Phil Flynn
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Phil Flynn

Phil Flynn is writer of The Energy Report, a daily market commentary discussing oil, the Middle East, American government, economics, and their effects on the world's energies markets, as well as other commodity markets. Contact Mr. Flynn at (888) 264-5665

[Daniel J. Graeber, UPI]

State regulators approve of the route for the pipeline that was once an oil-industry scapegoat, but ordered TransCanada to avoid a sensitive ecological area in the state.

A decision spanning two U.S. presidential terms came to a head Monday when regulators in Nebraska cleared a remaining hurdle for the Keystone XL oil pipeline.

Referencing long-standing concerns about the Sandhills region in Nebraska, some of which were the source of legal battles, regulators on the state Public Service Commission sided against the preferred route for Keystone XL and instead voted for an alternative route that allayed ecological concerns.

“After careful evaluation and consideration of all the evidence adduced, and the careful weighing of all the issues, factors and aspects of the proposed routes of the Keystone XL pipeline, we find that the alternative mainline route is in the public interest and shall be approved,” the decision read.

The Nebraska Department of Environmental Quality published a report more than three years ago on the need to avoid the Sandhills area. Rod Johnson, a former Republican state legislator and commissioner for the PSC, said Monday that parts of the pipeline would be exposed and therefore vulnerable if TransCanada built the $8 billion pipeline through the region as planned.

The DEQ’s report from 2013 on the Sandhills concerns was followed by widespread protests over the pipeline. Following Monday’s decision, the Sierra Club said the pipeline planner still needs to clear a few more hurdles before it gets built.

“It is disappointing that the Public Service Commission sided with a foreign oil company over the interests of American communities who would be threatened by this pipeline, but we remain confident that Keystone XL will never be built,” Sierra Club Executive Director Michael Brune said in a statement.

Apart from environmental concerns, Brune said TransCanada was already facing market headwinds given the lack of shipper commitments for the pipeline. The U.S. State Department under President Barack Obama denied a Keystone XL permit on environmental grounds.

In addressing third quarter performance, the company said it had about 500,000 barrels of oil per day committed to the pipeline, which is about 60 percent of the total design capacity.

Sandy Fielden, the director of research, commodities and energy at Morningstar, told UPI last week that TransCanada will commit to the project if shippers commit to the project, but stressed “the whole thing is kind of a chicken and egg saga, with producers reluctant to pull the trigger and TransCanada scared to invest without their support.”

On Monday, Fielden said Keystone XL does nothing until it’s up and running. While it does alleviate some concerns about the lack of infrastructure in North America, he said the project, despite the support from U.S. President Donald Trump, is primarily a foreign pipeline.

“Once built it will definitely deliver more Canadian crude to the Gulf Coast, and potentially some from the Bakken shale oil reserve in North Dakota,” he said.

With more U.S. oil leaving the continent, meanwhile, Phil Flynn, a senior market analyst for the PRICE Futures Group in Chicago, added Keystone XL breaks the Canadian landlock in North America and gives it an opportunity to displace the dwindling supplies of Venezuelan oil on the market.

U.S. analysis from 2015 said most Canadian pipeline projects would break even with oil holding steady at between $65 and $75 per barrel. The State Department under Trump said in its permitting decision the break-evens for Canadian oil projects remained the same, but the sector in general has proven itself to be resilient in the low-price cycle.

Brent crude oil was flirting with $60 per barrel in Monday trading.

State Commissioner Chrystal Rhoades in the dissenting opinion said she “vigorously” disagreed with the majority, saying no man-made infrastructure is fail safe.

“As we stated in our submission to the Nebraska Public Service Commission, this pipeline will mean greater energy security for all North Americans by making sure people have access to Alberta’s responsibly developed energy resources,” Alberta Premier Rachel Notley said in a statement.

Keystone itself has not yet issued a statement on the approval. The original leg of its Keystone pipeline in the United States ruptured and released 5,000 barrels of oil in rural South Dakota last week.

https://www.upi.com/Energy-News/2017/11/20/Keystone-XL-clears-Nebraska-hurdle/5631511197055/

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