November 12, 2011 in Business

Pipeline change problematic

Backers say rerouting could sink entire project
Matthew Brown Associated Press
 

BILLINGS – The White House plan to seek alternate routes for a Canada-to-Texas oil pipeline presents a tangle of new problems for the project’s backers, and any of those obstacles could still sink the proposal before the first spade of dirt is turned.

Shifting the path to avoid a major aquifer could increase the number of perilous stream crossings and put the line closer to populated areas. Major changes also risk alienating pipeline supporters, who tout the economic benefits of creating thousands of jobs. And the most vocal opponents plan to keep up their fight regardless of the route.

The obstacles are tall enough, some observers say, that Canada’s oil-sands industry could even decide to bypass U.S. markets altogether and sell fuel directly to China using a pipeline through western Canada to the shores of the Pacific.

TransCanada’s $7 billion Keystone XL pipeline would carry up to 700,000 barrels of crude a day from Alberta’s tar sands to Gulf Coast refineries. The original route crossed six states, including Nebraska, where opponents worried about threats to the massive Ogallala aquifer. The line also would pass through Montana, South Dakota, Kansas and Oklahoma.

Largely because of complaints from Nebraska, the State Department agreed Thursday to look for new routes that would steer clear of the state’s Sandhills region and the aquifer, which flows beneath eight states and provides irrigation to huge farming areas. That effort will delay a final decision until early 2013.

Thirteen alternate routes were reviewed and rejected by the State Department over the past three years. Among those were paths to follow an existing TransCanada pipeline that roughly tracks the Canadian border east from Montana across North Dakota and then turns south to go through eastern South Dakota and Nebraska.

That option, favored by Nebraska’s governor, passes through a much smaller portion of the Ogallala aquifer. But it was rejected in part because the route is longer and would have raised the project’s price tag by about 25 percent, or an estimated $1.7 billion.

Also rejected were two routes that paralleled a stretch of Interstate 90 in South Dakota to avoid the Sandhills. Those would have cost almost $500 million more and involved putting the line through more densely populated areas and across more streams and rivers that could be fouled if the conduit broke or leaked.

Two western routes that passed through Wyoming and Colorado were thrown out because they would have added several hundred miles to the line, again making it more expensive.

An industry consultant who headed the federal pipeline safety agency under the Bush administration said any changes probably mean building a longer pipeline than TransCanada originally planned. That could expose the project to still more objections because a longer pipeline has more points at which it can fail.

“You could set this pipeline up for a death by a thousand cuts: Next year, the new route’s not good enough,” consultant Brigham McCown said. “I’m very skeptical about the fairness of the process at this point.”

Mark Lewis, a partner in the Bracewell and Giuliani law firm who represents pipeline developers, owners and operators, said any new route will be fraught with potential environmental problems. And of course, the rerouting might cost too much.

“If you have to reroute it through a more developed area, that becomes more expensive just to acquire the rights of way,” Lewis said. “The best place, just from a pipeline perspective, is open, rural land.”

© Copyright 2011 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.


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