CALGARY - TransCanada Corp. said Friday its controversial and long-delayed Keystone XL pipeline will take longer and cost more to bring into service than previously expected as it continues to await U.S. government approval.
The company (TSX:TRP) had been sticking to its late 2014 or early 2015 start up target, but the longer the regulatory process dragged on, the more difficult achieving that target became.
It is now looking at a late-2015 start-up for the pipeline, which would deliver 830,000 barrels per day from Alberta to U.S. markets, if and once it is built.
"Maintaining a project through this kind of delay is not inexpensive," CEO Russ Girling said following the company's annual meeting
The project's most recent estimate was $5.4 billion, including pipe to connect to North Dakota oil fields. Girling said it's too soon to say just how much that amount is expected to rise.
"There are thousands of moving parts inside of a construction project of this magnitude and we have to go through those in detail."
The costs could involve anything from paying contractors to making sure pipe that has been sitting outside in the sun for months is protected.
"Efficiency is gained by timely approval of things and you don't have timely approval things, it costs the economy money and that's just an unfortunate fact of these kinds of delays," said Girling.
The company has said it needs two solid summer construction seasons to get the pipe in the ground.
So far, TransCanada has sunk US$1.8 billion into the project. It figures that if Keystone XL doesn't go ahead, it can recoup about half of that amount by using some equipment and materials in other projects. Money spent on things like engineering work, however, would be out the window.
TransCanada shares closed down 63 cents at $49.14 on the Toronto Stock Exchange.
Keystone XL is only one of several megaprojects planned by TransCanada over the next three years, but it has been a target of environmental groups mainly because of its connection with the oilsands industry.
There have also been concerns about the effects of the pipeline itself, mostly in Nebraska, which is home to a sensitive ecosystem of grass-covered sand dunes known as the Sand Hills and sits atop an important fresh-water aquifer.
And the debate has only intensified the process nears its end, Girling said.
"I believe that those that are fundamentally opposed to our pipeline are getting louder and more shrill as we move towards a decision," he said.
The Obama administration rejected an earlier iteration of the Keystone XL project — which would have run from Hardisty, Alta., to the Texas coast— last year because of environmental concerns in Nebraska.
The company responded by breaking up the project into two parts and going ahead with the southern leg between Oklahoma and the U.S. Gulf Coast, which does not require presidential approval. That US$2.6-billion project is about 70 per cent complete and on track to start delivering crude late this year.
The U.S. State Department is weighing whether to award a permit for the more contentious northern part, which crosses the border and includes a reworked route through Nebraska. Critics have scoffed at the new route, saying it still poses a threat to the Ogallala aquifer and Sand Hills region.
The U.S. State Department issued a draft environmental report earlier last month that flagged no major concerns with the project.
A 45-day public comment period has wrapped up, and next the State Department will issue a final environmental report. After that, it will consult with other government agencies for up to 90 to determine if the project is in the U.S. national interest. U.S. President Barack Obama has the final say.
Earlier this week the Environmental Protection Agency denounced the State Department's positive draft review, urging it to rethink its finding that Keystone XL would not lead to higher output from Alberta's carbon-intensive oilsands or boost greenhouse gas emissions.
Also Friday, TransCanada reported it earned $446 million, or 63 cents per share, in its first quarter, up from 50 cents per share or $352 million in the first quarter of 2012.
Comparable earnings for the quarter, which exclude unrealized gains and losses from derivatives, were $370 million or 52 cents per share, up slightly from $363 million or 52 cents per share a year ago.
Revenue was $2.25 billion, up from $1.9 billion in the first quarter of 2012.
Analysts polled by Thomson Reuters were on average expecting earnings per share of 53 cents and revenues of $2.1 billion.
Meanwhile, the company has been looking to ship crude to Eastern Canadian refineries by converting part of its underused natural gas mainline to oil service.
New pipe would need to built between Quebec and Saint John, N.B., which is home to the huge Irving Oil refinery. Saint John is also home to a big deepwater port, from which crude can be exported via tanker.
The 181 million metric tons of (CO2e) from Keystone XL is equivalent to the tailpipe emissions from more than 37.7 million cars. This is more cars than are currently registered on the entire West Coast (California, Washington, and Oregon), plus Florida, Michigan, and New York – combined.
Between 2015 and 2050, the pipeline alone would result in emissions of 6.34 billion metric tons of CO2e. This amount is greater than the 2011 total annual carbon dioxide emissions of the United States.
If approved, the Keystone XL pipeline would be responsible for emissions equal to that of 51 coal-fired power plants.
The International Energy Agency has said that two-thirds of known fossil fuel reserves must remain undeveloped if we are to avoid a 2 degree C temperature rise.
U.S. demand for oil has declined since 2005 by 2.25 million barrels per day or the equivalent of almost three Keystone XL pipelines.
More on the oilsands and Canada’s environment:
Syncrude Upgrader and Oil Sands
The refining or upgrading of the tarry bitumen which lies under the oil sands consumes far more oil and energy than conventional oil and produces almost twice as much carbon. Each barrel of oil requires 3-5 barrels of fresh water from the neighboring Athabasca River. About 90% of this is returned as toxic tailings into the vast unlined tailings ponds that dot the landscape. Syncrude alone dumps 500,000 tons of toxic tailings into just one of their tailings ponds everyday.
Boreal Forest and Coast Mountains / Atlin Lake, British Columbia | 2001
This area, located in the extreme northwest of British Columbia, marks the western boundary of the Boreal region. On the border of the Yukon and Southeast Alaska, the western flank of these mountains descends into Alaska's Tongass Rainforest and British Columbia's Great Bear Rainforest. Far from the oil sands, the greatest remaining coastal temperate and marine ecosystem is imminently threatened by the proposal to build a 750-mile pipeline to pump 550,000 barrels per day of oil sands crude to the coast. Once there, it would be shipped through some of the most treacherous waters, virtually assuring an ecological disaster at some point in the future.
Tailings Pond in Winter, Abstract #2 / Alberta Tar Sands | 2010
Even in the extreme cold of the winter, the toxic tailings ponds do not freeze. On one particularly cold morning, the partially frozen tailings, sand, liquid tailings and oil residue, combined to produce abstractions that reminded me of a Jackson Pollock canvas.
Aspen and Spruce | Northern Alberta | 2001
Photographed in late autumn in softly falling snow, a solitary spruce is set against a sea of aspen. The Boreal Forest of northern Canada is perhaps the best and largest example of a largely intact forest ecosystem. Canada's Boreal Forest alone stores an amount of carbon equal to ten times the total annual global emissions from all fossil fuel consumption.
Tar Sands at Night #1 | Alberta Oil Sands | 2010
Twenty four hours a day the oil sands eats into the most carbon rich forest ecosystem on the planet. Storing almost twice as much carbon per hectare as tropical rainforests, the boreal forest is the planet's greatest terrestrial carbon storehouse. To the industry, these diverse and ecologically significant forests and wetlands are referred to as overburden, the forest to be stripped and the wetlands dredged and replaced by mines and tailings ponds so vast they can be seen from outer space.
Dry Tailings #2 | Alberta Tar Sands | 2010
In an effort to deal with the problem of tailings ponds, Suncor is experimenting with dry tailings technology. This has the potential to limit, or eliminate, the need for vast tailings ponds in the future and lessen this aspect of the oil sands' impact.
Tailings Pond Abstract #2 | Alberta Tar Sands / 2010
So large are the Alberta Tar Sands tailings ponds that they can be seen from space. It has been estimated by Natural Resources Canada that the industry to date has produced enough toxic waste to fill a canal 32 feet deep by 65 feet wide from Fort McMurray to Edmonton, and on to Ottawa, a distance of over 2,000 miles. In this image, the sky is reflected in the toxic and oily waste of a tailings pond.
Confluence of Carcajou River and Mackenzie River | Mackenzie Valley, NWT | 2005
The Caracajou River winds back and forth creating this oxbow of wetlands as it joins the Mackenzie flowing north to the Beaufort Sea. This region, almost entirely pristine, and the third largest watershed basin in the world, will be directly impacted by the proposed Mackenzie Valley National Gas Pipeline to fuel the energy needs of the Alberta Oil Sands mega-project.
Black Cliff | Alberta Oil Sands | 2005
Oil sands pit mining is done in benches or steps. These benches are each approximately 12-15 meters high. Giant shovels dig the oil sand and place it into heavy hauler trucks that range in size from 240 tons to the largest trucks, which have a 400-ton capacity.
Oil Sands Upgrader in Winter| Alberta Oil Sands | 2010
The Alberta oil sands are Canada's single largest source of carbon. They produce about as much annually as the nation of Denmark. The refining of the tar-like bitumen requires more water and uses almost twice as much energy as the production of conventional oil. Particularly visible in winter, vast plumes of toxic pollution fill the skies. The oil sands are so large they create their own weather systems.
Boreal Forest and Wetland | Athabasca Delta Northern Alberta | 2010
Located just 70 miles downstream from the Alberta oil sands, the Athabasca Delta is the world's largest freshwater delta. It lies at the convergence of North America's four major flyways and is a critical stopover for migrating waterfowl and considered one of the most globally significant wetlands. It is threatened both by the massive water consumption of the tar sands and its toxic tailings ponds.
Tar Pit #3
This network of roads reminded me of a claw or tentacles. It represents for me the way in which the tentacles of the tar sands reach out and wreak havoc and destruction. Proposed pipelines to American Midwest, Mackenzie Valley, and through the Great Bear Rainforest will bring new threats to these regions while the pipelines fuel new markets and ensure the proposed five fold expansion of the oil sands.