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TransCanada’s Keystone XL Pipeline Takes a Detour

TransCanada Corp. may skirt the need for federal approval on its Keystone XL project to bring oil from Canada and Montana’s Bakken shale formation to refiners in the Gulf of Mexico by shortening the path of the pipeline, reported Bloomberg.

The U.S. State Department turned down the company’s $7 billion proposal yesterday. Government approval is required for the project to move forward because the proposed route crosses the border with Canada. TransCanada may try again for approval after it builds a segment from Montana to refineries in Texas, said Alex Pourbaix, the company’s president of energy and oil pipelines.

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In November, TransCanada agreed to find a new route so the pipeline wouldn’t disturb Nebraska’s environmentally-sensitive Sandhills region. The company hopes to reach an agreement with the state on a new route by September.

An estimated 4.3 billion barrels of technically recoverable crude exist in the Bakken shale-rock formation in North Dakota and Montana, according to a 2008 U.S. Geological Survey report. In November, oil output in North Dakota jumped 42 percent to 510,000 barrels a day, which is more than the production of Ecuador. The Bakken field may produce as much as 750,000 barrels a day this year, according to Edward Morse, managing director of commodities research for Citigroup .

As originally planned, Keystone XL would have followed a 1,661-mile (2,673-kilometer) path carrying up to 830,000 barrels of crude a day from Canada’s oil sands and the Bakken field to the Gulf of Mexico. The surge in Bakken output may allow TransCanada to start building the segment from Baker, Montana, to the Gulf, using much of the original route, said Pourbaix. The company would apply later for federal approval to connect the pipeline to the Canadian oil sands.

TransCanada has already poured 1.9 billion Canadian dollars ($1.88 billion) into the Keystone XL project, which might still make its targeted 2014 completion date, Chief Executive Officer Russ Girling told investors on Tuesday. The company already owns the rights to 93 percent of the land it needs to complete the original Keystone XL route, said Girling. TransCanada contracted Quanta Services Inc. to build the pipeline.

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