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If U.S. rejects Keystone XL pipeline, Canadian oil giant could transport crude oil to Gulf Coast via St. Lawrence Seaway


CANTON - Environmental groups on the U.S. and Canadian sides of the border are keeping an eye on the massive Keystone XL oil pipeline planned from western Canada to the Gulf Coast of Texas: If it is not approved by the U.S. government, the Canadian oil giant that crafted the proposal could decide instead to ship its crude oil east through the St. Lawrence Seaway with ocean freighters, looping around the East Coast to get to Gulf Coast refineries.

That alternative route, which could be under consideration if the Keystone XL pipeline is rejected, is described as a “no action alternative” in the U.S. Department of State’s final environmental impact statement released Friday. President Barack Obama is expected to decide the fate of the 875-mile pipeline this year by signing or rejecting a permit needed to approve the project, planned by TransCanada Corp., Alberta, since 2008.

According to its proposal, the company would transport up to 830,000 barrels of crude oil per day through the 36-inch pipeline, extracted from tar sands at the Western Canadian Sedimentary Basin in Alberta and the Bakken Shale Formation in Montana. The pipeline would cross the U.S. border in Montana. It would run south through South Dakota and Nebraska, where it would link to existing pipelines for delivery to Cushing, Okla., and the Gulf Coast of Texas, where more than half of the country’s refining capacity is based. The project would create an estimated 42,100 jobs and add $3.4 billion to the U.S. economy, according to the environmental impact statement.

The statement reviews several “no action” alternative routes, including the St. Lawrence Seaway, that could be pursued by TransCanada if the pipeline plan is scrapped. Potential exists for an oil pipeline to be built from western to eastern Canada that would link to the St. Lawrence Seaway. A network of natural gas pipelines could be converted into oil lines to do so, and proposals to build such pipelines already have been developed. The report also points out that Canadian companies are increasingly using oil floating barges and freighters to transport large volumes of crude oil in the U.S.

As a case in point, the Irving oil refinery in St. John, New Brunswick, receives crude oil by rail from oil sands in western Canada and the Bakken Formation in Montana. That crude oil is also transported east by freighters on the St. Lawrence Seaway.

If the U.S. decides to reject the Keystone pipeline plan, the environmental study suggests that the St. Lawrence Seaway could be eyed by TransCanada as the primary route to ship oil from western Canada to the Gulf Coast. But the study concludes that planning such a route will likely not be considered a viable option due to “logistical challenges” and “permitting issues.” The maximum freighter size allowed on the Seaway, for instance, is 45,000 tons — a restriction that would affect Canadian oil companies seeking to transport large amounts of crude oil.

“These options would clearly be more expensive, relative to the other scenarios discussed in this section, if the ultimate destination for crude oil is the U.S. Gulf Coast,” the study states.

Nevertheless, environmental groups whose mission is to protect the St. Lawrence River are concerned such a proposal could be under consideration if the Keystone XL pipeline isn’t approved. Save the River, an environmental advocacy group in Clayton, has actively opposed oil pipelines planned in Canada that could affect tributaries that flow into the St. Lawrence River in the event of an oil spill, said D. Lee Willbanks, executive director of the nonprofit.

Mr. Willbanks is concerned that Canadian oil companies seeking to do business with U.S. refineries have been shipping more oil using barges and freighters on the St. Lawrence River. He said if the Keystone XL pipeline is not approved, a problematic scenario could be created if the Canadian developer decides to shift its attention to the St. Lawrence Seaway as its primary transportation route.

“Most environmental reviews look at alternatives, and I’m not completely surprised this was discussed because we’ve seen pressure from the Alberta oil field companies trying to get that product to market however they can,” Mr. Willbanks said. “We’ve seen the rail cars being used since they don’t have a pipeline, so it’s not surprising that they would look at the Seaway as an alternative.”

Ocean freighters, with capacities of up to 40,000 tons allowed on the Seaway, would pose a major threat of oil spills to the Seaway, Mr. Willbanks said.

“It wouldn’t take but one mistake, and the amount of oil that they can unload would make a significant environmental impact on the river,” he said. “We’re concerned about the difficulty of doing an emergency response and oil spill control in one of the fastest rivers in North America. And we have a tremendous number of bays, estuaries and tributaries that would be almost definitely affected by a spill.”

Moreover, the crude oil extracted by tar sand in Alberta poses a greater oil spill risk because of its greater density than other oil varieties, Mr. Willbanks said. While most oil varieties sit on the surface of the water when spilled, this particular crude oil sinks to the bottom, he said.

“When BP’s oil rig blew up in the Gulf, a lot of it came to the surface, but this oil won’t do that,” he said. “The majority of the oil that comes out of tar sand has a consistency that would put it at the bottom of whatever water it enters. In the St. Lawrence River, which gets deeper and shallower, you’d never able to recover it. Toxins in the oil would end up in your ecosystem that would last a long life at the bottom and go through several generations of fish.”

Such a large-scale operation proposed by TransCanada would greatly increase ship traffic along the Seaway, posing greater danger for oil spills, Mr. Willbanks said. And he doesn’t believe towns and villages situated along the U.S. or Canadian border would see much of an economic benefit, because the majority of Seaway traffic passes through without stopping.

Freighters “don’t really increase economic activity for people on the Canadian or U.S. sides of the river,” he said. “The benefits would go somewhere else. Massena was once hailed as the ‘Detroit of the north country’ — in 1958 that was the promise — but it wasn’t seen. Using the Seaway wouldn’t be a tremendous economic benefit, because the jobs are only going to be at the originating port and terminating port. What you would be seeing is an increase in risks that isn’t balanced by any kind of increase in economic activity.”

The number of freighters carrying bulk liquids along the Seaway has increased in recent years, Mr. Willbanks said.

The Cornwall, Ontario-based St. Lawrence Seaway Management Corp. reported that in 2013 the Seaway’s cargo drew a “12 percent increase in liquid bulk, as double-hulled tankers moved volumes of petroleum distillates between distribution locations to smooth out inventory levels and ensure adequate supplies in key markets.”

That’s a trend Mr. Willbanks said likely will continue due to the strong Canadian demand to find export markets for oil in the U.S.

“It’s something we’re going to pay close attention to, because Canada is doing everything it can to take every drop of rail out of the ground it can find,” he said. “Because there so much oil product, the owners are having a hard time getting it to the Gulf Coast where it can be used by refineries.”

A call made to the office of Betty S. Sutton, administrator of the St. Lawrence Seaway Development Corp., was responded to with an email from a spokesperson from the U.S. Department of Transportation in Washington, D.C., where Ms. Sutton’s office is located.

“Our top priority at the Saint Lawrence Seaway Development Corporation is to ensure the safe and efficient transportation of all goods that move through the locks,” the email stated, declining to provide more information.

A spokesperson from the St. Lawrence Seaway Management Corp. said senior officials were not available to comment Tuesday.

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