OIL AND GAS:

Groups urge stronger U.S. standards for oil sands pipelines

Story updated at 3:12 p.m. EST.

The thick, sticky type of oil carried from Canada to the United States in several high-profile pipelines also brings a higher risk of leaks and ruptures that demand stronger government safety standards, green groups and pipeline watchdogs argue today in a new report.

Safety along the nation's 2.3-million-plus miles of oil and gas pipelines became a flashpoint for many policymakers last year after a Michigan rupture spilled an estimated 800,000 gallons of crude and a gas leak caused a fatal blast in California.

Today's safety report aims to link those lapses to proposed pipelines that would carry more crude from the Canadian oil sands to U.S. refineries -- specifically, the multibillion-dollar Keystone XL line, which would run through a half-dozen states where green groups will talk up their safety concerns at local events today.

At the heart of the environmentalists' and watchdogs' case against approval for Keystone XL, which remains under review by the State Department, is the prospect of transporting hundreds of thousands of barrels per day of the heavy diluted bitumen fuel known as "DilBit."

Shipping DilBit across the Plains states, the "primary purpose" of the proposed pipeline, requires higher operating pressures and temperatures that heighten the risk of corrosion-related ruptures, according to the new report.

"This infrastructure will lock the United States into a continued reliance on pipelines that may not be operated or regulated adequately to meet the unique safety requirements for DilBit for decades to come," the report's authors wrote of Keystone XL.

Collaborating on the release were the Natural Resources Defense Council, National Wildlife Federation, Sierra Club and Pipeline Safety Trust, a watchdog group often invited to the Hill for independent testimony on oil and gas transportation safety issues.

Among the most significant statistics in the report is a comparison between the rate of internal corrosion-related spills along Canadian pipelines versus those in the U.S. network. The advocacy groups found more than 16 times as many spills per 10,000 miles along Canada's pipelines than in the United States, adding that "the corrosive characteristics of DilBit may account for the disparity."

But the report's authors also acknowledged that the two countries' different methods of collecting safety data make it difficult to directly compare the Canadian rate to the U.S. rate, concluding only that the propensity of DilBit to cause corrosion problems is a "yet unanswered question" that should be further evaluated by U.S. regulators before new oil sands pipelines are allowed to proceed.

The Canadian Energy Resources Conservation Board (ERCB), an independent regulator of that nation's oil and gas development, blasted the American environmentalists for "factually inaccurate" assertions made in their attempt to compare U.S. and Canadian spill rates.

The authors of the report failed to note that Canada's regulator "requires all incidents to be reported, regardless of whether or not any product is spilled, and also regardless of spill volume, whereas in the U.S. only spills of five barrels of liquids or more are required to be reported," ERCB said in a statement. "This results in a misleading comparison of pipeline failure numbers between the U.S. and Alberta."

ERCB also challenged the environmentalists' and watchdogs' assertion that DilBit behaves in a more unpredictable manner during transport than conventional crude. Once the bitumen at the core of Canadian oil sands crude is diluted, ERCB added, "DilBit should behave in much the same manner as other crude oils of similar characteristics."

The absence of a definitive conclusion on the corrosion risk of DilBit drew immediate scrutiny from advocates for the Keystone XL project. Michael Whatley, a vice president at the industry-backed Consumer Energy Alliance (CEA), rapped the report for making an "apples to oranges" comparison of spill rates in the two nations.

"We've been bringing oil sands down from Alberta for decades," Whatley said of the Canadian oil sands hub, "and we have not seen problems associated with corrosion whatsoever. The fact is, as we've increased the amount of DilBit that has been coming down here [to the United States], the safety rates, the accident rates, the corrosion rates are substantially better today than they were before we started bringing this stuff down."

Whatley cited data compiled by the Association of Oil Pipe Lines, an industry group, that showed the total number of U.S. pipeline spills declining by 60 percent over the past decade, as volumes of imported Canadian oil have increased. During the same period, according to the pipeline group, corrosion-related lapses decreased by 70 percent.

Pipeline price increases

The stakes for today's latest volley from green groups and watchdogs were heightened yesterday by an announcement from the Keystone XL project's sponsor, Calgary, Alberta-based TransCanada Corp., that the cost of the pipeline would rise by $1 billion amid uncertainty over its review by Obama administration regulators.

In its latest earnings statement, TransCanada acknowledged that the State Department's evaluation of the pipeline "is continuing within a heightened political environment and opposition to the project has been expressed."

The pipeline giant also adjusted its estimated time frame for receiving a final decision from the Obama administration from the first quarter of this year to "mid to late 2011," leaving Keystone XL on track to begin carrying crude to the Gulf Coast in 2013.

Congressional Republicans and a handful of Democrats have aligned with TransCanada and the oil industry in backing the $7-billion-plus pipeline as a national security boost that would require less imported crude from the Middle East (E&ENews PM, Feb. 11). Still more Democrats are siding with environmentalists in decrying Keystone XL as an unnecessary enabling of continued fossil-fuel consumption (E&ENews PM, July 6, 2010).

The State Department has yet to announce whether it plans to conduct a supplemental environmental review of the pipeline, as urged by U.S. EPA and a bipartisan group of lawmakers but opposed by the industry. A final decision on that move could come as soon as this month.

Click here to read the advocacy groups' pipeline report.

Click here to read the ERCB response to today's report.

Updated story includes the Canadian Energy Resources Conservation Board's response to the study.

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