St. Louis While the political debate rages over the future of the Keystone XL pipeline, a competitor is proposing a line that would cut across Kansas and Missouri and provide an alternative to Keystone for shipping Canadian tar sands oil to the Gulf Coast.
Calgary-based Enbridge Inc. hopes to link its existing Canadian oil pipelines from where they currently end near Chicago with another pipeline that runs from Cushing, Okla., to Houston and Port Arthur, Texas.
To do that, the company wants to build a $1.9 billion pipeline adjacent to an existing Enbridge line that cuts diagonally across northern Missouri before entering southeast Kansas. Together, the two Enbridge pipelines would be able to carry almost 700,000 barrels a day between Illinois and Oklahoma.
"In the energy industry, and oil in particular, there's always been a history of fierce competition," said Paul Blackburn, an environmental attorney and pipeline consultant. "One has to anticipate that if one of the players stumbles, another is going to try to capitalize on that."
Earlier this month, the Obama administration decided to delay consideration of a permit for the controversial $7 billion Keystone XL line until at least 2013. Company officials had anticipated that oil already would be moving down the line by then.
Keystone's fate became a political issue, with some arguing that failure to approve the line will cost thousands of construction jobs and others arguing that it would damage the environment and much of its refined product would be exported.
The Keystone XL pipeline is designed to carry 830,000 barrels a day from Alberta to the Gulf of Mexico by crossing Montana, South Dakota, Nebraska, Kansas, Oklahoma and Texas. Another segment of the Keystone system runs from Alberta to Conoco-Phillips' Wood River refinery in Illinois and on to Patoka, Ill. That part of the line, which has a capacity of 590,000 barrels a day, became operational in 2010.
The delay in Keystone XL's construction created an immediate demand for more capacity to move crude from Canada and the upper Midwest that Enbridge is jumping to fill, said John Auers, senior vice president of Turner, Mason & Co., a Dallas-based consultant. Enbridge hopes to get regulatory approval and enough commitments from shippers to begin construction next year and be in service by mid-2014.
"This was a project out there waiting in the wings," Auers said of the Enbridge proposal.
Enbridge's proposed line would generally follow the company's existing right of way but may require some land acquisitions to avoid congested areas and terrain features, a company spokesman said. The line runs southwest from the Flanagan, Ill., area, crosses the Mississippi River north of Hannibal, Mo., and exits Missouri in Bates County.
Unlike Keystone, Enbridge's line would not cross an international boundary, and much of it is already built, meaning it wouldn't cost as much and wouldn't be subject to many of the regulatory hurdles that Keystone has faced, Blackburn said.
"The bottom line is whoever gets those segments completed first gets a pretty significant commercial advantage, and that's what Enbridge is trying to do," Blackburn said.
A spokesman for TransCanada, which owns the Keystone line, played down any competition posed by the Enbridge line. TransCanada already has long-term contracts that will keep the Keystone XL line flowing at near capacity when completed, and there's plenty more Canadian oil for others to carry, said company spokesman Terry Cunha.
"The Gulf Coast refining market can benefit from both pipelines as the area has capacity for both projects," Cunha said.
"In the long run, they'll be enough demand for both those pipelines," Auers said.