Documents show Canadian government tweaking its U.S. sales pitch

Congressional backers of Keystone XL have long pointed to its allowance for light oil from the Bakken Shale play -- a U.S. on-ramp that the pipeline's Canadian sponsor initially resisted -- as proof that the oil sands crude link would be vital to domestic fuel production.

Canada's government also has embraced the American-oil argument this year as it intensifies a push to win a presidential permit for KXL.

But internal documents that Canadian conservationists acquired through their nation's Access to Information Act show the Natural Resources ministry changing its depiction of the pipeline's U.S. crude capacity from a guaranteed minimum to a potential maximum.

A memo prepared for Canadian Natural Resources Minister Joe Oliver's March visits to Chicago and Houston, released by the Pembina Institute green group, states that "at least 20 percent of the crude carried by Keystone XL would be American." During both U.S. speeches that month, Oliver described that crude cargo as "from the U.S. Bakken."

When Oliver returned to the United States in April for a speech in New York, his briefing notes replaced the phrase "at least 20 percent" with "up to 30 percent."


The infrastructure planned for KXL by sponsor TransCanada Corp. includes two possible access points for U.S. crude along the pipeline's nearly 2,000-mile trip from the oil sands of Alberta to Gulf Coast refineries. The first sits near the Bakken in Montana and can accept up to 100,000 barrels per day (bpd), while the second would allow up to 150,000 bpd to enter in Cushing, Okla.

In order for KXL to carry at least 20 percent American oil, it would need to accept between 140,000 and 166,000 bpd from those two on-ramps. That range aligns with the total volume of crude that left the Bakken by pipeline in February, according to the North Dakota Pipeline Authority's most recent estimates, which show 20 percent of oil departing the region by pipe compared with 71 percent by rail.

For KXL to accept 30 percent U.S. crude, both on-ramps would need to run at full strength, shipping 250,000 bpd of the pipeline's initial 700,000-barrel capacity. TransCanada told the State Department during its KXL review that it had secured commitments from Bakken shippers to run 65,000 bpd of oil from the northern access point.

"Up to 250,000 barrels of oil per day can come from both the Bakken and other U.S. sources (i.e., Cushing, Oklahoma, Texas, for example)," company spokesman Shawn Howard said via email. Confidentiality agreements with crude shippers prevent TransCanada from discussing the specific apportionment of space on the Keystone system, he added.

Critics of KXL charged Oliver and other pipeline promoters with putting a false all-American spin on the project to lock down U.S. support.

"This is a clear instance of the pro-Keystone XL camp telling Americans what it thinks they want to hear about the tar sands pipeline, whether it's true or not," Natural Resources Defense Council international program attorney Anthony Swift said via email.

"It was only after a long battle that TransCanada permitted a small on-ramp in Montana. When push comes to shove, Keystone XL is a proposed tar sands pipeline -- and if approved, that's what it will move."

A spokeswoman for Natural Resources Canada, Jacinthe Perras, attributed its portrayal of KXL's U.S. capacity to TransCanada and Oil Sands Fact Check, a pro-pipeline group supported by the American Petroleum Institute (API) and other industry players. That group stated last year that 25 percent "of the oil that will run through KXL would be from U.S. sources."

Perras, of the Canadian government, followed Oliver's April comments in describing the American space on KXL. "TransCanada has indicated that as much as 25 percent of the oil delivered by Keystone XL will be U.S.-produced oil from North Dakota, Montana and Oklahoma -- domestic oil which bottlenecks currently keep from getting efficiently to refineries," she said.

The change from minimum to maximum language in describing the pipeline's U.S. oil is not the only messaging shift indicated by the documents Pembina obtained. Between March and April, Natural Resources Canada's description of KXL as necessary "in order for crude oil production to grow" changed to reflect the spring conclusion of the U.S. State Department that the project's fate "is unlikely to have a substantial impact on the rate of development in the oil sands" (Greenwire, Aug. 26).

The federal policy director at Pembina, Clare Demerse, said in an interview that her government tends to emphasize the U.S. crude capacity of KXL only when leaving home to push for the project.

"In Canada, the government tries to make the case for Keystone by talking about getting a better price for the oil sands and generating economic benefits," she said. "On this side of the border, we hear very little from the government about the potential upside for the U.S. energy industry."

Given the meteoric rise of oil-by-rail in the Bakken, the ability of its still-humming wells to produce enough to fill proposed crude pipelines remains an open question. Tulsa, Okla.-based ONEOK Inc. last year canceled its plans for a $1.8 billion pipeline between the Bakken area and Cushing, pointing to a lack of shipper interest.

"As projects to increase pipeline capacity to more than 650,000 [bpd] and rail capacity to nearly 900,000 [bpd] come online in 2013, takeaway capacity from the Bakken could possibly exceed production growth," the Energy Information Administration wrote in March.

Continental Resources Inc. CEO Harold Hamm, once a major booster of KXL's Bakken on-ramp, told National Journal recently that he no longer believes it is necessary but still plans to keep his commitment to ship 35,000 bpd if the controversial pipeline is approved.

Click here to view the two pages of briefing notes from Natural Resources Canada that show the change in description of the U.S. oil that would flow on Keystone XL.

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