Jan 19, 2012

TransCanada Corp. (TRP)’s $7 billion Keystone XL oil pipeline still will move ahead with an alternate route after President Barack Obama’s decision to deny a permit, investors, public officials and analysts say.

Obama blamed congressional Republicans yesterday for imposing a deadline on his decision, which he said left no time to approve the project. His administration invited TransCanada to reapply, an overture the Calgary-based company promptly said it would accept.

Denying the permit pushes a final decision on the pipeline into 2013, safely past this year’s presidential election. John Stephenson, who helps manage $2.7 billion for First Asset Management Inc. in Toronto, said he bought 350,000 shares yesterday as TransCanada fell the most in 18 months.

“This is clearly the biggest infrastructure project on the continent, and once the election is settled, we believe it will be approved,” Stephenson said in an interview. “All the waffling just gives people an opportunity to trade around it.”

TransCanada today said it may build U.S.-only pipeline segments, which don’t require federal approval, and apply later for permission to connect the pipeline to Canadian oil sands and complete Keystone XL as originally proposed.

Yesterday’s decision by the State Department was praised by environmentalists and was decried by the U.S. oil and gas industry and Republican presidential candidates and lawmakers, who had pushed Obama to approve the project as a way create jobs.

Congressional Deadline

Obama acted before a Feb. 21 deadline Congress set after he postponed a decision to allow for a review of of a revised route through Nebraska. TransCanada said the 1,661-mile (2,673- kilometer) project would carry 700,000 barrels of crude a day from Alberta’s oil sands to refineries on the U.S. Gulf of Mexico coast, crossing six states and creating an estimated 20,000 jobs.

Obama called Canadian Prime Minister Stephen Harper, who told the president Canada will seek to diversify its energy exports after Keystone was rejected. Harper “expressed his profound disappointment” with the Keystone decision, according to a statement from his office.

Currently, 99 percent of Canada’s crude exports go to the U.S., a figure that Harper wants to reduce in his bid to make Canada a “superpower” in global oil markets. Canada this month began hearings on a proposed pipeline from the oil sands to the British Columbia coast, where it could be shipped to Asian markets.

‘Proper Routing’

The State Department said in a report to Congress yesterday that the pipeline would create 5,000 to 6,000 construction jobs during the two years needed to build the project, based on labor expenses TransCanada included in its application.

“Once we get the proper routing done, I think it’s very appropriate that the country accept that as an oil source,” Anadarko Petroleum Corp. (APC) CEO Jim Hackett said Wednesday at a conference in Houston on North American energy prospects. “We have one of the most friendly nations to our country who has never stopped trade in my lifetime that is willing to send their supplies down to us as if it were domestic oil.”

Congress’s deadline would have forced Obama to choose in an election year between environmental supporters, who said the pipeline will worsen climate change and endanger drinking water supplies in Nebraska, and organized labor.

‘Politically Motivated’

The decision to deny the permit was “politically motivated” and will make the U.S. more dependent on foreign nations “that don’t share our interests,” U.S. Chamber of Commerce President Thomas Donohue said.

Environmental groups praised the decision, mindful that the pipeline still is a possibility.

“We’re going to declare victory today and tomorrow we’ll deal with the new application,” Susan Casey-Lefkowitz, director of the international program at the Natural Resources Defense Council, said in an interview. “I don’t think that they are predisposed to approving the pipeline.”

U.S. House Speaker John Boehner, an Ohio Republican, accused Obama of “selling out American jobs for politics,” and said Congress would consider adding pipeline language to a longer-term extension of the payroll tax cut sought by Obama, and the reauthorization ofFederal Aviation Administration and surface transportation programs.

House Energy and Commerce Chairman Fred Upton, Republican from Michigan, said his committee has asked Secretary of State Hillary Clinton to testify next week on the decision.

American-Made Energy

“I’m disappointed that Republicans in Congress forced this decision, but it does not change my administration’s commitment to American-made energy,” Obama said in a statement. “We will continue to look for new ways to partner with the oil and gas industry to increase our energy security.”

TransCanada applied for a U.S. permit in 2008. Canada is the largest U.S. oil supplier at about 2.67 million barrels a day, compared with about 970,000 barrels a day from Venezuela, which ranked fourth in exports to the U.S. in the first 10 months of 2011, according to the Energy Department. Mexico and Saudi Arabia ranked second and third in shipments to the U.S.

“Until this pipeline is constructed, the U.S. will continue to import millions of barrels of conflict oil from the Middle East and Venezuela,” TransCanada Chief Executive Officer Russ Girlingsaid in a statement. The company said the pipeline might still be ready to open in 2014 if the U.S. expedites review of its new application.

New Plans ‘Underway’

“While we are disappointed, TransCanada remains fully committed to the construction of Keystone XL,” Girling said. “Plans are already underway on a number of fronts to largely maintain the construction schedule of the project.”

Nebraska Governor Dave Heineman said today that the decision brought to a halt the environmental-review process underway in the state for a new pipeline route. Heineman, a Republican, says it’s unclear if the permit process must start over or if Nebraska can continue working on a route that takes the pipeline away from an environmentally sensitive region.

“It certainly is a major step backwards,” Heineman said in a telephone interview. “We need to make contact with TransCanada. We need to review our statutes relative to what the president did. We need to figure out if this means we have to start all over again.”

Alternate Pipelines

The ultimate fate of the project may rest on oil prices and whether alternate pipelines emerge, according Kevin Book, managing director at ClearView Energy Partners LLC, a Washington-based policy-analysis firm.

“We regard realization of the XL project as more likely under a Republican Administration in 2013, but we don’t believe the project is necessarily dead even if President Obama returns in 2013 for another term,” Book said in a client note yesterday.

If the U.S. rejects Keystone, two possible pipelines could send the crude west for export to Asian markets, according to Neil Beveridge, a Hong Kong-based analyst at Sanford C. Bernstein & Co. Canadian Prime Minister Stephen Harper touched on alternate export routes when he told Obama in a telephone call yesterday that Canada will seek to diversify its energy exports.

“If it’s not taken to the lower 48 states, I know that it will be developed and probably go to the Asian markets,” ConocoPhillips (COP) CEO Jim Mulva said yesterday at a conference in Houston. It would be a “significant lost opportunity for the United States.”

http://www.bloomberg.com/news/2012-01-18/obama-administration-is-sa...

President Swiftly Rejects Keystone XL Pipeline Plan from TransCanada

1/18/2012

The Obama Administration is expected to announce a rejection of a Canadian oil firm’s Keystone XL pipeline application. The Keystone XL pipeline has made headlines over the past year as environmentalists seek to influence Washington’s decision to allow the pipeline to be extended 2,000 miles from Alberta’s oil sands to the Gulf Coast. Republicans in the Senate have been pushing for a swift decision on the pipeline from the administration, in spite of hard evidence that it would seriously damage American ecosystems in its construction in operation. This latest move is sure to be seen as a triumph for those in opposition of the destructive plan.

The Obama administration’s decision today comes with a statement of concern over the pipeline’s chosen path through Nebraska’s delicate Sandhills. The adminstration will allow TransCanada — the developer of the pipeline — to find a different route around the delicate ecosystem and then reapply, but that process could take at least until the after the November Presidential election. The President’s statement on the pipeline was clear.

“This announcement is not a judgment on the merits of the pipeline, but the arbitrary nature of a deadline that prevented the State Department from gathering the information necessary to approve the project and protect the American people,” President Obama said in his prepared statement, adding, “I’m disappointed that Republicans in Congress forced this decision, but it does not change my Administration’s commitment to American-made energy that creates jobs and reduces our dependence on oil.”

Back in November, in response to environmental opposition lead by the group 360.org, the President decided he was going to delay the approval of the pipeline to make way for extensive research into the environmental impact of the project. Most officials said that process would take at least until the start of 2013. In last month’s payroll tax extension bill, Republican representatives inserted language that declared the President had to make a decision about the pipeline by February 21st. The administration seems to be treading cautiously on this subject as a great many environmental activist groups are key voting sectors for Obama’s presidential reelection campaign.

“Today’s decision will be a fairly easy one for the White House to make,” noted Stephen Brown, vice president for federal government affairs for the oil refiner Tesoro Cos. ”No one who was planning on voting against the President would have been won over simply because of the approval of Keystone.”

“The Republican provision to force a decision in sixty days for a route that hasn’t been chosen yet is asking the President to write a blank check to a big foreign oil company regardless of the harm to Americans,” Daniel J. Weiss, director of Climate Strategy at the Center for American Progress said in an e-mail to the Washington Post. “Denial of the Keystone XL permit would mean that President Obama will protect Americans by ensuring that the pipeline construction and operation will not pollute our air and water. This approach is like having medical tests before deciding on surgery.”

White House Spokesperson Jay Carney said on Tuesday that it is wrong to suggest, “the president should sign into law something when there isn’t even an alternate route identified in Nebraska and when … there was an attempt to short-circuit the review process in a way that does not allow the kind of careful consideration of all the competing criteria here that needs to be done.”

Most supporters of the pipeline believe it will be a boon for the economy, create thousands of jobs, and allow us to release some tension on the unstable foreign oil market. Opponents say that TransCanada’s job claims are exaggerated and that energy efficiency improvements are the best way to reduce our dependence on foreign oil, not importing more foreign oil.

Via The Washington Post  http://www.washingtonpost.com/national/health-science/obama-adminis...