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Vol. 14, No. 40 Week of October 04, 2009
Providing coverage of Alaska and northern Canada's oil and gas industry

Judge dismisses Keystone pipeline lawsuit

Says environmental group did not have authority to challenge TransCanada permit; base line to be complete by late November

Petroleum News

A judge has dismissed a lawsuit brought by an environmental group that claimed a permit that allows the construction of an oil pipeline between the United States and Canada violated federal law.

U.S. District Court Judge Richard Leon ruled Sept. 29 that the Natural Resources Defense Council did not have the authority to challenge the permit issued for the TransCanada Keystone Pipeline by the U.S. State Department.

The council claimed the State Department violated the National Environmental Policy Act because it issued the presidential permit based on a deficient environmental impact statement. NRDC sought a court order requiring the permit to be revoked.

Calgary-based TransCanada Corp. is building the pipeline that will run 2,148 miles from Alberta through North Dakota to Illinois.

Expansion could bring price to $12B

The company wants to expand the pipeline to Cushing, Okla., and then to the U.S. Gulf Coast by 2012. The total investment could be up to $12 billion.

The pipeline will be able to deliver 1.1 million barrels of oil a day and could be expanded to 1.5 million barrels a day, TransCanada has said.

Base line almost complete

According to an Oct. 1 article in Nebraska’s Lincoln Journal Star, work on the Keystone base line in Nebraska is close to completion.

Two crews, including one of about 500 construction workers based in Lincoln, have buried “virtually all of the … pipe from Cedar County along the South Dakota border to Jefferson County along the Kansas border,” the newspaper reported.

“The work has gone very well,” Keystone spokesman Jeff Rauh said Oct. 1. “We’re progressing, and weather permitting, we will continue to make good progress. And we’re certainly comfortable with scheduled completion by a Thanksgiving time frame,” which is the target date for 380,000 barrels of crude to start flowing southward from Alberta’s oil sands to refineries in Illinois.

Economic shot-in-the-arm

The $5.2 billion base line Keystone line “has been a shot in the arm to motels, restaurants and other fixtures of the Nebraska economy at a time when many of the state’s other construction-related projects have been lagging,” the Lincoln Star reported.

“It’s been an engineering feat that required the pipe to be threaded under the Missouri River near Yankton, S.D., last fall and then under a 4,700-foot expanse of the Platte River between Columbus and Schuyler this summer.

“And it’s been a source of easement income and sometimes a disruption to hundreds of farmers and other property owners along a route that runs 110 feet wide and more than 1,000 miles long through six states,” the newspaper reported.

Draft EIS likely in November

Rauh told the Lincoln Star that “the pipe system’s integrity will be subjected to a final test before the oil valve is turned in Canada: Water will be pumped through it at 125 percent of its normal operating pressure.”

The next step in the TransCanada project that will connect the 36-inch line to Cushing, Okla., and then to the Texas Gulf Coast, is moving forward, the newspaper reported.

“The federal regulatory review is proceeding,” Rauh said of Keystone XL. “We anticipate that a draft environmental impact statement is likely in November. That’s a significant milestone in the regulatory review process.”

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U.S. oil imports from Canada rise

Although U.S. oil imports were down 8.9 percent in July from a year earlier, to 9.227 million barrels per day, oil supplies from Canada to the United States hit new records, picking up the slack as OPEC countries have cut back exports to the U.S.

Already the largest supplier of crude oil to the U.S., imports from Canada rose 5.4 percent in July to the highest monthly level in at least 36 years, the federal Energy Information Administration said Sept. 30.

Imports from Canada in July rose 109,000 bpd from June, and 134,000 bpd, or 6.8 percent, from July 2008, averaging 2.11 million bpd, the most since the EIA began reporting import numbers by country in January 1973.

More than 62 percent of the crude was shipped via pipeline into the Midwest, including heavy, sour crude to light, sweet synthetic oil upgraded from Alberta’s oil sands.

Those imports are expected to rise when two pipeline projects go online in 2010.

In August, the U.S. State Department gave the go-ahead for Enbridge’s Alberta Clipper pipeline, which will start delivering 450,000 bpd of oil sands crude into the Midwest in 2010.

The first leg of TransCanada’s Keystone pipeline, which also will ship oil sands bitumen to the U.S. Midwest, is under construction with completion slated for late November.

Refiners paid an average of $62.93 a barrel for imported crude supplies in July, EIA said, down 5.2 percent from June and less than half the year-earlier record level of $127.77 a barrel.

EIA, which is part of the Department of Energy, also reported U.S. oil demand in July was 4 percent below a year earlier, at 18.771 million bpd — a 13-year low for July, but the highest in any month since January.

—Petroleum News