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TransCanada’s original proposal for the $7 billion Keystone XL pipeline would bring crude from Canada’s oil sands to the Gulf, but after the Obama administration rejected the proposal, the company has said it will consider shortening the pipeline so that it stretches from Montana’s Bakken Shale to refiners in the Gulf of Mexico.
The project only required U.S. approval because the original proposal would have had the pipeline crossing the border with Canada. The company may still go ahead and build the segment from Montana to the Gulf without permission. Changing the project would allow TransCanada to use existing pipe materials and rights-of-way, and apply again later for federal permission to connect the pipeline to Canada.
The Bakken shale-rock formation in Montana and North Dakota is estimated to hold up to 4.3 billion barrels of technically recoverable oil. Oil production in North Dakota increased by 42 percent in November to 510,000 barrels a day — that exceeds the daily output for all of Ecuador. Production could reach as many as 750,000 barrels a day this year.
TransCanada has originally hoped that the Keystone XL pipeline would carry as much as 830,000 barrels a day from Canada’s oil sands to the Gulf. The company has already spent $1.88 billion on the pipeline project, which CEO Russ Girling still believes could be completed by 2014. The company already owns the rights to 93 percent of the land it needs to build the pipeline along the originally proposed route.
TransCanada agreed in November to re-route the project so as to avoid the environmentally sensitive Sandhills region in Nebraska, but discussions with the state have not yet to produce a new route. The U.S. State Department rejected TransCanada’s permit application yesterday, with Obama saying that the February 21 deadline for a decision, which was set by Congress, did not leave enough time to make a decision on the new Nebraska path.
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