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Keystone XL pipeline will be built, TransCanada CEO predicts

Russ Girling, chief executive of TransCanada Corp, waits to speak at the annual IHS CERAWeek conference in Houston, Texas March 4, 2014. REU
Russ Girling, chief executive of TransCanada Corp, waits to speak at the annual IHS CERAWeek conference in Houston, Texas March 4, 2014. REU

By Ernest Scheyder

HOUSTON (Reuters) - The controversial Keystone XL pipeline will receive President Obama's blessing and be built to transport crude oil from Canada to Texas, TransCanada Corp Chief Executive Russ Girling predicted on Tuesday.

Girling's confidence helps project a sense of inevitability around the $5.4 billion project, which supporters say would create badly needed jobs, and offset a recent unfavorable Nebraska court ruling and more than five years of political wrangling in Washington.

"It is the next pipeline that is going to be built" in the United States, Girling said in an interview at the IHS CERAWeek energy conference in Houston. "The marketplace continues to push us to build a pipeline. It's the right thing to do."

Girling sought to reassure many of the Canadian company's customers attending the conference, the largest gathering of energy companies in the world, that Keystone XL ultimately would open and be able to transport their crude oil to Texas refineries.

The project has become a lightning rod for opposition, with environmentalists saying oil spills would become common along the Keystone XL route and warning that the project could hasten climate change.

Still, the U.S. State Department issued a report in January that downplayed environmental concerns surrounding Keystone XL, rankling opponents and buoying supporters of the project.

The project's delay has perplexed some in Canada, where government officials have urged Obama to give his consent to TransCanada, the second-largest Canadian pipeline operator.

"We hope to see a resolution soon," Joe Oliver, Canada's minister of natural resources, said in an interview on Tuesday. "We hope it's a positive outcome."

President Obama told U.S. governors last month that he expects to make a decision on whether to approve TransCanada's Keystone plans in the next few months, a step that would end the long-running saga.

"There's no reason in my mind why it can't come to a conclusion," Girling said.

The project hit a snag last month when a Nebraska judge ruled the state's governor lacked authority to approve part of the project. Girling said he believes that ruling is a "solvable problem" and won't affect Obama's process for reaching a final decision on Keystone XL.

The Keystone pipeline network was designed in four phases, three of which have been built already, and TransCanada began shipping Canadian crude oil to Texas in January.

The Keystone XL portion of the network, roughly 800 miles through Montana, South Dakota and Nebraska, would increase capacity and allow Bakken crude oil from North Dakota and Montana to be shipped on the network.

RAIL POTENTIAL

While waiting for approval, TransCanada would be open to building railcar loading hubs for crude oil, depending on customer needs, Girling said.

Hubs to load and transport oil via train have become a popular second option in the energy industry as pipeline projects have encountered regulatory delays. TransCanada rival Enbridge has built its own network of rail hubs to service areas with limited pipeline capacity.

TransCanada already has a series of crude oil storage facilities in Texas, Oklahoma, Illinois and Alberta, and building loading hubs at each location to connect with rail lines could let it get crude oil to markets faster as it waits for regulatory approvals.

"If we need to bridge the gap between growing production and the time we bring pipelines online, we'll definitely do that," he said. "We've had conversations with our customers and railroads about making those kinds of things work out."

No plans have been made yet to build such hubs, though, Girling said.

(Reporting by Ernest Scheyder; Editing by Ken Wills)

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