In line with TransCanada predictions, budget estimates for Keystone XL have almost doubled to $10 billion and the clock keeps running down to a Doomsday point as the 45 Republicans in the U.S. Senate delivered a blunt message to President Barack Obama to meet his commitments on the pipeline.
The senators marked the sixth anniversary of TransCanada’s original application by pressuring Obama to “approve the pipeline immediately.”
That coincided with word from TransCanada Chief Executive Officer Russ Girling who said the project could climb from its current target of $5.4 billion to $10 billion.
“As we delay … further those costs will continue to increase,” he said.
But he said a final price tag won’t be known until and unless the State Department approves the XL permit.
Even if the permit is denied, TransCanada will incur costs, although the company is “not quite sure what they will all be and what equipment we might be able to use elsewhere,” said TransCanada spokesman Shawn Howard.
TransCanada told the South Dakota Public Utilities Commission in a recently filed petition that the cost of installing the 314 miles of the 1,179-mile system through that state had risen to $1.974 billion over the past four years from $921.4 million, due mostly to a protracted regulatory process, labor cost increases and currency changes.
Girling said TransCanada is now working on more precise calculations of costs in other states, including Montana and Nebraska.
The pipeline has been designed to ship about 730,000 barrels per day of bitumen from the Alberta oil sands and 100,000 bpd of crude from the Bakken to Gulf Coast refineries.
Message in the letter
The Senate letter to Obama noted that the U.S. Department of State has received hundreds of thousands of comments and completed five environmental impact statements, all of which found that XL would have no significant negative impact on the environment.
It also recalled that Obama told a conference call in March 2013 that he would make a decision on XL before the end of 2013.
“Mr. President, it is long past the time to make a decision,” the senators said.
They argued that “states should have the primary role of determining the proper legal and regulatory procedures for siting the pipeline within their respective jurisdictions. The federal government should move forward with its determination.”
The senators said the stalling on XL has also raised concerns about the safety of moving crude by rail and long delays in agriculture shipments.
North Dakota’s Sen. John Hoeven said “it’s time to take off the blinders and do what is in the best interest of the United States” by approving XL. Sen. Lisa Murkowski of Alaska said the approval is “long overdue … this is a simple decision to improve trade with our closest ally that could - and should - have been made years ago.”
The anniversary
TransCanada described the sixth anniversary as an “unfortunate milestone.”
Alex Pourbaix, the company’s president of development, said “our goal is to have more oil moving through pipelines which are safer, produce fewer emissions and provide safe, secure and reliable supplies of oil to American refineries.”
TransCanada’s Howard also noted that the climbing project costs will land on refiners and gasoline consumers.
TransCanada breakup?
The dithering over XL has prompted U.S. activist hedge funds - notably Daniel Loeb’s Third Point, which has accumulated a strong position in TransCanada over recent months - to examine the case for breaking up the pipeline and power company. Reports are circulating that some of TransCanada’s largest shareholders have been contacted by hedge funds which are increasingly eying energy infrastructure companies because there is a high demand for their assets.
TransCanada’s former CEO Hal Kvisle told reporters that reports of a TransCanada break up are “wild speculation” because the company through its management team has an established record of paying strong dividends.
Sarah Ladislaw, with the energy and national security program at the Washington, D.C.-based Center for Strategic and International Studies, said XL has become a “political phenomenon that has gone to a place no company would want to be” by carrying a name that is “short-hand for significant ideological divisions.”
She also suggested that XL is “not a top-tier” political issue in the U.S. when compared with big-government, small-government and foreign policy and has collided with U.S. billionaires who have funded the case against XL by environmental activists.
