TransCanada open to building Keystone in segments

Thu Jan 19, 2012 2:02pm EST
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By Jeffrey Jones

CALGARY, Alberta (Reuters) - TransCanada Corp may build a $2 billion southern portion of its Keystone XL oil pipeline first following the initial rejection of the full-blown project, which would mesh with one of President Barack Obama's goals but put it in direct competition with another major proposal.

TransCanada had broached the idea of constructing the Gulf Coast expansion part of the Canada-to-Texas oil pipeline before as a way to help alleviate an oil glut at the Cushing, Oklahoma, storage hub and get more crude to Texas refineries, but Chief Executive Russ Girling said it has now gained in priority.

"Clearly, with yesterday's decision, we are now open to amending or changing our plans to build this in segments if that's what the company and our shippers believe is the right thing to do," Girling said at an investor conference.

His comments come a day after Washington rejected TransCanada's application for the $7 billion Keystone XL pipeline, angering Republican lawmakers who had tried to force an approval and disappointing Canada's government and oil industry which seek to expand oil sands exports.

The project is a flashpoint in the debate between energy security and environmental projection, although Obama said it was not rejected on its merits but on a too-tight deadline set by Congress late last year.

The company plans to reapply to build the controversial 1,661-mile pipeline and Girling said he believes it could be in service by the end of 2014, assuming it gets a green light in the first quarter of next year.

That puts it past the time when rivals Enterprise Products Partners and Enbridge Inc aim to ship 400,000 barrels a day to the Gulf from Cushing on a reversed Seaway pipeline.

Girling said that any idea of moving forward with the Gulf Coast portion of Keystone, which would move 830,000 barrels a day and include a recently announced Houston leg, had previously depended on the company's talks with the U.S. State Department, which ultimately rejected the application.   Continued...