With Keystone XL in Jeopardy, Consider These Alternatives

A few pipeline companies are in a race to be the first to receive the necessary project approvals before jams Hardisty and Edmonton, Alberta are unclogged. The economic benefits from these projects have the potential to boost the global economy. Unfortunately, the U.S. is making it hard to move the crude south of the Canadian border, with endless studies and regulatory processes holding up progress. 

What does this mean for investors? Well, if the crude can't be moved to the U.S., it will be moved across Canada to reach other markets. Pipeline companies still have to build infrastructure to take advantage of the opportunity, and investing in these companies could be the best way to play these developments.

Canadian oil bypassing U.S. markets?
TransCanada's (NYSE: TRP  ) is still awaiting approval for its controversial Keystone XL Pipeline project. Environmental studies have confirmed that the necessary safety regulations will be in place, suggesting a negligible impact on the environment, and the pipeline has been rerouted to avoid crossing a sensitive area, the Ogallala Aquifer in Nebraska. Nonetheless, the project's future remains uncertain. 

Source: NDEQ

Keystone XL, a proposed 1,179-mile, 36-inch-diameter pipeline, would connect Hardisty to Steele City, Nebraska. The pipeline would move 830,000 Bbls/d, adding more than 48,000 American jobs per year and about $9 billion annually in potential U.S. exports.

However, with the U.S. administration's rebuttal to grant such a project, Canadian companies have to find alternatives. In any event, if Americans can't get the Canadian crude, new markets will be reached to profit from it. Enbridge (NYSE: ENB  ) , seeing an opportunity while TransCanada was struggling with the approval of Keystone XL, considered reversing the flow of its Eastern Canadian Refinery Access line 9.

Line 9 is an existing 30-inch diameter pipeline with a capacity of approximately 240,000 Bbls/d, extending from Sarnia, Ontario, to Montreal, Quebec. Originally flowing eastward, the pipeline was reversed in 1998 as foreign oil from the Middle East became more affordable. Therefore, reversing the flow again is making sense because Canadian oil is more affordable than foreign oil and it would help to de-bottleneck the hubs in Alberta, providing access to eastern provinces of Quebec and New Brunswick.

However, during that time, TransCanada looked for alternatives as well and came up with a new project, the Energy East Pipeline. The 2,796-mile pipeline would move 1.1 Mbbls/d from Alberta to eastern refineries, notably in Montreal.

Source: The Canadian Press

Such a project would be beneficial for Canadians as $35 billion in gross domestic product over 40 years would be added, including over 10,000 jobs and more than $10 billion in revenue from taxes.

Notably, another company is quietly proposing a project that would move the crude from Strathcona County, Alberta to the west coast, in Burnaby, British Columbia. From there, the oil would be shipped to emerging markets such as China and India, generating a substantial profit in the process. The largest midstream and the third largest energy company in North America, Kinder Morgan (NYSE: KMI  )  proposed its Trans Mountain Pipeline, an expansion of its current 714-mile pipeline that would create a twinned pipeline, increasing the capacity from 300,000 Bbls/d to 890,000 Bbls/d. Benefits would be about 60,800 Canadian jobs and over $1 billion in revenue from taxes.

Source: Kinder Morgan

My Foolish take
Denial of Keystone XL would have a negative impact over the U.S. economy, an economy that sorely needs a boost. Still, Canadian hubs are jammed and crude oil needs to go somewhere. Therefore, if Keystone XL gets rejected, there are some interesting alternatives on the table.

TransCanada has more than 60 years of experience, and several other projects are under way. Enbridge's extensive pipeline network is an asset, and its line 9 reversal could accommodate eastern Canadian markets. Kinder's Trans Mountain expansion project for its potential to provide exporting companies cheap oil for emerging markets definitely grants Kinder an edge over its competitors.

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  • Report this Comment On October 12, 2013, at 3:41 PM, cdkeli wrote:

    That this pipeline is in so-called "jeopardy" is a strange way to describe the imminent and justified failure of an engineering debacle that would serve merely as as lasting testimonial to man's greed, technical incompetence, stupidity, and environmental indifference.

  • Report this Comment On October 12, 2013, at 5:15 PM, SARATOGA20 wrote:

    For a long time I was opposed to Key stone XL because 1) it went through and later very close to the Ogallala aquifer.-2) Trans Canada and/or Enbridge Pipeline had a terrible record for safety & large spills. Now trans Canada has re-routed the proposed line a "safe" distance from the aquifer.

    I don't know what safety provisions have or are proposed.--Pipelines ARE pipelines--The best of them have had large "spills".--Some among us oppose Keystone XL because the refining process will further pollute the environment. I to have this concern. However, Canada is NOT going to allow this asset remain dormant forever. Someone is going to get and refine this crude.---It might as well be us. The pollution caused by refining will exist no matter who refines it.--The real problem is that our contribution to world pollution will rise substantially and we will be less able to be critical of other polluters (China & India) for their lack of efforts to curb their pollution.

  • Report this Comment On October 12, 2013, at 5:28 PM, joystocks wrote:

    There are some untruths in this article. First of all Keystone XL just want to go through the U. S. They want the access to the gulf coast to send the oil to the world market. The U.S. will not get any of it. The pipeline is not all that safe as the first pipeline they put through just a few years ago had 13 leaks in the first year. They say they have moved the route off of the sensitive sand hills and the Ogalalla Aquifer. They have not moved it far enough it still goes over both. Canada's route is having the same issues, It is not safe. When the pipeline leaks they do not know how to clean it up out of water. It is thick dirty tarsands with poisonous chemicles in it, which they will not tell anyone what they are. The thick chunky part sinks in water. Michigan and Arkansas found that out.

  • Report this Comment On October 12, 2013, at 6:15 PM, GeorgePolitico02 wrote:

    Keystone XL is a good investment. Canada is a friendly, stable country and in this case will be a captive supplier--which is the next best thing to domestic production. When the oil enters our country it will be entirely up to us what to do with it. We can use it here (best choice) or in an emergency use it to support western Europe or Japan (for example) against Russian or OPEC extortion. And if we want our embargo of Iranian oil--which is aimed at preventing nuclear terrorism--to succeed, we need alternative oil supplies. Transport by pipeline is safer than transport over the ocean.

    The environmental movement should stop attacking energy production here and in Canada and instead promote alternatives--perhaps as part of a bargain that approves Keystone XL. Better to build a few windmills than to curse the fossil fuel companies.

  • Report this Comment On October 12, 2013, at 8:10 PM, Oilvet wrote:

    The absolute stupidity of the enviro whacko industry their parasitic lawyers and the boob in the White House along with the liberal mentality on energy is beyond a doubt a bigger threat to the US economy than any rag head with a bomb!

  • Report this Comment On October 12, 2013, at 8:30 PM, CaptAmericaa1 wrote:

    Not approving this pipeline would be a huge mistake. Dems declaring war on union workers and the american middle class.

  • Report this Comment On October 12, 2013, at 10:16 PM, toomuchgas wrote:

    The Obama administration won't block the pipeline, they'll just study it to death.

  • Report this Comment On October 13, 2013, at 7:07 AM, rdneal1 wrote:

    Amazing, this article reeks of stupidity. Answer me this. Since more than 90% of the tar sands oil is to be exported why does it matter what port you export it from. Why build a pipeline all the way to Texas when one of the best ports in the world is only one third the distance? Who is so foolish to think the investors of the tar sands oil have not thought of this already. The answer to these questions is simple. They have already tried to build a pipeline west and have failed, MULTIPLE TIMES!! Tar sands oil will have little, if any, benefit for the people of the United States. I suspect the people of Canada have already figured out it is the same for them.

  • Report this Comment On October 13, 2013, at 10:31 AM, bobthegoodone wrote:

    The pipeline would move 830,000 Bbls/d, adding more than 48,000 American jobs per year and about $9 billion annually in potential U.S. exports. This is the biggest line of BS so far even the oil company only says it will result in 50 to 100 full time jobs !

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