Pipeline reversal aims to ease glut, boost gulf access

November 16, 2011

Despite the Obama administration’s move to delay a decision over the Keystone XL pipeline permit, a swirl of activity continued Wednesday over new ways to circumvent or revive the controversial pipeline.

Enbridge, a Canadian company, announced that it will purchase a half-interest in a U.S. crude oil pipeline that runs from the Gulf of Mexico coast to Cushing, Okla., and will reverse the flow to carry more oil from Canada’s oil sands and the U.S. Bakken field to refineries in Texas.

The plan would do part of what the controversial Keystone XL pipeline would do, easing a bottleneck in Cushing, a hub where the New York Mercantile Exchange prices the benchmark West Texas Intermediate crude oil.

The announcement of the deal Wednesday drove up the price of WTI crude for December delivery to $102.59 a barrel, up 3.2 percent. Because of the glut of crude oil in Cushing, there has been an unusually large gap between U.S. prices for oil and the higher price of Brent crude, the international and more widely used benchmark traded in London.

Meanwhile, the battle over the proposed Keystone XL pipeline continued despite last week’s move by the State Department to delay a decision on whether to grant a permit for the line until early 2013 to have time to alter the route.

On Wednesday, the Nebraska legislature voted 45 to 0 for a bill that the Keystone XL developer said was “favorable” to its efforts to build a leg of the pipeline there. Leading Nebraska politicians had earlier opposed the pipeline, but after TransCanada, the company that wants to build the new Keystone line, said it would change the previously proposed route to avoid the state’s ecologically sensitive Sandhills, sentiment there appears to have changed.

A TransCanada spokesman said the vote in Nebraska could shorten the State Department review process to six to nine months. That would reignite the political fight over the line, which environmentalists view as a major test for President Obama.

Separately, Friends of the Earth released more State Department documents it obtained through the Freedom of Information Act. The environmental group noted that one document, dated July 30, 2010, describes a meeting that included TransCanada officials and its lobbyist, as well as Cardno Entrix, the contractor that wrote the environmental impact statement for the State Department. Transportation Department officials overseeing U.S. pipelines also attended the meeting.

“Why is Cardno Entrix in the room during a lobbying meeting when they’re a contractor conducting an EIS?” said Damon Moglen of Friends of the Earth. “It just suggests a conflict of interest and an inappropriate relationship between Cardno Entrix and Trans­Canada and the State Department.”

Environmental groups have alleged that Cardno Entrix could not provide an independent opinion about the environmental impact because it has performed other work for TransCanada.

The State Department’s inspector general, responding to a request from members of Congress, has said he will review the department’s handling of the permitting process.

In the deal announced Wednesday, Enbridge, a pipeline company in Canada and the United States, will pay ConocoPhillips $1.15 billion for its 50 percent stake in the Seaway system, which includes the 500-mile, 30-inch-wide pipeline from Freeport, Tex., to Cushing. Seaway also has oil storage facilities on the gulf’s coast and four import docks. Enbridge said the pipeline could be carrying 150,000 barrels a day out of Cushing by early 2012 and 400,000 barrels a day by early 2013.

TransCanada spokesman James Millar said: “Enbridge’s plans have no impact on how we are approaching Keystone. We have spoken to all our major shippers, and they continue to support Keystone XL.”

Steven Mufson covers the White House. Since joining The Post, he has covered economics, China, foreign policy and energy.
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