Oilsands executives lay out Keystone XL alternatives

CALGARY — Amid growing suggestions the U.S. State Department will delay or potentially reject the Keystone XL oil pipeline, oilsands executives counting on ramped up exports of bitumen said Thursday there are other options.

Canadian Natural Resources Ltd. president Steve Laut said oilsands producers could pursue other markets, if the U.S. denies a presidential permit needed for construction of the proposed 2,700-kilometre crude oil pipeline from Alberta to the Texas Gulf Coast.

CNRL has 120,000 barrels per day “locked up on Keystone for 20 years,” said Laut, who’s betting on U.S. approval. That’s about one-fifth of the company’s current total production of oil and gas.

Laut, speaking on a conference call, said if the up to 900,000 barrel-per-day line doesn’t win approval south of the border, it’s “pretty clear” U.S. markets are “not in favour” of Canadian oil.

“If it does not happen, I think you will see industry in Canada, which as you know is very resilient and very innovative, move very quickly to find other outlets to get our heavy oil production and our synthetic oil production likely off the West Coast and into Asian markets,” he said.

“We believe Keystone will go ahead, ultimately, although obviously it’s running into choppy waters here, but we believe it will happen.”

Calgary-based TransCanada Corp. is awaiting approval to build its $7-billion cross-border project and says it’s confident a decision will come by year end, despite that the State Department backed away Wednesday from a commitment to meet that timeline, a day after U.S. President Barack Obama told a Nebraska television reporter he expected the review within the next “several months.”

Obama has been pushed to reject Keystone XL by environmental groups, a few recognizable film actors, various Nobel laureates and wealthy Democratic donors worried about the greenhouse gas impact of increased oilsands growth. Business groups have called for its approval on job creation and energy security merits.

Suncor Energy Inc. CEO Rick George said Thursday that oilsands producers have several alternatives to consider if Keystone XL startup is delayed.

“This industry is very inventive,” George said on a conference call. “If you see a differential large enough, we’ll get the crude moved around one way or the other. There is and there will be a Plan B in case this doesn’t go forward.”

Production from northern Alberta’s vast bitumen resource is set to double by 2020 and triple by 2035 to 3.3 million barrels per day, according to the International Energy Agency. Keystone XL is viewed as an essential conduit to get that crude to market.

TransCanada executives warned earlier this week that extended delays for Keystone XL could force producers and refiners with contractual commitments to look at other options.

Nebraska Gov. Dave Heineman has proposed changing the pipeline’s route through that state over fears any oil spill would pollute a water aquifer in the line’s right-of-way.

TransCanada president of pipelines Alex Pourbaix said that if Nebraska senators are successful in introducing legislation that would give the state regulatory oversight of pipeline routing — and force TransCanada to reroute its project around the Ogallala aquifer — that could add two to three years of delays tied to new environmental study.

On Thursday, Nebraska lawmakers wrapped up submissions of five proposals that could make it into law. Public hearings on the proposed legislation are to begin next Monday, with several hundred people hoping to testify, sources told Reuters.

“What I do expect is maybe that in the end what we will get before us on the floor (of the legislature) will be parts from all of these bills,” said Sen. Bill Avery, who introduced a proposal for TransCanada to create a $500-million so-called indemnity fund to make the company responsible for spills and damage to roads, land and infrastructure during construction. The firm has offered a $100-million fund.

Final action is not expected until later in the month.

TransCanada has cited legal analyses to back up its argument that any pipeline siting legislation from Nebraska narrowly targeting Keystone XL — instead of the entire oil and gas industry — would be unconstitutional.

Canada’s Natural Resources Minister Joe Oliver has said if Keystone XL isn’t approved, Canada will ramp up efforts to sell oilsands bitumen to Asia.

“What will happen if there wasn’t approval — and we think there will be — is that we’ll simply have to intensify our efforts to sell the oil elsewhere,” Oliver said.

— With files from Dan Healing, Calgary Herald, and Reuters

rpenty@calgaryherald.com