Investing in Infrastructure

The Keystone Pipeline project that will connect Alberta, Canada to Illinois and Oklahoma has faced some stiff opposition. In an exclusive interview, Robert Jones, VP for the Keystone Pipeline, explains how the project is progressing and reveals how he fought off the critics.

“We will meet or exceed industry and government standards that have been designed to ensure public safety”
-Robert Jones, Keystone Pipeline

With a rising demand for energy in North America, it is imperative that the US expands its key oil supplies so that future supply disruptions in other parts of the world do not create such ferocious impacts on prices, as witnessed earlier this year. One option close to home is Canada. The US currently buys around 1.8 million barrels of oil per day from Canada, and forecasters predict that number will rise to almost another three million barrels a day between now and 2020.

The Keystone Pipeline is one innovative solution to link the surging demand with a reliable and stable supply of crude oil. The 2148-mile pipeline will transport crude oil from Hardisty, Alberta to US Midwest markets at Wood River and Pakota, Illinois as well as Cushing, Oklahoma. The Canadian portion of the project involves the conversion of approximately 537 miles of existing Canadian mainline pipeline facilities from natural gas to crude oil transmission service, and the construction of approximately 232 miles of pipeline, pump stations and terminal facilities at Hardisty, Alberta. The US portion of the project includes the construction of approximately 1379 miles of pipeline and pump stations. The pipeline will have an initial nominal capacity of 435,000 barrels per day in late 2009 and will be expanded to a nominal capacity of 590,000 barrels per day in late 2010. Keystone currently has contracts in place with shippers totaling 495,000 barrels per day, with an average term of 18 years.

Before construction could begin in the second quarter of 2008, TransCanada Corp and ConocoPhillips, who own half the pipeline each after a deal earlier this year, had to apply to both the US and Canadian governments to get the work permitted. In 2007, National Energy Board approval was given for two major regulatory applications to construct and operate the Canadian portion of the project. Keystone finally got the go ahead after receiving a Presidential Permit from the US State Department in March 2008 to build the line across the nations' border.

In the wake of pending approval, two North Dakota residents have filed an initiated measure that asks voters to stop similar projects in the future and they have also stated that they hope their petitions will cause the Keystone project to be moved to a safer location. Their main concerns are over the perceived environmental impact of the oil pipelines on water supplies on Lake Ashtabula and the Cheyenne River. The pair believe that water supplies could be quickly poisoned, and are particularly concerned about the impact of Canadian tar sands oil because of its chemical content. So far around four percent of landowners in the Keystone's path have refused to sign on the project. Robert Jones, VP for the Keystone Pipeline, has said that the project remains committed to the prevention of pipeline oil spills and all other concerns that the public may have. "The safety of the public and our employees is our top priority," he says. "We will meet or exceed industry and government standards that have been designed to ensure public safety. Our commitment is reflected in the design and construction of our facilities, as well as in our operating and maintenance practices."

Jones goes on to explain that the Keystone Pipeline will use non-destructive examination equipment to inspect all welds and then apply a coating to the weld to protect it from corrosion. "Additionally, prior to being placed into operation, all new pipeline sections are pressure tested with water up to at least 125 percent of the pipeline's maximum allowable operating pressure," says Jones. Pipeline maintenance activities will also include regular aerial patrols and internal pipeline inspection using specialized electronic inspection tools. The pipeline will also be continuously monitored using state-of-the-art supervisory control and data acquisition (SCADA) and leak detection systems.

Challenges
As well as facing resistance, there have been several other challenges in terms of getting construction, maintenance and operation of facilities authorized. "Preparing optimal construction schedules that considered all environmental restriction timing windows was particularly tough," explains Jones. "For example in both Canada and the US, Keystone's construction program had to be developed to avoid various biological resources such as fisheries, protected plants and wildlife species to comply with restrictive seasonal activity time periods."

Additionally Jones says that there are restrictions that affect construction procedures regarding biophysical resources or soil conservation. "In certain regions, mitigation measures such as additional construction timing restrictions or altering some procedures were established to reduce or avoid effects to the natural environment," explains Jones.

Since construction started in the second quarter of 2008, the Keystone project has faced some additional challenges that it couldn't have prepared for. In the 2008 construction season, the project experienced some extremely wet conditions in Manitoba, North Dakota and South Dakota as it was one of the wettest years in recorded history, and the wettest year in North Dakota history. "But, despite these conditions we are continuing to make progress on pipeline construction and are on schedule to meet the pipeline's anticipated in-service date," states Jones.

Design and construction
While designing the pipeline and facilities alongside it, Jones allowed for several new technologies and materials, for example, high-strength steel and specialized welding techniques developed especially for high-pressure pipelines. Also all pipes will be delivered from qualified manufacturers with a corrosion resistant protective coating to protect against corrosion for as long as possible.

During the construction process the pipelines will be buried with a minimum depth of cover of four feet depending on the land use. However, in areas of consolidated rock, the pipeline will be buried with a minimum depth cover of three feet. The permanent right-of-way easements - the strips of land set aside to constrict and operate a pipeline - will measure approximately 50 feet in width, although temporary workspace will be required during construction.

Environmental and social impacts
Jones has taken several steps to minimize both the environmental and social effects that the construction and operation of the Keystone Pipeline will bring. In terms of the environment, Jones says that during construction the goal is to avoid or minimize any impact on the land. Prior to construction, an extensive effort goes into collecting data along the pipeline route and Keystone's stakeholder consultation process is to engage dialogue with landowners and the public to ensure environmental planning efforts are made to avoid any impacts where possible. The land and environment data is collected, analyzed by third party experts to ensure impacts can either be avoided or that environmental protection measures are put in place to minimize or mitigate any effects to the greatest extent.

"Keystone will also be designed so that it meets or exceeds all applicable standards for the safe design and operation of oil pipelines and pumping facilities," says Jones. "We also plan to develop and implement an Emergency Response Plan before the pipeline is operational."

In order to minimize social impact, Keystone's comprehensive stakeholder engagement program was developed and adapted to meet specific stakeholder needs according to the nature, location and potential effects of the project. Stakeholders include landowners and residents, community leaders, including federal, provincial and state, regulatory agencies, emergency services organizations, special interest groups and co-located right-of-way owners. Keystone's community relations program encourages stakeholders to learn about proposed activities, be engaged in the consultation process and be involved in addressing issues and opportunities that may affect them.

Various approaches to communicate and reach out were employed depending on the stakeholder or audience. This included project introduction and follow-up letters, fact sheets and brochures, news releases, personal visits, meetings and consultations. "We recognize the importance of incorporating public input into project plans," explains Jones. "Through consultation Keystone can address questions and concerns by integrating important public input into activities, such as sharing project information, gathering input throughout the planning phase and incorporating feedback into its project design and implementing as appropriate."

As we move into 2009, the Keystone Pipeline is moving at full steam ahead in order to ensure that the timeline will be met and that the project will be operating at a nominal capacity of 435,000 barrels per day within the next 12 months. Jones is confident that this target will be met, and although there is bound to be controversy in any project of this size he believes that the Keystone Project has done all it can to ensure that as little environmental and social impact is made on the pipelines surrounding countryside as possible.

Fact File

• The total length of the Keystone Pipeline is 2148 miles
• Approximately 1379 miles of new pipeline will be constructed in the US
• The Canadian portion includes the construction of approximately 232 miles of new pipeline and the conversion of approximately 537 miles of existing TransCanada pipeline from natural gas to crude oil transmission
• The new pipeline will be 30 inches in diameter to Illinois and 36 inches from Nebraska/Kansas border to Cushing, Oklahoma
• The pipeline will be buried with a minimum depth of cover of four feet, depending on land use
• The estimates operating pressure of a new pipeline sections will be 1440 psi. The existing pipeline proposed for conversion to crude oil transportation will be operated at it s current approved allowable operating pressure of 880 psig

Project timeline

2008
- Complete receiving regulatory decisions and permits
- Ongoing easement acquisition activities in Alberta, Manitoba, North Dakota, South Dakota, Nebraska, Kansas (mainline), Missouri and Illinois
- Initiate conversion of exisiting facilities and construction of new facilities in Canada, North Dakota and South Dakota
- Begin easement acquisition on Cushing section in Kansas and Oklahoma

2009
- Construction of new facilities in Canada, Nebraska, Kansas, Misouri and Illinois
- Anticipate Keystone in-service by year end
- Keystone Wood River Patoka portion to be completed
- A nominal capacity of 435,000 barrels per day

2010
- Anticipate Keystone expansion in-service by year end
- Keystone Cushing part to be completed
- Nominal capacity expanded to 590,000 barrels per day

2011
- Keystone Gulf Coast portion to be completed

2012
- Keystone Steele City portion to be completed and pipeline to be up and running

Expansion and extension

The proposed Keystone Gulf Coast Expansion Project (Keystone XL) is complementary to the Keystone Pipeline and would potentially serve existing refineries and markets in the US Gulf Coast in Texas. The proposed project will be approximately 1980-mile 36-ince crude oil pipeline that would begin at Hardisty, Alberta and extend southeast through Saskatchewan, Montana, South Dakota and Nebraska. It would incorporate a portion of the Keystone Pipeline to be constructed through Kansas to Cushing, Oklahoma, before continuing through Oklahoma to a delivery point near existing terminals in Nederland, Texas to serve the Post Arthur, Texas marketplace. A 50-mile pipeline to the Houston, Texas marketplace has also been proposed.

The expansion is expected to cost approximately $7 billion. When completed, the expansion will increase the commercial design of the Keystone Pipeline system from 590,000 barrels per day to around 1.1 million barrels per day, and result in a total capital investment of approximately $12.2 billion.