Keystone pipeline and Marcellus/Utica

I'm confused. How does the Keystone Pipeline affect us here in the Marcellus/Utica region? Will it interfere with the drilling here?

Thanks!

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Permalink Reply by Joseph-Ohio on November 18, 2015 at 5:23am
You've written :

'I'm not sure what theories you are looking for me to confirm or debunk specifically and would be happy to provide my thoughts as requested.'

My reply :

Oh, just anything new or something that changes your mind about any perspective you've shared with us thus far, Daryl.

Thinking here you being on the inside you'll learn of any such much sooner than we.

Thanks.

J-O
Permalink Reply by Daryl Brown on November 18, 2015 at 5:29am

Will do.  Thanks

Permalink Reply by Joseph-Ohio on November 18, 2015 at 5:36am
http://ca.reuters.com/article/businessNews/idCAKCN0T62GJ20151117

The link above takes you to a Reuters Article about TransCanada future intentions and Keystone XL is briefly mentioned.

Accessed it via that API SmartBrief newsletter I receive.
Permalink Reply by Heidlebergman on November 18, 2015 at 7:11am
There are 4 phases to the Keystone Pipeline project. All but phase 4 are complete. Phase 1 and 2 have the capacity to transport 590,000 barrels per day. Phase 3 has the capacity to transport 700,000 barrels per day. I do not know the exact proposed numbers for phase 4. The United States is already importing oil from Canada via the Keystone pipeline...its phase 4 that is causing the political stir.
Permalink Reply by Daryl Brown on November 18, 2015 at 8:23am

Commercial Information The first leg of the Keystone Pipeline from Hardisty, Alta. to Wood River and Patoka, Ill. has capacity of 435,000 barrels per day. Phase II of the project to Cushing, Okla. increases capacity to 591,000 barrels per day. Keystone XL will add an additional 500,000 barrels per day in 2013. When completed, Keystone XL will increase the commercial design of the Keystone Pipeline System from 591,000 barrels per day to approximately 1.1 million barrels per day.  

Heidlebergman is correct phase 1 - 3 are done and yes oil has been flowing from Canada for years but as you can see from above the phase 4 would significantly increase the volume so that is what I think everyone chatters about so much.  I did find some info that indicated 100,000 barrels would on ramp in the Bakken so there is a little something for the US producer to get excited about.

Permalink Reply by Thomas Malcolm Pendergast on November 22, 2015 at 1:11pm

Hi Daryl,

Re "The first leg of the Keystone Pipeline from Hardisty, Alta. to Wood River and Patoka, Ill. has capacity of 435,000 barrels per day . . . "

Isn't that the Enbridge Alberta Clipper pipeline that runs from Hardisty thru Superior Wi to Patoka?

Permalink Reply by Joseph-Ohio on November 18, 2015 at 3:00pm
Permalink Reply by Joseph-Ohio on November 18, 2015 at 11:20pm

http://gomarcellusshale.com/forum/topics/column-mexico-oil-swap-a-r...

A link above to another earlier post pro Keystone.

My meaning is who's right and who's wrong ?

To me pro-Keystone is pro-North America.

To me if it's pro-development it's right to be pro-Keystone.

Go around the Sioux Nation.

Our House and Senate should override the President's Keystone veto.

Build it.

JMHOs

Permalink Reply by Elnathan Cory on November 19, 2015 at 5:14pm
It's a negative for us. We are trying to sell our oil. We don't want oil from Canada!!!##
Permalink Reply by Joseph-Ohio on November 19, 2015 at 10:18pm

Well Elnathan, I read you; and you (in Crawford County PA, I assume, as that's your GMS group) are a near geographic neighbor of ours (as we're in adjacent Ashtabula County OH).

So, to bottom line it neighbor, I take what you write very seriously; to the point of admitting that I may be wrong in my interpretation of how things are (or aren't) working out for us as landowners / lessors / potential lessors.

I'll also add that I realize that the first and biggest winners on Keystone XL would be the O & G power cartel that are involved; and that's not the 1st time that has occurred in history / recent history.

I'd like to read how other of our neighbors in Ashtabula County Ohio and Crawford County PA interpret these things.

I guess I'm back on the fence as my 1st / best friends in all of this are my near geography neighbors.

However, another important fact to realize is that from what I read on here, it's 3/4 complete, and I think on that account, it's going to happen whether we like it or not.  Also, by virtue of that, all of this, seems to me, is looking a lot like election year politics / delay of game.

Good luck to all of us neighbor, I think we need it.

Permalink Reply by Thomas Malcolm Pendergast on November 20, 2015 at 12:34pm

Hi Jett!

I hope I can clear up some confusion.

For the last six years, an Enbridge pipeline - the 'Alberta Clipper' - has been transporting Canadian heavy crude (diluted with light sweet and/or condensate sourced in Canada) through the twin ports of Duluth, MN and Superior, WI (where some of it is delivered to a smallish Koch Industies refinery there, which, by the way uses both the diluent and the heavy crude).  From Duluth/Superior, the pipeline delivers the Canadian Crude to the Patoka terminal.  Branch lines carry the crude to BP's Whiting refinery, Husky's Lima refinery and BP-Husky's Toledo refinery (about 40,000 bbls/day each).  As far as I know, none of the Alberta Clipper-delivered Canadian crude is delivered to the Gulf Coast.

Some Canadian heavy crude producers do source light sweet and/or condensate from North Dakota but they also have domestic supplies.  When and how much they source from the US or Canada depends on supply and demand in the market.

Here are a couple of sources of reliable information on energy issues:

Bricker and Eckler Law firm (Columbus);  especially Matt Warner Esq's articles

Penn Energy Daily Petroleum Update

Mondaq Newsletters (www.mondaq.com); mostly contributions from law firms

These are all free and much more reliable and informative than mainstream media!

Below is an article from The Oxford Club I think you'll like:

Obama's Real Problem With the Keystone XL

Matthew Carr, Emerging Trends Strategist, The Oxford Club


editor headshotFriday was a big day for the markets.

The jobs numbers came out Friday morn  . . .[deleted to save a little space] . . .


To top it all off, Obama took to the podium and announced that TransCanada's (NYSE: TRP) application to build the Keystone Pipeline XL would be rejected. 

Shares of TransCanada tumbled more than 6%. 

The news shouldn't be a shock. As you may recall, Obama vetoed a bill approving the construction of the pipeline back in February. 

The nearly 1,200-mile pipeline proposal, which would bring heavy bitumen from Canada to refiners in the U.S. Gulf of Mexico, has been in legislative limbo for seven years. 

But Friday's announcement is only the tip of the iceberg. This has been one of the most politically heated and bizarrely managed construction projects in recent memory. 

Before Obama's announcement, TransCanada sent a letter to the U.S. State Department asking for the Justin Trudeau review of the pipeline to be suspended. The pipeline company was at odds with Nebraska over the route through the state. 

And here's the real eyebrow raiser... the United States already has a pipeline filled with tar sands oil coming over the border. Enbridge's (TSX: ENB) $3.3 billion Alberta Clipper pipeline, which carries 450,000 barrels per day of Alberta oil sands bitumen into Wisconsin, was given the thumbs-up by President Obama and wasn't nearly as controversial. 

Major Loophole in American Markets...

Several studies have uncovered a major irregularity in the current markets... That is handing certain investors outsized gains.

One study says it's "generated the greatest average annual return for investors since 2000."

Another by a prominent university says this loophole can reduce risk "by more than half." Click here to find out how.


On March 3, 2010, when the final welds on the pipeline were made, it was just another day for the most part.

The first shipments started moving their way through the Alberta Clipper in October 2010. That's just over five years ago. 

And Enbridge applied for an expansion that would allow it to carry as much as 800,000 barrels per day. Which is basically the same amount the Keystone Pipeline would have carried from Alberta, Canada, through Montana, South Dakota and Nebraska on its way to refineries in Texas. 

So, why did TransCanada fail where Enbridge succeeded? 

The answer is in TransCanada's request for suspension of review. 

TransCanada said it expected that it would take at least seven to 12 months to get through the state court system.

But rumors of a denial had been brewing since earlier this year. 

And those rumors came to fruition. The State Department rejected TransCanada's request for the suspension. By the end of the week, the entire project application had been rejected. 

The story of Keystone is one of partisanship. It's become a political issue. 

TransCanada went from spending tens of thousands in lobbying legislators to spending millions. 

But one of the biggest obstacles to the success of the pipeline came from an unexpected place - a conservative Republican stronghold.

The "Stand with Randy" movement emerged from TransCanada's dispute with Randy Thompson, a landowner in Nebraska. TransCanada made an offer to use Thompson's mother's land. That offer was rejected.

TransCanada came back with a final offer, threatening that if it wasn't accepted, the pipeline company would initiate "eminent domain." 

This really happened... Nebraska passed a law that gave TransCanada eminent domain. This gives TransCanada the right to force landowners to sell their property so it can construct and maintain the pipeline.

Needless to say, the locals didn't take this well.

Ironically, the eminent domain decision ultimately doomed the Keystone Pipeline. It meant the pipeline's route crossed over the Ogallala Aquifer as well as the Sandhills, which are both environmentally sensitive areas. 

Its rejection was almost certain. 

Days later, TransCanada enacted eminent domain and gobbled up the final 12% of easements it needed from holdout landowners.

Despite the property issues, the Keystone Pipeline dilemma will be painted as environmentalists versus oil. 

But the story is much more complex. 

It's not about lower oil prices - we have those. It's not about rejecting Canadian oil - we have an approved pipeline that brings this in daily. And we have crude swaps in place with Canada and Mexico. 

Keystone became something larger than itself. 

Even TransCanada CEO Russ Girling, in his condemnation of the Obama decision, portrayed the issue as something different: "It is disappointing the administration appears to have said yes to more oil imports from Iran and Venezuela over oil from Canada, the United States' strongest ally and trading partner, a country with rule of law and values consistent with the U.S."

U.S. imports of crude from OPEC, which includes Venezuela and Iran (which we don't import oil from), have been falling while Canadian imports of crude have steadily increased...

Chart


You will notice that in recent years we've begun importing more crude from Canada than from OPEC. 

So, does this impact U.S. crude prices? No.

Does it mean Canadian imports of crude will stop? No.

Will the U.S. import more crude from OPEC, Venezuela and Iran? Probably not.

The Keystone Pipeline became a victim of its own devices when it became a political talking point. Even Russ Girling turned it into a divisive political issue in his dissent, labeling the situation as "us versus them."

So what does all of this mean for investors?

For U.S. oil investors, it's a neutral event at the moment. 

For Canadian producers, it's a bearish situation. 

When Justin Trudeau's party took control, the threat of Canada building a pipeline to the West to export crude to Asia basically died. This was the leverage Stephen Harper's party, which held power for a decade, used to try to force U.S. approval of the Keystone XL. 

Canadian oil, like U.S. oil, is trapped in North America... which is why prices in both countries are much lower than the global benchmarks. 

If Canadian crude were exported to the rest of the world, prices would rise. 

It's important to note that 99% of all Canadian oil is exported to the United States. Plus, 100% of its natural gas. 

Basically all of Canada's pipelines run south. So, outside of the environmental issues and political battle lines drawn in the U.S., this is an ongoing chess match. When Canada's pipelines reach capacity in 2017, there's going to be a huge problem. That's when we'll see a glut and a backup as Canadian crude has nowhere to go. 

Good investing,

Matthew

Permalink Reply by Joseph-Ohio on November 20, 2015 at 11:26pm

TMP,

The link to the article explaining the investment 'loophole' isn't working at this time.

Curious to know if it's explaining the 'hedge' investment practice that has been and is still occurring in the US market these days ?

Do you think this market will extend into 2017 (locking Canada's production closed to a larger market) ?

Is it an accidental 'spin-off' of anti Oil & Natural Gas behaviors ? Or could that (market share / market control / isolating North America from overseas markets) be the intent in the 1st place ?

I should remind everyone reading that I've grown even more cynical over the years I've spent sharing my thoughts on these pages.

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