KEYSTONE PIPELINE COST EXPECTED TO DOUBLE, TRANSCANADA CEO SAYS

WASHINGTON– TransCanada Corp.’s chief executive said the cost to build the Keystone XL pipeline, currently estimated at $5.4 billion, is expected to double by the time the U.S. government completes its review of the largest part of the project.

Russ Girling, chief executive of the Calgary, Alberta,-based company, in an interview this week said he expects the project’s cost could increase to a “number that gets you into the high single digits to a 10 number.” He was hesitant to say the project’s cost could double. “I was actually trying to avoid saying those words,” Mr. Girling said. “Obviously, the costs have increased significantly.”

The pipeline, which would send Canadian oil sands to the Gulf Coast, has faced delays and has become a political flash point in the nation’s debate over climate change, economic growth and national security. TransCanada first submitted its application to the U.S. State Department, which has authority over cross-border oil pipelines, six years ago this Friday.

The pipeline would bring up to 830,000 barrels of oil a day, mostly from Alberta’s oil sands to Gulf Coast refineries. Of the total 1,700 miles, the southern 485 miles have already been built and are transporting oil from Cushing, Okla., to Texas. That portion of the pipeline cost the company about $2.6 billion. For the remaining approximately 1,200 miles yet to be built, TransCanada has invested $2.5 billion of the $5.4 billion figure it estimated.

Mr. Girling’s comments come after TransCanada told the South Dakota Public Utilities Commission the cost to build the South Dakota portion of the pipeline has more than doubled in the last four years, from $921.4 million to $1.97 billion. Reasons for the projected higher costs include maintaining pipes, labor agreements and inflation, according to company executives.

TransCanada is seeking updated cost estimates in other states the pipeline would cross, including Montana and Nebraska, to get a new total cost of the project. “We’ve got to complete estimates in those other regions, but the direction points in terms of a double in the cost,” Mr. Girling said.

The State Department said in April it won’t make a final decision on the pipeline until the resolution of a Nebraska state Supreme Court case, which questions a state law that approved the pipeline’s route through that state. That may not happen until the end of this year or early 2015.

“As we delay those things further, those costs will continue to increase,” Mr. Girling said. The company won’t know the final cost until–or unless–the State Department approves its permit, and it will face costs even if it’s denied the permit.

“We will incur costs, yes, not quite sure what they will all be and what equipment we might be able to use elsewhere,” said TransCanada spokesman Shawn Howard.

This never had to be. Purchase of all necessary rights-of-way and easements, plus the actual construction costs of the pipeline, and necessary auxiliary equipment to assure the proper function of the pipeline, constitute only a small part of the cost. The rest of the expense is in litigation and defending in court the access to the right to even build the pipeline, in the deferred cash flow which was not coming in from the completed pipeline, and the diversion of funds that could well and profitably be applied elsewhere.

The major obstacle to a full and equitable economic recovery, not this smoke-and-mirrors illusion of one, is the adamant refusal to recognize that petroleum is, and shall continue to be, one of the primary sources of economic growth for most part of the 21st Century, and probably well into the 22nd Century.

The myth of “peak petroleum” has been used as a reason to curb present day use of that important resource, for some far future date when it shall have become so precious that none at all could be used for anything. The reality is, that innovative technology has vastly expanded the opportunities to continue to extract petroleum in ever greater quantities, for as long as it shall take to find and exploit other LESS EXPENSIVE sources of energy. That is where the “green” energy technologies fail - so far, every one of these alternative sources is MORE costly to produce and distribute, than that energy extracted from the so-called “fossil fuels”.

You cannot mine hydrogen, and even if you could, some “environmentalist” group would come up with all sorts of specious reasons it should not be done. So failing in that, we can extract really almost limitless quantities of methane (natural gas), and it is relatively easy to distribute. So if petroleum is to be displaced at all, it shall be by natural gas, not the “green” and supposedly “environmentally friendly” technologies, which end up being even more disruptive of the environment than the coal and oil resources they were supposed to be replacing.

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