Pipeline Problems
Does America Still Need Keystone?

After all these many years of dithering, Keystone XL finally has the green light from the federal government that it deserved in the first place. It almost seems fitting, then, that this pipeline beguiled by political dithering and delays is now facing yet another bump in the road at the final hour. TransCanada, the company that proposed Keystone in the first place, is apparently now taking another look at the project to make sure it will be used enough to justify its cost. The Globe and Mail reports:

TransCanada Corp. is reassessing whether oil producers in North Dakota and Montana are still interested in shipping crude through its long-delayed Keystone XL pipeline, now that they have other new options to ship their product, including the Dakota Access pipeline.

The Calgary-based company’s announcement this month comes with the Keystone XL still needing approval of its proposed route through Nebraska and with the Dakota Access, which was designed to transport about half of North Dakota’s oil production, expected to be fully operational by June.

What’s changed, then? For one, the Dakota Access pipeline, which stole Keystone’s prestigious title as America’s most contentious pipeline last year, is now helping transport crude from the Dakotas’ Bakken shale formation to refiners along America’s Gulf coast. That project makes Keystone less of a vital artery for American energy interests.

But what about Canada’s part in all of this? Alberta’s oil sands producers were looking forward to the construction of Keystone as it would provide them a route to those aforementioned American refineries, and the Dakota Access pipeline won’t serve them the way it will for U.S. frackers. For those Canadian suppliers, Keystone remains an important potential option for them to get their product to market.

So even if the rationale is diminished, this project is far from dead. And given the dynamism of U.S. shale production over the past decade, we’d be much better served to err on the side of too many pipelines, rather than too few. That’s especially true as America gears up for what could be a banner year of oil output in 2018.

In the meantime, court cases in Nebraska are holding up the routing approval process. We’ll have to wait for those to be resolved before we learn just how necessary Keystone XL really is.

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