?There is a new battle shaping up in America, and it is being fought in town halls, civic centers and boardrooms across the U.S. On one side of the table sit homeowners and business owners spooked by the recent spate of pipeline explosions and hydrocarbon releases. On the other side sit citizens and associations concerned with rising oil demand, Middle Eastern oil imports and high energy prices.

The ruckus is centered on TransCanada Corp.’s plan to extend the reach of its Keystone pipeline system, via the Keystone XL Pipeline project, to bring Canadian oil-sands crude south through the American heartland to Gulf Coast refiners.

On the anti-pipeline side, two advocacy groups based in Texas—Public Citizens Texas and Stop Tar Sands Oil Pipeline—have recently issued anti-pipeline statements and claim to have received complaints ranging from trespassing to threats of eminent domain by TransCanada representatives.

Also, in February, the National Resources Defense Council, the National Wildlife Federation, the Pipeline Safety Trust and the Sierra Club issued a joint report entitled “Tar Sands Pipelines Safety Risks,” which calls for the U.S. to reduce demand for oil, “especially tar sand oil.” These pipelines, it warns, “appear to pose new and significant risks of pipeline leaks or ruptures due to corrosion, as well as problems with leak detection and safety problems from the unstable mixture” of diluted bitumen and condensates.

On March 7, U.S. Senator Mike Johanns (R-NE) called for a delay of the Keystone pipeline in a public statement, and on March 9, Wenonah Hauter, executive director of Food & Water Watch, stated that processing tar sands generates two to four times as much greenhouse gas as producing one barrel of conventional oil.

Phase two of the Keystone pipeline project, shown here under construction, runs from Steele City, Nebraska, to Cushing, Oklahoma.

On the pro-pipeline side, the big guns at the American Petroleum Institute called on the U.S. Department of State, on January 27, 2011, to approve the Keystone pipeline project as soon as possible “as a matter of critical national interest.”

Also, on March 4, 2011, an impressive group of 66 U.S. Marine Corps, Air Force, Army and Navy veterans sent a letter to Secretary of State Hillary Clinton expressing concern for America’s energy security and urging the State Department to expeditiously approve the Keystone XL Pipeline project.

Yet, what are the facts of the matter? Just as there are two sides to every debate, there are also two energy-industry sectors—upstream production and midstream transmission—that have an interest in bringing oil-sands production from Canada to the U.S. Gulf Coast.

Energy security

The Canadian Ambassador to the U.S., Gary Doer, has a lot to say about the upstream issues of oil-sands production, and much of it dispels some of the myths. He believes the Keystone XL project will significantly improve North American energy security. And when it comes to producing reliable energy from the oil sands, he’s a true believer.

“When people argue against oil from Alberta, or argue against all oil or fossil fuels, they often neglect the fact that there is a continuing demand for energy. Oil and gas will continue to be the fuels that meet that demand,” says Doer.

He contends that the next question during any energy security debate should be, “Would Americans prefer to get their oil from Canada, a neighbor with a democratic government and with the same democratic values as the U.S., or would they prefer to get it from the Middle East or Venezuela?”

Also, the cost associated with building the pipeline is not coming from the public sector, he points out. No tax dollars are needed to subsidize the project.

“It is coming from the businesses themselves, and that investment will create an estimated 13,000 private-sector jobs directly connected to the project along with thousands of additional jobs indirectly associated with the pipeline.”

He adds, “While it’s true that Texas has a lower unemployment rate than the rest of the U.S—about 8.1% —the state needs these jobs. The pipeline project has the potential to help the economy.”

Doer says now is the time to get the building trades people, who have a 25% unemployment rate, working. “And this is not requiring any government subsidies. It’s straight-up old private-sector money. ‘Cash on the dash,’ as they say.”

Phase two of the Keystone pipeline, completed February 8, 2011, brought the capacity up to 591,000 barrels per day.

But what about the opposition?

“We acknowledge that sometimes we are dealing with advocates against oil. The unfortunate situation is that they often oppose operations on the basis of what I call ‘frozen facts.’ This is particularly an issue in Washington, not here (in Texas), and not generally where the pipeline is proposed to go.”

Frozen facts

The number one frozen fact is the perception of emissions, he says. When the oil sands were first being developed, emissions were about 80% higher than conventional oil. Today, that level has been brought down to 18%. “It’s lower than that of California thermal oil,” he says.

“Inside Washington, nobody wants to talk about coal having 60 times more emissions than the oil sands. Because nobody wants to take on the coal lobby in Washington, the oil sands have sort of become a bit of a target. I’m convinced that if people have the proper facts, the oil sands can survive this scrutiny.”

Number two is water utilization. Water volumes required to produce the oil sands were high when production first began.

“It’s like comparing the old IBM computer, which used to fill up a room, to a BlackBerry. Water usage has been reduced from 10:1 to 2:1, which is lower than ethanol. And it still must continue to improve, as far as Canadians are concerned,” he says.

Number three frozen fact is the belief that the oil sands are devastating the province (Alberta). “In fact, we’ve set aside a portion of the boreal forest in Canada that is the size of France. We’ve preserved a lot of land.”

Canada takes the preservation of its forests seriously, especially some of the undisturbed lands that historically have never been touched except by the traditional aboriginal people who lived in those areas, he says.

“The other thing we’re contending with is propaganda. I was attending a panel in Copenhagen with Canadian Prime Minister Stephen Harper last year that addressed emissions and environmental responsibility. There was a beautiful actress on the panel who said, ‘You know, I’ve weaned myself completely off of fossil fuels.’ My response is that it’s a long kayak ride from Hollywood.”

Meanwhile, Canada is going ahead with new regulations on coal production and use, which will probably eliminate all but two coal-fueled plants in Canada for the purposes of electricity, he says.

“We’re not trying to be holier than thou, and we know we have to continue to improve our footprint. We take that seriously, but critics of the oil sands should consider the fact that where other oil is coming from is not Disneyland.”

There are misunderstandings concerning the midstream arena as well.

Statistics on the Keystone project vary greatly. Almost every data point, from final total commercial capacity to total miles of pipeline, has been misreported or misunderstood. Terry Cunha, spokesman for TransCanada Corp., spells it out.

During the past two years, TransCanada has completed the first two of the four planned stages of the Keystone project.

Just the facts

“We plan to build a $13-billion, 1,661-mile, 30- and 36-inch-diameter oil pipeline to transport crude oil in the U.S.,” says Cunha. “The oil would be sourced from the Canadian oil-sands development in Fort McMurray, as well as from Montana, North Dakota and Oklahoma.”

When completed, the pipeline will run southward through the U.S. to its final termination at existing terminals in Nederland, Texas, to serve the Port Arthur, Texas, marketplace and Gulf Coast refineries. Along the line, TransCanada will install 23 pump stations in the U.S.

“During the past two years, we have been able to complete the first two of the four planned stages of the project. The first phase ran from Hardisty, Alberta, to Wood River and Patoka, Illinois.” That section, which began operations on June 30, 2010, provided some 435,000 barrels of oil per day of transportation capacity to the U.S. Midwest.

“Phase two of the project runs from Steele City, Nebraska, to Cushing, Oklahoma. That section of pipe, completed on February 8, 2011, brought the capacity up to 591,000 barrels per day. We have firm contracts from oil producers for about 530,000 barrels per day,” he says.

Today, TransCanada is busy planning for the next two sections, which are collectively named Keystone XL. These two sections comprise a $7-billion stretch that will run from Alberta through Montana, South Dakota, Nebraska and Oklahoma to the Gulf Coast. When completed, this section will move an additional 500,000 barrels per day through the system, which will bring the total commercial capacity to 1.1 million barrels of oil per day into the Midwest and Gulf Coast.

“At this point, we are waiting for the U.S. Department of State to give us a Presidential permit that will allow us to begin construction on phases three and four of this project,” says Cunha. The company needs a permit from the State Department because the pipeline will cross the border between the U.S. and Canada. TransCanada received its permit from the National Energy Board in Canada, in March 2010, to build the Canadian portion of the pipeline.

To date, the crude is a mixture of Canadian light, synthetic oil and heavy crude. But, as highlighted in Trans-Canada’s U.S. Department of State request, if the company is given permission to proceed with the buildout, it could begin moving crude production from Montana, North Dakota and Oklahoma into the Gulf Coast area.

“All of the pipeline, 100%, will be newly built,” says Cunha. “This pipeline will be built with the newest and latest technologies. It will be one of the safest pipelines built in North America. We are using the latest technologies in pipeline development, including high-grade steel, satellite-controlled shutdown valves, new SCADA systems, safety procedures and protocols. Everything we are using is the most advanced in pipeline technology.”

Currently, the U.S. is using about 19 million barrels of oil per day. About 13 million of that is imported, and Canada is the largest crude-oil exporter to the U.S. When completed in second-quarter 2013, the Keystone Project will further reduce dependency on Middle Eastern and Venezuelan imports by about 40%, says Cunha. “We are seeing what is going on in the Middle East, and the resultant high oil prices that we haven’t seen in a number of years. As we continue to articulate to numerous groups, it’s important that the U.S. continue to receive a safe and reliable supply of crude oil.”

Beyond secure energy, Cunha points to two other benefits that are derived from the next two phases of the project. For one, independent studies have predicted that the project will generate several thousand new jobs, sorely needed as the U.S. continues to struggle with 8%-plus unemployment rates. Roughly 13,000 new jobs would be gained in the construction sector. An additional 7,000 jobs would be born in manufacturing to produce pipe and equipment. Secondly, the U.S. economy would be stimulated by about $20 billion flowing into the states along the pipeline route, which would also generate millions of dollars in taxes.

At press time, the U.S. Department of State’s decision had not yet been made. Stay tuned.

TransCanada is waiting for the U.S. Department of State to issue a Presidential permit that will allow construction of phases three and four of the Keystone project.

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