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The Keystone XL Pipeline Project: Opportunity and Challenges

The Keystone XL Pipeline is a pipeline system running from the Athabasca oil sands region in Alberta, Canada to the United States, including locations in Illinois, Oklahoma, and the Gulf Coast.  The purpose of the pipeline is to transport crude oil from Canada to markets in the United States.  TransCanada, a Canadian pipeline company, owns the project.

The Canadian portion of the pipeline received approval through the National Energy Board of Canada on September 21, 2007.  In 2008, TransCanada filed an application with U.S. Dept. of State to build the Keystone XL pipeline.  Since Keystone would connect the U.S. with a foreign country, the project requires a presidential permit from the State Department and must be evaluated to meet “national interest.”  According to the Temporary Payroll Tax Cut Continuation Act of 2011, permit decisions must be made within 60 days after the application is filed.  On January 18, 2012, the State Department denied the project, citing insufficient time to evaluate it.

On May 4, 2012, TransCanada submitted a new application for a presidential permit, and on September 5, 2012, the company submitted an environmental report on a new route through Nebraska that was designed to minimize environmental disturbance.  While waiting for approval, TransCanada has proceeded with the part of the pipeline not requiring a presidential permit, which is a stretch that runs from Cushing, Oklahoma to the Gulf Coast.

In this blog post, we’ll discuss the different project phases for Keystone XL, as well as the arguments for and against its construction.

Keystone XL Project Phases

If all phases are approved and completed, Keystone will be able to carry 830,000 barrels per day.  Right now, Phases 1 and 2 are operating, while Phases 3 and 4 are still in the proposal stage.

Phase 1 runs 2,147 miles from Hardisty, Alberta to the refineries in Wood River and Patoka, Illinois.  The Canadian section is approximately 537 miles long.  The U.S. section is 1,379 miles long and runs through Buchanan, Clinton, and Caldwell counties in Missouri and Nemaha, Brown, and Doniphan counties in Kansas.  Phase 1 went online in June 2010.

Keystone XL Phase 2 runs 291 miles from Steele City, Nebraska, through Kansas, and into Cushing, Oklahoma.  It went online in February 2011.

Keystone and the Bakken Formation

In addition to the four phases above, TransCanada has signed contracts with Bakken oil producers to carry 65,000 barrels per day from the Bakken region through the Keystone XL pipeline.  This portion of the pipeline is called the “Bakken MarketLink” project and will run from Baker, Montana to interconnect with the Keystone XL pipeline, then to Cushing, Oklahoma and finally the Gulf Coast.

Infrastructure in the U.S. portion of the Bakken has not kept up with the rapidly growing output.  The Bakken MarketLink will help transport the crude oil out of the Bakken area and ease the pressure on existing infrastructure.

Arguments For and Against Construction

Advocates for the completion of the Keystone XL Pipeline typically base their arguments on the economy.  The pipeline will provide for more efficient transport of crude oil and increase the U.S. petroleum supply.  Another possible positive impact is the creation of jobs, especially jobs related to the immediate construction of the remaining phases.

Proponents of the pipeline also believe that it will aid in U.S. energy security and help lessen the dependence on foreign oil.

Those opposing the Keystone XL Pipeline typically voice concern over the environmental and domestic impact of the project.  Environmental concerns include the greenhouse gas emissions associated with the extraction of Canadian oil sands, as well as concerns about how the pipeline itself will impact agriculture and cattle grazing.  Communities along the pipeline route have also expressed concerns about potential release of heavy crude oil and the ability for emergency response in remote areas.

The Sand Hills region of Nebraska has been the source of some of the most public concern and is one of the bigger reasons that the initial TransCanada application failed to get a presidential permit.  The region has a high concentration of wetlands, extensive areas of very shallow groundwater, and a sensitive ecosystem.

When they reapplied for a permit, TransCanada announced that they would work with the Nebraska Department of Environmental Quality to build a pipeline route that would avoid the Sand Hills, as shown in the map below:

Conclusion:  Setting the Stage

The Keystone XL Pipeline will set the stage for future development projects in the U.S.  The project has potential to increase efficiency of moving crude oil, as well as boosting employment in both the construction and oil and gas industries.  However, measures to protect the environment during both construction and production must be put in place, and this will add a great deal of challenge to this project.

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