TransCanada surprised Keystone XL pipeline became 'lightning rod' for debate
'We thought we had created the best mousetrap': CEO
CALGARY - As the final hours of public hearings on one of North America's largest energy projects were set to begin, Russ Girling was taking in a bird's-eye view of his company's planned megapipeline route through a key battleground - Nebraska.
Having ditched his suit and tie for work boots after meetings in Washington over the $7-billion, 2,700-kilometre cross-border Keystone XL, the TransCanada Corp. CEO tracked the pipeline's right-of-way over the state 30 metres up in a helicopter.
The controversy over the Nebraska leg of the line centres on an aquifer in farmland the crude oil pipe would bisect.
Girling's team spent three years "working the route" of the proposed project that would expand a line from Alberta's oil hub in Hardisty to the refining centre around Houston, considering the environmental impacts, he says, including to every plant, animal and burial ground.
But Girling wanted to see for himself why state officials, environmental groups and some ranchers, farmers and other landowners are so fear-ful a potential oil spill along the pipeline could poison the source of 80 per cent of Nebraska's drinking water - the vast Ogallala aquifer.
"I wanted to be on the ground and understand every aspect of that concern," Girling, 49, said in an interview, noting he's now fully satisfied fears are unwarranted.
Shortly after Girling's aerial scan nearly two weeks ago, the U.S. State Department, which must issue a presidential permit for Keystone XL to be built, started a round of public hearings in six states the pipeline would traverse. A final forum will occur in Washington on Friday before an expected decision by the end of the year.
Unlike the warm reception Keystone XL received from most in Port Arthur, Texas, on Monday, the crowd in Lincoln, Neb. the next day was split. The company's opponents at the eight-hour hearing dismissed the pipeline's promises of energy security and job creation to continually return to concerns over water.
Nebraska's top three officials are against the pipeline and state Senator Ken Haar wants to give the state power to force its rerouting around the Ogallala.
It's a conflict the company never foresaw.
"We didn't expect the aquifer to become a major controversial issue," Girling said.
Nor did Girling foresee becoming a de facto defender of oilsands development at the heart of broader opposition to Keystone XL, which would increase bitumen shipments to the U.S. More than 1,200 people have been arrested at protests in Washington and Ottawa and a group of Nobel laureates is campaigning to block the project.
"This is a debate about the social licence to develop the oilsands," said Girling, who characterizes Keystone XL as a proxy for a larger "ideological" discussion around North America's use of hydrocarbons for energy, over renewable alternatives.
Girling, at the helm of Trans Canada, is in the hot seat.
"We've become the lightning rod for that debate," Girling said, calling arguments against the project "rhetoric."
The company expects an approval of Keystone XL but it's not guaranteed. Nonetheless, to avoid the massive cost of delays, it is preparing for construction by securing steel, pipe and pumps and acquiring warehouses for storage.
Keystone XL would ship up to 900,000 barrels of oil per day to Gulf Coast refineries, 25 per cent of which would come from booming Bakken oilfields in Montana and North Dakota, as well as production near the Cushing, Okla., trading hub.
Also called the Keystone Gulf Coast Expansion, XL builds on the pipeline from Hardisty to Wood River and Patoka, Ill. that came online last year and the extension from Steele City, Neb. to Cushing completed in February. the entire 1.1-million-barrelper-day project is worth $13 billion.
When the mammoth endeavour - TransCanada's largest to date - was conceived of, Girling never expected so much ink would be spilled.
"We thought we had created the best mousetrap," said Girling, who led the project then as president of the firm's pipelines division.
In 2007, Venezuelan President Hugo Chavez had nationalized the South American country's oil industry and supply deals with U.S. Gulf Coast refineries were set to end by 2013.
Companies in the Texas refining hub of Houston and nearby Port Arthur and Beaumont - the largest in the world - appealed to TransCanada, Girling remembered.
The idea was to tap into Alberta's oilsands, the second largest crude oil resource in the world, to meet looming oil supply shortages.
Among Girling's biggest challenges in the beginning was to get major oilsands players, including Canadian Natural Resources Ltd., Total SA and Shell Canada, to agree on a pipeline route with refiners.
A selling point to policymakers was to propose keeping the entire value chain from each barrel of oil produced in North America on the continent, by pushing those barrels through Gulf Coast refineries.
With an escalating oil price, oilsands projects kept being announced, making the Keystone project vital to marketing new production.
Prime Minister Stephen Harper has called the project a "no-brainer" for Canada's economic growth.
The first leg of the Keystone pipeline, like Enbridge Inc.'s 450,000 barrel-per-day Alberta Clipper approved in 2009, faced legal challenges that were eventually dismissed.
Neither project, though, earned the widespread attention and animosity that Keystone XL is now facing.
Early on, there were calls from some U.S. officials to scrap the project over the climate change effects linked to increased oilsands crude consumption.
But public debate over Keystone XL didn't ratchet up until an environmental disaster in April 2010 rocked the energy industry: BP's Deepwater Horizon oil spill in the Gulf of Mexico.
More than four million barrels of oil spewed into the Gulf as a result of a spill that forced the temporary closure of more than 500 kilometres of Louisiana shoreline, damaging wildlife and the region's fishing and tourism industries.
Enbridge's July 2010 spill of 19,500 barrels of oil into Michigan's Kalamazoo River - which the Calgary company is still cleaning up - added fuel to the fire. The flames were again fanned less than three months ago when ExxonMobil's pipeline under Montana's Yellowstone River ruptured, dumping 1,000 barrels of crude into the river.
"All of those things shake public confidence," Girling said.
Since a year ago, a couple months into the top job Girling took over from the retiring Hal Kvisle, the executive and his team have done more than 1,500 media interviews on Keystone XL.
The images that stand out on the largely bare walls of Girling's uncluttered downtown Calgary office, apart from works of Canadian art, are two blown-up maps of the Keystone project across from his desk.
Girling makes trips unrelated to Keystone to deal with other matters, like his visits to see employees at the firm's hydroelectric facilities in the U.S. Northeast, recently damaged by hurricane Irene.
"You've got to deal with the Keystone issues and do the day job. You're still running a $50-billion corporation here that has a lot of needs and a lot of other things going on," Girling said.
The firm is also attempting a contentious restructuring of tolls on its struggling natural gas Mainline pipeline from Alberta to Ontario, to boost profitability of the flagship line.
And there are projects worth $10 billion on the go outside Keystone XL.
But the public relations and lobbying efforts tied to Keystone have been "a huge drain" on the company's resources, more so human than financial, Girling said, adding - somewhat facetiously:
"Good thing there are 24 hours in a day."