TransCanada (NYSE:TRP) has withdrawn its request to the Pipeline and Hazardous Materials Safety Administration (PHMSA) for a special permit. The permit would have allowed TransCanada to operate the proposed Keystone XL pipeline at a slightly higher pressure than current federal regulations for oil pipelines in the United States, subject to building the pipeline using stronger steel and additional safety conditions.
After listening to concerns from the public and various political leaders, TransCanada made the decision to withdraw the permit application. The company will build Keystone XL using the as-proposed stronger steel but will operate it at a lower level of pressure, consistent with current U.S. regulations.
The company recognizes it needs to take more steps to assure the public and stakeholders that the parameters of the special permit would result in a safer pipeline. The company will continue to establish an operating record which will demonstrate the strength and integrity of the Keystone Pipeline System, which has been granted a special permit.
Keystone XL will implement the additional safety measures that would have been required under the special permit. These measures offer an enhanced level of safety and would allow TransCanada to request a special permit in the future. These safety measures also will be consistent with those that have been implemented on the existing Keystone Pipeline. In issuing the special permit for Keystone, PHMSA concluded the permit would provide a level of safety equal to or greater than that provided if the pipeline were operated under the current standard.
Without the special permit, Keystone XL will meet all of its initial commercial commitments to serve Gulf Coast refineries. Keystone also will continue to work with U.S. producers in the Bakken and broader Williston Basin area to provide needed transport for growing production in Montana and the Dakotas.
The Keystone XL project received approval in March 2010 from both the South Dakota Public Utility Commission and the National Energy Board in Canada. Pending receipt of additional permits, construction is planned to begin in 2011.
When completed, the Keystone XL project will increase the commercial capacity of the overall Keystone Pipeline System from 590,000 barrels per day to approximately 1.1 million barrels per day. The $12 billion system is 83 percent subscribed with long-term, binding contracts that include commitments of 910,000 barrels per day for an average term of approximately 18 years.
Commercial operations of the first phase of the Keystone system began June 30. Construction of the extension from Steele City Nebraska to Cushing Oklahoma is one-third complete and the pipeline is expected to be operational in 2011.
Keystone XL is a planned 1,959-mile (3,134-kilometre), 36-inch crude oil pipeline stretching from Hardisty, Alberta and moving southeast through Saskatchewan, Montana, South Dakota and Nebraska. It will connect with a portion of the Keystone Pipeline that will be built through Kansas to Cushing, Oklahoma and facilitate take away capacity from U.S. hubs located on the pipeline. The pipeline will then continue on through Oklahoma to a delivery point near existing terminals in Nederland, Texas to serve the Port Arthur, Texas marketplace.