Funny How Things Turn Out

I posted a story some months ago that 2013 will be the year of the pipeline. As my dad would say: 'in spades."

A few weeks ago I had to start a special page just to keep track of all the pipelines of interest. RBN Energy seems to focus on a) feedstocks, ethylene; b) crude-by-rail; and, c) piplines.

So, this story, sent to me by Don, is yet another piece of the puzzle, or in 21st-century parlance: another pixel in the image.

The Calgary Herald is reporting:

Calgary-based pipeline giant TransCanada Corp. is in the process of determining what, precisely, the market wants out of its Energy East pipeline through a process known as an open season, which will wrap up in June.

Energy East involves configuring part of TransCanada's underused natural gas mainline between Alberta and Quebec to handle oil, as well as laying down a chunk of new pipe to the East Coast.

The line, which could carry up to 850,000 barrels of oil per day, would deliver crude to refineries in Montreal, Quebec City and Saint John, N.B.

TransCanada rival Enbridge Inc. has a plan of its own to reverse the flow of an existing pipeline between southern Ontario and Montreal — Line 9 — in order to send Western crude east. So far, it has not announced plans to extend it to the East Coast.

Several stories are in play here:

• the most important: more and more TransCanada is looking at backup plans if President Obama kills the Keystone XL, which is more likely, based on Las Vegas odds, based on the fact that newly-elected Democratic senator from North Dakota, Ms Heidi Heitkamp, voted against the president's gun law (payback is hell);
• west-to-east is more environmentally acceptable to the Canadians (as opposed to going over, under, and/or through the beautiful Canadian Rockies); the Canadian east coast refineries are struggling with much more expensive foreign oil (one wonders why TransCanada didn't do this at the get-go; see the answer below; wow, the President really screwed the pooch on this one)
• the route would be entirely through Canada; the Canadians could thumb their noses at the US (and well-deserved)
• huge competition for Enbridge whose route through the US is problematic; already the key to their eastern access project, the Sandpiper Pipeline has been nixed by the US FERC

Not many years ago, in 2004, there was a race between Burlington Northern Railroad and Union Pacific Railroad to have the first dual-track rail between Chicago and Los Angeles. I forget who won, and it appears not to have made a difference except for bragging rights.

Mr. Juarez is a player in a modern version of the track-laying race that created the U.S.'s cross-country rail link. Today's competition is between two industry giants, Union Pacific Corp., the nation's largest railroad, and Mr. Juarez'semployer, Burlington Northern Santa Fe Corp. Both want to be the first to run side-by-side tracks between Chicago and Los Angeles, the nation's busiest freight entry point.

This 2,100-mile, two-lane railroad highway would allow multiple trains to travel the same route at different speeds -- and in opposite directions -- without trains having to stop or use sidings. Burlington Northern Santa Fe had a head start because a large portion of its Chicago-Los Angeles freight mainline, known as the Transcon, already had two lines. It has now double-tracked about 90%. That's far ahead of Union Pacific, which had less double track to begin with and constraints on capital spending. Union Pacific has completed only about 30%.

"We're ahead and we prefer to keep it that way," says Lewis Ruder, a construction engineer for Burlington Northern Santa Fe.

The article goes on, suggesting who the winner was:

Union Pacific is working feverishly to narrow the gap, although there's little chance it can catch up. When Burlington Northern Santa Fe tried to secure another track-laying machine last spring, the company quickly learned that Union Pacific had snagged it. The soonest either side could finish will be 2008.

According to wiki, it looks like the dual track was not completed until 2011 (and even then, 31 miles were still single track). But I digress. 

Back to TransCanada Energy East:

The line, which could carry up to 850,000 barrels of oil per day, would deliver crude to refineries in Montreal, Quebec City and Saint John, N.B. 

In addition to getting the oil to Canadian refineries, the oil could also be super-tanked out of Montreal via the St Lawrence Seaway. 

This is why TransCanada did not consider the west-to-east route earlier, from the linked Calgary Herald article above:

Eastern refineries have been struggling, as they rely on expensive crude imported from overseas. Most are configured to handle light, sweet oil, not the heavy stuff produced in the oilsands.

That imported oil follows prices of Brent, a benchmark for light crude produced in the North Sea. Brent trades at a big premium to West Texas Intermediate, the inland North American light benchmark, even though the two are of similar quality.

Last year, Eastern refineries imported some 720,000 barrels of oil per day from overseas suppliers — many of which are far from being political allies — to meet virtually all of their needs, said Alex Pourbaix, president of energy and oil pipelines at TransCanada.

It cost refiners along the US Gulf Coast billions of dollars to convert their light-oil refineries to heavy-oil refineries in anticipation of receiving Canadian heavy oil through the Keystone XL (wow; the president really screwed the pooch on this one, unless he wanted to make life miserable for US refiners). Well, duh.