AS work on the southern leg of the Keystone XL pipeline continues, prepping to move crude oil from Oklahoma to the Texas Gulf, the push to simply get started on the northern leg continues to wane. And the oil industry is apparently OK with that.
President Barack Obama has blocked construction of the northern leg, from Canada to Oklahoma, in a bow to environmentalists who see the pipeline as a disaster waiting to happen. The proposed route was vetted, vetted some more, approved by the State Department, then adjusted to address 11th-hour concerns. And still Obama has refused to sign off.
Earlier this summer he pooh-poohed the project in an interview with The New York Times, saying “there is no evidence” that building the Keystone pipeline would generate large numbers of jobs. “Realistic estimates” are that it might put 2,000 to work during the construction phase, he said. TransCanada, which is waiting to invest billions to build the pipeline, has said there would be 13,000 construction jobs.
Obama clearly remains in no hurry to revisit this topic. Oil companies have stopped waiting. Instead they have found other ways to move those Canadian tar sands to refineries in North America — mostly by rail and truck.
Harold Hamm, CEO of Oklahoma City-based Continental Resources and a staunch, longtime advocate for building Keystone XL, recently told National Journal Daily that the project is “not critical any longer. They just waited too long,” Hamm said. “The industry is very innovative, and it finds other ways of doing it and other routes.”
The number of rail cars in Canada carrying crude oil or fuel was up 20 percent in the first seven months of this year, compared with the same time a year earlier. In 2012, the amount of crude oil shipped by rail in North America was up by more than 300 percent over 2011. According to bloomberg.com, forecasts are for shipments by rail to increase fivefold, to 30,000 barrels a day, by the end of 2014. Keystone XL is designed to transport 830,000 barrels per day.
The Wall Street Journal notes that Valero Energy Corp. no longer considers Keystone XL critical to its business — this after spending billions to upgrade its Gulf Coast refineries in order to handle the Canadian crude. Now Valero is expanding railroad terminals at its refineries in Quebec, Louisiana and California. “If we just sat around and waited for Washington, we'd never get anything done,” a company spokesman said.
Plenty of crude will still get piped into this country from Canada. The Journal said a rival to TransCanada, Enbridge Inc., plans to expand some of its pipelines to move crude to the Midwest and eventually the Gulf Coast. Enbridge doesn't need federal OK because it will be using existing pipeline rights of way.
We continue to hope for approval of Keystone XL because it would be a winner for U.S. workers. But oil companies have moved on. The irony is that there are three times as many spills involving crude transported by rail than by pipeline. So Obama's gift to the green lobby may not be so thoughtful after all.