May 21 (Reuters) – TransCanada Corp is in talks with customers about shipping Canadian crude to the United States by rail as an alternative route as its Keystone XL pipeline project that has been mired in political delays, Chief Executive Russ Girling said on Wednesday.
“We are absolutely considering a rail option,” Girling told Reuters on the sidelines of a conference in New York. “Our customers have needed to wait for several years, so we’re in discussions now with them over the rail option.”
The comments are the first to confirm growing speculation that TransCanada might use more costly railway shipments as a stopgap alternative to the proposed Keystone XL pipeline, whose approval has been delayed by the U.S. government.
Girling said the firm was exploring shipping crude by rail from Hardisty in Canada, the main storage and pipeline hub, to Steele City, Nebraska, where it would flow into an existing pipeline to the Gulf refining hub.
The Keystone XL pipeline would deliver crude from the oil sands of northern Alberta to the U.S. Gulf Coast. The Obama administration signaled last month that there would be further delays to the regulatory process, which requires approval from the State Department.
The pipeline has drawn sharp criticism from environmental groups who say it will fuel more production of Canada’s energy-intensive oil sands. But the oil-by-rail movement has also come under scrutiny after a series of explosive derailments, including the one in Lac-Megantic, Quebec, last summer that killed 47.
TransCanada has waited more than five years for the Obama administration to make a decision on the $5.4 billion project, which would carry up to 830,000 barrels per day of crude from the Hardisty to Steele City, then join Keystone’s existing line.
While the project has received a mostly favorable environmental report, the State Department last month delayed a decision beyond the mid-term elections in November while a legal dispute over the line’s route in Nebraska is settled.
The line has the backing of the Canadian government and conservative Prime Minister Stephen Harper called the project “a no-brainer.” Canada is counting on new export lines to boost discounted oil prices in the country and accommodate rising production from the oil sands. (Reporting by Catherine Ngai and Scott Haggett; Editing by Jessica Resnick-Ault and Marguerita Choy)
