Canadian Oil Pipeline Report: Keystone XL Revival Could Spur Activity

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Following the election of U.S. President Donald Trump, a sense of optimism has arisen within North America’s oil and gas pipeline industry. After more than two years of being mired in a downturn, the revival of long delayed pipelines could prove to be a spark for the industry in 2017.

On Jan. 24, Trump signed an executive order that would pave the way for TransCanada’s Keystone XL pipeline to finally be completed after years of delay. The president’s order invited TransCanada “to promptly re-submit its application to the Department of State for a Presidential Permit for the construction and operation of the Keystone XL pipeline.” The order also directed the Secretary of State to “facilitate its expeditious review” and render a final decision regarding the permit with 60 days of the company’s submission of the application.

TransCanada acted quickly, announcing Jan. 26 that it had submitted a new application for the Presidential Permit. The company will know no later than by the end of March whether its application
is approved.

The revival of the Keystone XL project was lauded by several pipeline organizations, including the Canadian Association of Petroleum Producers (CAPP) and the Canadian Energy Pipeline Association (CEPA).

In a statement, CAPP called the executive orders a “a major step forward for
Canada, the United States and North America.” Association president and CEO Tim McMillan said that “the re
lationship that Canadian producers share with the U.S. is a critical one.”

CEPA president and CEO Chris Bloomer echoed those sentiments, adding, “While recent pipeline approvals will ensure our energy moves to tidewater, we must continue to maintain the long-standing, strong relationship that we have with our neighbors to the south. All pipeline projects in Canada remain critically important to North America’s energy interests.”

Texas-based energy lawyer Scott Marrs said that the biggest impact to the oil and pipeline industry will be an infusion of capital, as Trump’s actions removed a level of uncertainty in the market, which he called the “biggest killer of projects.”

“With President Trump’s executive order and presidential memorandums relating to the Dakota Access and Keystone XL pipeline comes certainty in the oil patch,” said Marrs, regional managing partner at the Akerman lawfirm. “With certainty comes investment and capital infusion into energy projects.”

Marrs added that the president’s executive orders were a “much-needed step in the right direction” and would lead to additional capital to fund other pipeline projects, creating “a new energy infrastructure renaissance.”

Creating more avenues of market access for Canadian oil and gas resources remains a major driver for the countries pipeline industry, McMillan said. What follows are highlights regarding projects to expand Canada’s crude oil transportation infrastructure that are under way, awaiting approval from the Alberta Energy Regulator (AER) or Canadian National Energy Board (NEB) or still in the planning stages.

Athabasca Pipeline Twinning Project

Location: Alberta

Stakeholder(s): Enbrige

Overview: The Athabasca Twinning Pipeline Project (APT) involves construction of a 36-in. diameter crude oil pipeline, originating at Enbridge’s Kirby Lake Terminal, near Fort McMurray, Alberta, and terminating at Enbridge’s Battle River Terminal, near Hardisty, Alberta. The new pipeline generally follows the company’s existing Athabasca Pipeline right of way, starting at its existing Kirby Lake Terminal, near Winifred Lake, and ending at the existing Battle River Terminal, near Hardisty. Instead of building the proposed Wood Buffalo Extension, Enbridge plans to use the Athabasca Twinning Pipeline to transport volumes south of the Enbridge Kirby Lake Terminal. The in-service date for the recently constructed APT Project was originally scheduled for 2015. However, at the request of Enbridge’s shippers, the in-service date has been delayed until 2017. This was caused by changes in production estimates from oil sands operations. The company determined it would be possible to take advantage of the existing capacity available on the APT line by combining the transportation of both Wood Buffalo and Athabasca product. By using existing infrastructure, the company says it will help to reduce environmental impacts and land disturbance, as well as eliminate the use of two partially filled pipelines running side by side. As part of the project, Enbridge Athabasca has finished construction on a new pipeline, approximately 345 km long and 36 in. in diameter, between Enbridge Athabasca’s Kirby Lake Terminal and Battle River Terminal. The projected in-service date is 2017.

Energy East Pipeline Project

Location: Alberta, Saskatchewan, Manitoba, Ontario, Québec and New Brunswick

Stakeholder(s): TransCanada

Overview: TransCanada has a 4,600-km pipeline that will carry 1.1 million bpd of crude oil from Alberta and Saskatchewan to refineries in eastern Canada and a marine terminal in New Brunswick. The project would involve converting an existing natural gas pipeline to an oil transportation pipeline, constructing new pipelines in Alberta, Saskatchewan, Manitoba, Eastern Ontario, Québec and New Brunswick to link up with the converted pipe, and constructing the associated facilities, pump stations and tank terminals. The NEB ruled Jan. 27 that the review process for the project would restart from the beginning, after the approval was stalled last year amid environmental protests. TransCanada originally planned to begin construction in late 2017, with service commencing in 2020, but now construction cannot start until at least 2018.

Keystone XL Pipeline

Location: Alberta to U.S. Midwest and Southeast

Stakeholder(s): TransCanada

Overview: The long-delayed Keystone XL pipeline project is a proposed 1,179-mile, 36-in. diameter crude oil pipeline from Hardisty, Alberta, to Steele City, Nebraska. At an estimated cost of $5.3 billion (USD), the pipeline will transport crude oil from Canada, as well as the Bakken shale region of Montana and North Dakota. The pipeline will have capacity to transport 830,000 bpd to Gulf Coast and Midwest refineries. On Jan. 26, TransCanada resubmitted its application for a Presidential Permit for a cross-border pipeline, which new U.S. President Trump ordered to be reviewed within 60 days.

Norlite Pipeline Project

Location: Alberta

Stakeholder(s): Enbridge

Overview: The $1.4 billion (CAD) Norlite Pipeline Project involves construction of a 446-km long, 24-in. diameter diluent pipeline, originating at Enbridge’s Stonefell Terminal, in Strathcona County, Alberta, and terminating at the company’s Fort McMurray South Facility, near Fort McMurray, Alberta, with a transfer line to Suncor’s East Tank Farm. The project also includes associated pumping and tankage infrastructure, with four 3,000-hp mainline pumps and a 1,000-barrel tank at Enbridge’s Stonefell site, and a 1,000-barrel tank at the Suncor site. Wherever possible, the pipeline route will follow existing pipeline rights of way, utility corridors and road allowances to ensure minimal environmental impact. Enbridge will employ industry-proven construction techniques for each of the planned crossings such as water courses, railways, roads and other pipelines. On Aug. 4, 2015, Enbridge received AER approval for the project. Construction started in summer 2015, with an expected project in-service date of the second quarter 2017.

Northern Courier Pipeline System

Location: Alberta

Stakeholder(s): TransCanada Corp., Fort Hills Energy LP

Overview: TransCanada was selected by Fort Hills Energy to design, build, own and operate the proposed $660 million Northern Courier Pipeline project, which comprises a 90-km pipeline system to transport bitumen and diluent between the Fort Hills Mine and Bitumen Extraction Facility to Suncor East Tank Farm located north of Fort McMurray, Alberta. The pipeline is fully subscribed with long-term commitments. TransCanada received approval from AER in July 2014 and began construction in October 2014. The company expects complete construction in the second quarter of this year, with pipeline commissioning scheduled for September.

Northern Gateway Pipeline Project

Location: Alberta, British Columbia

Stakeholder(s): Enbridge

Overview: In November, Enbridge withdrew its application for the proposed Northern Gateway system, which would have included two 1,177-km pipelines from Alberta to the British Columbian coastline, with associated storage tanks and terminals, at a cost of $5.5 billion.

Pembina Phase III Expansion

Location: British Columbia, Alberta

Stakeholder(s): Pembina Pipeline Corp.

Overview: Pembina Pipeline plans to proceed with constructing approximately $2 billion in pipeline expansions to its Peace and Northern Pipeline system. The Phase III Expansion will follow and expand upon certain segments of the company’s existing pipeline systems from Taylor, British Columbia, southeast to Edmonton, Alberta, to fulfill capacity needs. The core of the project involves the construction of a new 270-km, 24-in. diameter pipeline from Fox Creek, Alberta, to the Edmonton area. As a result of strong customer demand, Pembina announced in September 2014 an additional 16-in. pipeline from Fox Creek to Namao, Alberta, which will be built on the same right of way of the 24-in. line. Once both pipelines are complete, Pembina will have four distinct pipelines in the Fox Creek to Edmonton corridor with a capacity of more than 1 million bpd. Pembina received approval from the AER for the project in April 2016. The Phase III Expansion is expected to be in service in the first quarter 2017.

Trans Mountain Pipeline Expansion Project

Location: Alberta, British Columbia

Stakeholder(s): Kinder Morgan

Overview: For more than 60 years, the Trans Mountain Pipeline system has been providing the only West Coast pipeline access for Canadian oil products. From the time when Trans Mountain was first constructed in 1953, the pipeline system has adapted to meet the growing needs of customers. The pipeline system was most recently expanded in 2008 as part of the Anchor Loop Project. Approximately 158 km of pipeline was twinned between Hinton, Alberta, and Hargreaves, British Columbia. Now, the company is proposing a $5.4 billion expansion of its current 1,150-km pipeline between Strathcona County, Alberta (near Edmonton), and Burnaby, British Columbia. The proposed expansion would create a twinned pipeline that would increase the nominal capacity of the system from 300,000 bpd to 890,000 bpd. Kinder Morgan conducted an open season from fall 2011 to fall 2012 and received strong binding support. In January 2013, the company signed new long-term contracts with 13 committed customers. The company filed an application with the NEB in December 2013. Following a 29-month review, NEB concluded the project to be in the interest of the Canadian public in May 2016. The Canadian government approved the project Nov. 29, 2016. Construction of the new pipeline is scheduled to begin in September, with the expansion operations to begin in late 2019.

Upland Pipeline Project

Location: Manitoba, Saskatchewan and North Dakota

Stakeholder(s): TransCanada

Overview: TransCanada is proposing to construct, own and operate the Upland Pipeline to connect Williston Basin crude oil from various production areas in North Dakota, Saskatchewan and Manitoba to oil transportation connection points near the Manitoba-Saskatchewan border in Canada. The proposed pipeline would begin southwest of Williston, North Dakota, cross the Canada-U.S. border near Flaxton, North Dakota, and end near the Manitoba-Saskatchewan border in Canada. The project would include approximately 400 km of 20-in. pipeline and related facilities, including valve sites, tanks and new pump stations along the proposed route. The pipeline would transport up to 300,000 bpd of crude and is scheduled to be in-service in 2020.

This is not a comprehensive list of the oil pipeline projects in Canada. For more information about these and other projects, you can visit the NEB website at neb-one.gc.ca or the AER site at aer.ca.

North American Oil & Gas Pipelines provides quarterly updates of oil and gas pipeline projects in the United States in Canada. The next update will be May, covering U.S. oil pipeline projects.

Bradley Kramer is managing editor of North American Oil & Gas Pipelines. Contact him at bkramer@benjaminmedia.com.

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