more economical option.
Absent any viable alternative to get significant volumes of oilsands crude directly to the Gulf Coast, Pendill doesn’t see TransCanada or its supporters abandoning hope in Keystone XL.