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Canada oil pipeline into US gets extension support

December 15, 2011
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CALGARY, Alberta—TransCanada Corp. said Thursday that it has received customer support to undertake an extension of its stalled Canada-to-Texas Keystone XL oil pipeline pending regulatory approval in the U.S.

Russ Girling, TransCanada's president and chief executive officer, said in a statement that the potential 50-mile (80-kilometer) expansion of the Keystone XL pipeline would increase the capacity of the pipeline to 830,000 barrels per day from 700,000 barrels.

Instead of ending in Port Arthur, Texas, the pipeline will reach into the Houston market, known as the Houston Lateral, as well. That will more than double the U.S. Gulf Coast refining market capacity the pipeline can access if it's approved.

"This significant demand and additional long-term customer commitments confirm the continued strong shipper support of TransCanada and the need for Keystone XL to move forward," said Girling.

"Proceeding with the extension of the Keystone XL system to Houston and increasing capacity on the pipeline system will further enhance the connection of a secure, growing and reliable supply of Canadian crude oil and domestic U.S. crude oil with the largest refining market in North America, while providing additional flexibility to our shippers," he added.

The Houston Lateral is within the original scope of the regulatory process that is currently under way, TransCanada said.

The U.S. State Department was originally set to announce its final decision by year-end, but in November said more time was needed to weigh a new route for the pipeline to take through Nebraska, in order to avoid environmentally sensitive areas.

The pipeline would carry oil from western Canada to refineries in Texas, passing through Montana, South Dakota, Nebraska, Kansas and Oklahoma and Houston if the expansion is approved.

Montana state officials on Thursday announced environmental approval for the pipeline.

But TransCanada spokesman Shawn Howard said there were no immediate plans to begin work in Montana while federal approval is pending.

The U.S. State Department -- which has final say because Keystone XL would cross an international border -- now expects to make its decision in early 2013. If it's approved, TransCanada expects Keystone XL, including the Houston Lateral, to be in service by the end of 2014.

Republicans in Congress are trying to speed up a decision by linking approval to a measure renewing a payroll tax cut.

Keystone XL is one of several pipeline projects to draw the ire of environmental groups waging a wider war against the development of "dirty" oilsands crude. Heavy crude from Alberta's oilsands takes a lot of work to process and has a long way to travel to U.S. refineries that can handle it. Critics say Keystone XL could bring risks of oil spills to the central United States and foster more development of carbon-intensive tar sands production.

It's a battle pitted against those who argue the pipeline will provide massive job opportunities at a time when the economy is in dire need of jobs on both sides of the border.

A University of Calgary report released Thursday said the Canadian oilsands industry's improved access to international markets could add as much as US$126.73 (CA$131) billion to Canada's gross domestic product between 2016 and 2030, which could garner US$26 billion (CA$27 billion) more in government tax receipts.

"The rewards of additional pipelines for all of Canada are too great to ignore," said report co-author Michal Moore. "Pipelines must be a national priority."

TransCanada Corp. is looking to relieve the bottleneck at Cushing, Oklahoma, a massive storage hub that has become a major choke point.

The report said producers stand to gain US$10 for every barrel they produce if they can get their oil past Cushing to the Gulf Coast, where it would displace imported crude like Mexico's Maya.

"It seems to me that the right role of government is to make it clear that this resource is a world product and should be allowed to get access to world markets and, where possible, they can seek out the help to do that."

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