What is the Keystone XL Pipeline?
The Keystone XL Pipeline is an extension of the Keystone oil transportation pipeline system across the U.S. and Canada. The pipeline runs from Alberta, Canada’s Western Canadian Sedimentary Basin to refineries in the states of Illinois and Texas in the U.S.
Keystone Pipeline System
The keystone pipeline system is an oil transport system in North America. It is jointly owned by T.C. Energy (previously known as Trans Canada) and the government of Alberta, Canada. The project was initiated in 2005, with the first phase being completed in 2010.
Keystone XL Pipeline
The Keystone XL Pipeline is an alternative route from Hardisty, Alberta to Steele City, Nebraska. It significantly reduces the length of the system and therefore the transportations costs. Also, it will increase the capacity by increasing the diameter of the pipeline.
The new XL pipeline is proposed to start from the same location as the Phase 1 pipeline in Alberta, Canada. The pipeline will run through Canada for 526 km. and then enter the United States at Morgan, Montana. En route to Steele City, oil produced in the U.S. will be added to the pipeline at Baker, Montana.
Timeline of the Keystone XL Pipeline Project
With environmental factors and economic viability threatening the pipeline since its inception, the go-ahead of the pipeline has been a roller coaster ride. Major events over the time period include:
- June 2008 – Keystone XL proposed by Trans Canada (now T.C. Energy)
- February 2010 – The South Dakota Public Utilities Commission grants permission for construction
- March 2010 – the National Energy Board approves the project
- September 2011 – The Cornell ILR Global Labour Institute published a report on the environmental, energy, and economic impact of the XL pipeline
- November 2011 – The State Department does not authorize the project and postpones it while studying alternative routes for the XL pipeline
- January 2015 – The pipeline was approved by the U.S. Senate and the House of Representatives
- November 2015 – U.S. President Obama stopped the project over environmental concerns
- March 2017 – U.S. President Trump revived the project by signing a presidential permit
- July 2020 – The U.S. Supreme Court ordered the halting of all work on the Keystone XL Pipeline Project in a related case
- January 2021 – U.S. President Biden revoked a key cross-border permit required to finish the Keystone XL Pipeline Project
Environmental Concerns of Keystone XL Pipeline
The Keystone XL Pipeline Project has been controversial since the start. The major issue is the environmental impact of the pipeline. The environmental risks include leaks that may contaminate the surface and underground water. Increased exports to U.S. refineries will also increase air pollution.
It is important to understand that the pipeline will bring crude tar sands from Alberta, Canada. The tar sands contain more bitumen, making the oil more viscous. Therefore, extraction and refining become more difficult, expensive, and more polluting.
Economics of Keystone XL Pipeline
Tar sands extraction is expensive to process when compared to U.S. crude, such as WTI crude. The tar sands extraction cost approximately $65 per barrel in 2019, whereas the WTI crude can be extracted at $40 per barrel. Adding up the transportation costs to refineries near the Gulf of Mexico further increases the costs.
The transportation costs via a pipeline are approximately one-third of the costs incurred through a railway. With a high breakeven price, tar sands must be transported by a pipeline to make them competitive. The Keystone XL Pipeline Project is expected to lower the associated transportation cost for Alberta crude.
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