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News > World

Here's Why the Keystone XL Pipeline May Never Happen

  • Deer gather at a depot used to store pipes for Transcanada Corp's planned Keystone XL oil pipeline in Gascoyne, North Dakota.

    Deer gather at a depot used to store pipes for Transcanada Corp's planned Keystone XL oil pipeline in Gascoyne, North Dakota. | Photo: Reuters

Published 3 August 2017
Opinion

Protests against environmental damage have dogged the project since its beginning.

Due to low oil prices and the high cost of extracting Canadian crude from oil sands, the proposed Keystone XL pipeline now faces a slow death as the company behind the project said that the pipeline developer doesn’t know whether it will move forward, adding that the company will make a final investment decision by December.

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“We’ll make an assessment of the commercial support and the regulatory approvals at that time,” Paul Miller, executive vice president at TransCanada Corp, Canada's No. 2 pipeline operator, said in a conference call Friday with investors.

The project seemed to have scored a final victory when U.S. President Donald Trump in March granted a presidential permit allowing the pipeline’s construction to move forward, reversing a decision by Barack Obama.

Charles Mason, a University of Wyoming professor of petroleum and gas economics, said the biggest economic problem is that synthetic crude from the Canadian deposits is considered a lower-value product because it tends to be heavier. It’s more expensive to extract and to refine into gasoline and jet fuel.

The Canadian Association of Petroleum Producers has lowered its long-term outlook for Western Canadian oil in the wake of low oil prices. It now sees 1.5 million fewer barrels being produced by 2030 than it did in its 2014 forecast.

“Frankly, in the current price climate, it’s probably not going to be a going venture unless there’s a massive improvement in technology” for processing Canadian crude, said Mason.

The 1,179-mile Keystone XL pipeline would transport oil from tar sands deposits in Alberta, Canada, across Montana and South Dakota to Nebraska, where it would connect with existing pipelines that feed Texas Gulf Coast refineries.

In addition to the economic challenges, TransCanada is also still awaiting approval from Nebraskan regulators to finalize the pipeline's proposed route through the state.

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Environmental activists who oppose the project in Nebraska said the pipeline would pass through the Sandhills, an ecologically fragile region of grass-covered sand dunes. It would also across the land of farmers and ranchers who don’t want it.

A five-member Nebraska Public Service Commission is supposed to decide by Nov. 23 whether the project serves the public’s interests. If the commission approves the route, TransCanada can initiate legal proceedings under eminent domain to gain access to the land of holdout property owners.

Jim Carlson, a farmer near Silver Creek, Nebraska, who grows corn on the pipeline’s proposed route, said they don’t believe the company will surrender without a fight.

“We can’t let our guard down,” Carlson said. “We’ve got to continue to be vigilant and proactive. TransCanada could be doing things just to throw us off.”

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