GULF COAST PROJECTS START TO FILL KXL VOID
ENERGY
With its ambitious Keystone XL project rejected by U. S. President Barack Obama, TransCanada Corp. is pursuing more modest developments in the U. S. Gulf Coast oil refinery complex.
The company’s US$ 600 million Houston Lateral pipeline and tank terminal is set to come on stream by the second quarter of the year, connecting the existing Keystone pipeline system to refineries in Houston, Paul Miller, president of liquids pipeline said in an interview.
“Today we probably move 300,000 ( barrels per day) plus of crude oil from Canada to the U. S Gulf Coast, and we represent about a third of that,” Miller said.
“As we see the connection of our system going to these additional markets in the U.S. Gulf Coast we would look to increase both our share as well as the absolute volume.”
To bolster the Houston Lateral’s connection to Gulf Coast markets, TransCanada and Magellan Midstream Partners LP are building a US$ 50 million pipeline to ship 200,000 bbd between TransCanada’s under- construction Houston terminal and Magellan’s East Houston terminal.
“It’s small from a dollar perspective, but it’s hugely significant from a connectivity perspective, providing connectivity to both the Houston and the Texas City refineries,” Miller said.
The company is planning similar smaller projects either through acquisitions or greenfield developments around the Gulf Coast, Miller noted.
“Louisiana is another attractive marke t for TransCanada, considering the existing footprint we have down to the U. S. Gulf Coast.”
The Houston Lateral project falls under the $ 14.5 billion worth of projects that have secured regulatory approval and are set for completion by the end of the decade. But they will not be enough to fill the Keystone-sized hole in its project pipeline.
As such, the company is not giving up hope of moving ahead with t he 1,897- kilometre Keystone project connecting Hardisty, Alta. to Steele City, Neb.
This month, TransCanada filed a lawsuit against the U. S. president’s decision to scrap the project, on the grounds he exceeded his constitutional power in rejecting the pipeline. The company also initiated a US$ 15- billion claim under the North American Free Trade Agreement that the denial was “arbitrary and unjustified.”
Keystone XL was still among the company’s longterm “options,” company CEO Russ Girling told investors at a business conference in Whistler, B.C. on Thursday.
“It’s pretty clear we have been harmed in an arbitrary and discriminatory way,” Girling, noting that he was not discouraged by the U. S.’s perfect record in defending NAFTA challenges.
“I don’t think there’s anybody that would say this isn’t an egregious abuse of authority and that we weren’t treated fairly or equitably to whatever standards you choose — cross-border pipelines, domestic pipelines, or imports from other countries.”
Ben Pham, analyst at BMO Capital Markets, be- lieves TransCanada could have a “credible case” in arguing that it was unfairly treated and that the pipeline rejection was politically motivated and not assessed based on merit.
“Having said that, the odds appear to be against TRP ( no company has been successful with a NAFTA challenge so far with the U.S) and the process could take years to resolve (unless early settlement),” Pham said in a note to clients.
With Keystone in legal limbo, the company’s longterm “transformative” plan hinges on the Alberta-to-New Brunswick Energy East. But the project is already facing resistance, with mayors of the greater Montreal area the latest to voice their opposition on Thursday.