Efforts to fast-track approval of Keystone XL by challenging President Barack Obama’s decision-making authority were cut short Nov. 18, sending the explosive issue to the next Congress and possibly the next U.S. election.
The Senate fell just short of joining the House of Representatives in testing Obama’s resolve when it voted 59-41 to authorize immediate construction of the pipeline.
Senate Minority Leader Mitch McConnell served notice that XL will be an “early item on the agenda of the next Congress,” when Republicans take control of the House and Senate and pursue the 67 Senate votes needed to override Obama’s threat to wield his veto power.
However events unfold in the political arena, there is a restless mood among TransCanada’s committed shippers who have set aside their XL hopes and found ways through other pipelines and by rail to raise Canadian crude shipments to the Gulf Coast by 83 percent over the last four years.
Sandy Fielden, director of energy analytics at Texas-based consultant RBN Energy, told Bloomberg that XL is already “kind of old news ... producers have moved on and are looking for new capacity from other pipelines.”
Leading that shift is Enbridge, whose Flanagan South comes on stream this month and expansion of the Seaway pipeline is scheduled for December, potentially raising capacity from Alberta to Texas by 450,000 bpd.
Calgary-based ARC Financial is predicting that count will surpass 400,000 barrels per day in 2015, about double the August numbers, with rail well on the way to 100,000 bpd from 54,000 bpd in the first half of 2014.
Girling v Obama
Even TransCanada is indirectly conceding XL is getting overtaken, with chief executive officer Russ Girling issuing a statement Nov.18 estimating that since XL was launched six years ago almost 10,000 miles of oil pipelines have been constructed in the United States – the equivalent of eight XL lines.
“And yet our project sits idle, all while the U.S. continues to import over 7 million barrels per day of oil from unstable countries that do not share American values. It makes no sense to receive oil from the Middle East and Venezuela and not from a friendly neighbor in Canada,” he said.
Earlier this month, Obama – displaying his agitation – argued that XL might be good for Canada, but offers little benefit to Americans. After the House of Representatives passed its ninth pro-XL measure, he fired back from Burma (on his way to the G20 summit in Australia).
“Understand what this project is,” Obama said. “It is providing the ability of Canada to pump their oil, send it through our land, down to the Gulf, where it will be sold everywhere else. It doesn’t have an impact on U.S. gas prices,” Obama said in spurning repeated assurances from TransCanada that it has no reason to use XL for accessing markets beyond North America.
Girling flatly described Obama’s comments as “factually incorrect,” a clear sign of the growing testiness within Canadian government and petroleum industry circles, and noted that Valero, the largest refiner in the United States, has said it does not plan to re-export any crude it has contracted to transport through XL.
In a statement November 14, TransCanada said: “It makes no business sense for our customers to transport oil down to the U.S. Gulf Coast, pay to export it overseas, but then pay to transport millions of barrels of higher-priced oil back to the U.S. refineries to create the products we rely on.”
Girling also noted that a receipt point for XL at Baker, Montana, would allow Bakken crude to be delivered to U.S. refineries, pointing out that it is already happening through the southern leg of Keystone.
ARC Financial vice-president Jackie Forrest said Gulf Coast refiners are reaping the rewards of Canadian crude that saves them $7 a barrel compared with the price of U.S. domestic light crude.
And those facilities could benefit even more from increased Canadian deliveries to offset a shortfall of 900,000 bpd from traditional suppliers in Mexico and Venezuela, said a Valero spokesman.
