Oil & Gas

TransCanada's Girling discusses final stage of State Dept.'s pipeline review

With the State Department in its final review stage of the controversial Keystone XL pipeline, what impact will allegations of cronyism and negative environmental impacts have on State's final decision? During today's OnPoint, TransCanada CEO Russ Girling, addresses criticism of the $7 billion pipeline his company is lobbying for. He discusses the economic, environmental, and national security impacts of the project.


Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Russ Girling, CEO of TransCanada. Mr. Girling, thanks for coming on the show.

Russ Girling: Thanks, Monica.

Monica Trauzzi: Mr. Girling, with the State Department nearing a decision on whether to approve the Keystone XL pipeline, environmentalists are strongly questioning the cozy relationship that they see between TransCanada lobbyists and the State Department. Do you believe there's any evidence of cronyism between your lobbyists and the State Department, and that things have maybe gotten a little too friendly?

Russ Girling: The answer is absolutely no. I would characterize those accusations as sort of the latest tactic by those opposed to our project to discredit the regulatory process, discredit the regulators themselves, discredit our company and discredit our employees. Nothing could be further from the truth. This is a $7 billion project. We interact with numerous departments of the government, whether it be state, energy, environment, transport, defense, thousands of questions that we've had to answer. And there's constant dialogue between our corporation, all done professionally, all transparent.

Monica Trauzzi: Paul Elliott, one of your lobbyists was a former campaign aide to Secretary of State Clinton. Does that pose an issue for you?

Russ Girling: No, we hired Paul long before this issue arose. We hired Paul to deal with a lot of our government relation issues in New York. This issue descended upon us and he now is employed, you know, making sure that we can connect with those folks in Washington we need to talk to with respect to our $7 billion project. Nothing untoward, he's just doing his job.

Monica Trauzzi: Do you believe the U.S. State Department is qualified to make a judgment on an issue that deals heavily with energy and environment issues? There's been some question about that.

Russ Girling: What we're talking about is a pipeline, not necessarily an energy and environment issue. I think that those opposed to the project have tried to characterize it as a debate between fossil fuels and alternative fuels, but that's not the debate at hand. The debate at hand is where do you want to get your oil from? We're going to need that for decades to come. This country needs 10 million barrels a day of imported oil. It's really a question of where you get it from. So the issue of permitting comes down to can you permit a pipeline? There is hundreds of thousands of miles of pipeline that have been running through the United States for hundreds of years. This isn't the first rodeo in permitting a pipeline. They rely upon participating agencies like the Department of Transportation and PHMSA and EPA and others to provide the technical input they require for the permitting of this pipeline. They have every capacity to do it and it's been thorough, I can tell you, 36 months and counting of looking at every insect, plant, burial ground, aquifer. We have kicked over every stone and understand every aspect of this project and there's been qualified people on every one of those fronts.

Monica Trauzzi: NWF's Jeremy Symons was recently on the show talking about Keystone XL and he believes that your company will use the pipeline to manipulate supplies and eventually charge higher prices. He says we'll be paying about $4 billion more per year for oil as a result of this pipeline. Is TransCanada trying to raise gas prices through this pipeline?

Russ Girling: I would, again, add that to what's getting to be a long list of accusations raised by the opposition, whether that be poisoning of aquifers, emails, starting construction too soon, you know, those accusations, you'll fall into that category. I could give you a quick lesson on Economics 101, which is, all other things being equal, if we introduce 500,000 more barrels a day of supply into a fixed mix, more supply, constant demand, the prices go down.

Monica Trauzzi: Will the United States eventually become the middleman for oil exports heading to China?

Russ Girling: Add that to the long list of these accusations. The refiners that have purchased the crude oil from Canada were otherwise getting those barrels from Venezuela, those contracts are ending in 2011, '12, '13, for various political and other reasons. They need to replace that heavy crude oil. That crude oil will come into their refineries and be refined for use here in North America. There is no intent on exporting this product off the coast of the U.S. gulf to other locations.

Monica Trauzzi: OK, so on economics, a recent study out of Cornell said that your company was overestimating the number of jobs that this pipeline would create and it wouldn't actually do much to solve the employment issue that we have here in the U.S. In fact, it says that you're overestimating the jobs numbers by at least half. Are you inflating the economic benefits to make this more palatable for the U.S. audience?

Russ Girling: Absolutely not. I mean just, again, give you some macro kind of figures that we can all think about and that we can all think about directionally how large that turns into in terms of spinoff benefits. First of all, we know exactly how many people are going to be needed to construct our pipeline, about 13,000 jobs are created. As well we know the parts and pieces that we need, pumps, 7000 people will be employed doing this. So 20,000, we're pretty darn sure about that number. But to support this in context, you know, a $7 billion project, will that create jobs? Will that create an economic stimulus? It's a big, big project. Of course it will. And 500,000 barrels a day, you think of 500,000 barrels a day coming into the United States, where we can spend $100 a barrel in North America, in both refining and production, or we can send $100 a barrel offshore. Five hundred thousand barrels times about $80 a barrel gets you about $25 billion a year. Do you not think $25 billion a year of cash staying on the continent creates jobs and economic stimulus? I can't calculate how big that number is, but I can tell you it's a large number. We're not over inflating anything. I would suggest that we're conservative if I was to think about it in those terms.

Monica Trauzzi: When would you expect the U.S. to see an increase in oil supplies as a result of this pipeline?

Russ Girling: We would be prepared to construct this pipeline as soon as we get our go-ahead. If that was to occur late this year, early in 2012 we would start construction. We would de-bottleneck first the Cushing to Oklahoma bottleneck by constructing what we call phase 3 first. We would have that constructed throughout 2012. By the end of 2012 we would alleviate that bottleneck. It's about an 18-month construction period to build from Hardesty to Steel City and so by the mid-2013, end of 2013 timeframe we'll be flowing the barrels from Alberta, as well as the U.S. BOC in Montana and North Dakota crudes and the Cushing, Oklahoma crudes to the Gulf Coast.

Monica Trauzzi: How much money does your company stand to make if you get ultimate approval?

Russ Girling: This is a big project, a $7 billion project, we would expect a commensurate return. But I think, more importantly, this project is extremely important to the North American economy for all of the jobs reasons I talked about, the economic stimulus reason, and probably the most important one is the U.S. needs crude oil and we're going to supply that crude oil. And that's the biggest benefit to us all.

Monica Trauzzi: You've said the pipeline would operate under strict safety standards, but environmentalists, again, on this one say that a spill is a question of when, not if. How can you be certain that there will be no catastrophe if this is built in the United States?

Russ Girling: This pipeline is going to be built to a standard greater than any other pipeline that's ever been built in North America, 57 additional conditions on top of what was existing code. And a lot of those things are focused on improving the safety and reliability of response time. In the event that an occurrence does happen, we're prepared to move on it very, very quickly. River crossings would be a primary example, that's where a lot of focus and attention has been. Historically, you know 20, 30 years ago, they were buried 5 feet below the riverbed. Today, by code, we're required to drill underneath the riverbed at least 25 feet below the riverbed. So, in most places we're 40, 50 feet below the riverbed. If you have an incident, our monitoring system, we have 16,000 sensors on the system, satellite driven, we refresh the data every 5 seconds. We know where there's the most minute change in pressure, so the pressure drop would shut down the whole pipeline, we go in and we repair it. There will be no migration into moving the water systems, for an example.

Monica Trauzzi: Based on your conversations with all of the key players, do you expect ultimate approval from the state department?

Russ Girling: I think that denial of this permit would be a tragedy. From an environmental perspective, the Canadian oil sands is going to get developed. It would then move to Asian markets. That would mean that the U.S. would still need to import more oil into the Gulf Coast, increasing greenhouse gases. If that denial was to occur, you'd deny energy security, you'd deny jobs, deny economic stimulus and provide no benefit to the economy. So my view is denial is a lose-lose-lose-lose. This permit is very important and logic will prevail and we'll see a positive decision by the end of the year.

Monica Trauzzi: We'll end it right there. Thank you and I appreciate your time.

Russ Girling: Thank you very much.

Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.

[End of Audio]



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