On February 27th 2012 TransCanada Corporation announced their intension to build the Cushing Oklahoma to the Gulf Coast portion of the Keystone XL pipeline, the Keystone Phase III, a 435 mile extension of the existing Keystone pipeline to Port Arthur and Houston. The existing Keystone Pipeline Phase I runs from Hardesty, Canada to Steel City, Nebraska near the Kansas and Nebraska border. Keystone Phase II runs from Steel City to Cushing, Oklahoma where it terminates, leaving the Canadian crude oil stranded in Oklahoma along with U.S. domestic production from North Dakota that has been using the pipeline to reach the Oklahoma storage facilities. As oil prices have climbed recently the 55 million barrels of oil that can be stored in Cushing have produced a glut of oil waiting to be refined and the lowest gas prices in the nation for the mid-west.
In response to the glut of oil in Cushing, Enbridge Inc. and Enterprise Products Partners (who purchased a 50% interest in November) owners of the Seaway pipeline that runs from the gulf coast area to Cushing, Oklahoma, announced their intention to reverse the flow in their gas pipeline to move crude from Cushing to the gulf coast refineries. The reversal requires pump station additions and modifications, scheduled to be completed by June 2012, the capacity of the reversed Seaway Pipeline will be up to 150,000 barrels per day and further expansions could increase that volume. Now, TransCanada Corp. has announced that it will build a portion of the Keystone XL pipeline from the Cushing oil hub south to the Gulf Coast to compete with the Seaway pipeline while attempting to obtain approval of a revised route for the Keystone Phase IV leg to increase flow from Canada to Steel City, Nebraska.
The Keystone XL Pipeline has been very controversial. Most of the environmental controversy has focused on the porous soils of the Sandhills and fears of a possible oil leak into one of the nation's most important agricultural aquifers, TransCanada is reapplying for State Department and Presidential approval of a revised rout for the northern portion that bypasses the Sandhills. However, many who oppose the Keystone XL pipeline want to prevent the development of the oil sands resources in Canada to prevent the acceleration of global warming. The Canadian oil sands have been known for decades. Until the recent protests against the Keystone XL pipeline that labeled these oil reserves “Canadian Oil Sands,” they had been variously known as unconventional oil or crude bitumen. These oil sands have been surfaced mined in Canada with drag lines and power shovels since the late 1960’s, but until oil prices rose and technology improved these oil deposits were too expensive to exploit beyond the limited scope of surface mining. Advances in technology in both oil sand extraction and refining techniques and rising oil prices altered the economics and have made the extraction of oil sand possible.
Steam Assisted Gravity Drainage (SAGD) is the current method of extraction. In SAGD, two horizontal wells are drilled in the oil sands, one at the bottom of the formation and another about 15-20 feet above it. In each well pair, steam is injected into the upper well melting the bitumen, which flows into the lower well and is pumped to the surface. SAGD was the breakthrough that has quadrupled recoverable oil reserves and moved Canada into second place in proved world oil reserves. SAGD is cheaper than previous methods, allows very high oil production rates, and recovers up to 60% of the oil in place. It is the SAGD method that has created the need for a pipeline to deliver the oil to the American markets and the controversy. SAGD requires more energy to produce the oil and increases the carbon footprint of the crude. Those who believe completely in the positive feedback global warming model where increased CO2 raises global temperature, increases evaporation of water vapor to the atmosphere, and in turn increases the functional impact of CO2 on global warming see any increase in carbon as quickening the destruction of the earth. The Canadian oil sands increase the CO2 released in every gallon of gas adding to man’s carbon footprint. In addition, older methods of mining the oil sands left open pits that still need to be reclaimed, thought today groups of wells are typically drilled off a central pad and like fracking wells and can extend for miles in all directions. This reduces surface disturbances of the land and the footprint of the area to be reclaimed..
In June 2010 TransCanada commenced commercial operation of the first phase of the Keystone Pipeline System. Keystone's Phase I was the conversion of natural gas pipeline to crude oil pipeline and construction of a bullet line that brings the crude oil non-stop from Canada to Steel City at 435,000 barrels a day. Phase II of Keystone was an extension of the pipeline from Steele City, Nebraska to Cushing, Oklahoma and began operations in February 2011. Keystone Phase II increased the volume per day of Keystone Phase I with the addition of pumping stations, the system now runs at 591,000 barrels a day. The Seaway pipeline will begin operations in June completing the ability to pipe crude from Canada to the Gulf Coast carrying 150,000 barrels a day. The Keystone Phase III when it is completed will simply increase volume. The Keystone Phase IV when and if approved will increase volume of the upper portion of the pipeline from the current 591,000 barrels a day to 1.3 million barrels a day.
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