Keystone pipeline faces competition from Trans-Mountain

There's new competition from the likes of Enbridge and Plains All American for the contested pipelines.

Construction on the Trans-Mountain pipeline is shown. (Photo: Kinder Morgan)

The proposed Keystone XL and Northern Gateway pipelines have long confronted both public and political opposition. Now they face a new and equally formidable threat: competition.

On April 12, U.S. pipeline giant Kinder Morgan Energy Partners gave the green light to a $5-billion expansion of its existing Trans-Mountain pipeline from Edmonton to the Pacific coast near Vancouver. Raising the line’s current 300,000 barrels-per-day capacity to 850,000, it surpasses the capacity promised by Calgary-based Enbridge’s Gateway plan.

And while TransCanada Corp. moves ahead with the southern leg of Keystone XL from Cushing, Okla., to the Texas coast, others are enjoying a big head start. Enbridge and Enterprise Product Partners moved up the in-service date to May 17 for the reversal of their 150,000-barrelper-day Seaway pipeline along a route parallel to Keystone, and there’s speculation that Plains All American and Marathon Petroleum could reverse their 1.2-millionbarrel Capline pipe from Louisiana to Illinois. The prospect of siphoning off the current oversupply of inland crude prompted the price differential between the North American (West Texas Intermediate) and world (Brent) crude benchmarks to shrink by half, to around US$16 a barrel.

These developments raise the possibility that Canada’s two leading pipeline companies will lose out to American rivals in the race to get fast-rising oil production from Alberta, Saskatchewan and North Dakota to higher paying refiners on the Gulf Coast, Asia and California.

Kinder’s Trans-Mountain has the advantages of operating almost incident-free for 60 years and transiting the well-travelled Yellowhead corridor as opposed to Gateway’s wilderness route. The company added a second pipe a few years ago along the most environmentally sensitive section, through the Rocky Mountain parks, and need not do any more work there. Expecting to file for regulatory approval in 2014, Kinder hopes to be in service by 2017.

“If it’s successful in building the line, Trans-Mountain will be the most significant of the Pacific directed pipelines as it will have 1.7 times the export capacity of Northern Gateway,” says Steven Paget, an energy infrastructure analyst with FirstEnergy Capital. Still, he thinks there is sufficient demand for both pipelines.

Kinder Morgan also announced it would expand its Westridge Marine Terminal in Burnaby, B.C., which would raise the number of oil tankers visiting Vancouver harbour from 80 per year to one a day. As with Gateway, that scenario will be opposed by many. “The people of B.C. don’t want our Pacific coast to be transformed into a export facility for dirty oil, no matter where the proposed pipeline runs,” says Ben West of the Wilderness Committee, an environmental group.

But Kinder may have another option: shipping oil out of the U.S. The Trans-Mountain system includes a branch into Washington state. From an environmental perspective, this would be no improvement over Westridge; it would still pose a risk of spills in the Salish Sea between Vancouver Island and the mainland. But in terms of jobs, tax revenues and resource sovereignty, the location matters.

“Right now, our plans contemplate just focusing on the Westridge facility in Burnaby,” says Kinder Morgan Canada spokesman Andrew Galarnyk. “We have not entertained going into Washington state for that purpose.”