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What's Behind the Confusion Over Oil Sands Pipeline Capacity?

Watchdog groups have questioned why energy giant TransCanada has been using two different figures for the capacity of its proposed Keystone XL pipeline

By Nicholas Kusnetz

Mar 8, 2011

"They use that figure because it makes it sound better," Blackburn told SolveClimate News. "The question is whether the pipeline is needed, or whether the pipeline should be as big as it is."

Government documents associated with Keystone XL, including the State Department's from 2010, which will inform the final decision, reveal the official intentions of TransCanada.

"Keystone's goal is to initially transport up to 700,000 bpd (barrels per day) of crude oil by pipeline from the WCSB to the United States," the agency says, using an acronym for the tar sands region. "At maximum capacity … the project would have the potential to transport a total of 900,000 bpd."

A Simple Business Decision

Indeed, Howard says the 900,000 figure can be found in every one of its regulatory filings to Canadian and U.S. government authorities and the six states that fall along the Keystone XL route.

So why use the lower figure at all, especially in materials most accessible to the public and the press? Howard says the company is doing so to show potential customers how much capacity is still for sale.

The data suggests there is still a fair amount.

TransCanada's statements and informational material generally refer to Keystone XL with the other sections of the pipeline that have already been approved — Keystone I, which to Wood River and Patoka, Ill., last June, and Keystone II, which into Cushing, Okla., in February. The its 327-mile section of Keystone XL in March 2010.

Together, the full $12 billion Keystone pipeline system would run more than 3,800 miles and be able to carry 1.29 million barrels per day, with the ability to add an additional 200,000 barrels with more pumping capacity, for a total of nearly 1.5 million barrels. In 2009, the U.S. imported roughly 950,000 barrels per day of tar sands crude from the Alberta oil patch.

So far, TransCanada has offered for contract about 1.1 million barrels per day for the full pipeline, and has already secured deals for 910,000 of them — 83 percent of the line's "commercial design," as , and 60 percent if its full capacity.

Offering up the full capacity is not in the cards right now, Howard said.

Part of the reason for the smaller sale is that it allows TransCanada to offer short-term contracts, known as discretionary volumes, on top of its regular contracts for the crude, he explained. The other part, he admitted, is uncertainty.

"When you're building a new pipeline [and] when you're building new markets, you're testing what the overall demand is," Howard said.

He couldn't say for sure whether the rest of the capacity will be sold in the future. "We certainly hope so. Ultimately that's going to depend on the market."

Due to the international nature of Keystone XL, the is tasked with approving or rejecting TransCanada's request for a presidential permit to build and operate the pipeline. If okayed, the infrastructure would transport crude from Alberta's oil sands mines and across six states to refineries in the Gulf of Mexico, crisscrossing the Ogallala Aquifer, a massive water source that supports agriculture and provides drinking water for millions in the Midwest.

A final decision is expected sometime in 2011.

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