Alberta's tar sands to supply South Dakota's oil projects
Pipeline, refinery would tap into Canadian crude
Oct 23, 2007 04:30 AM
Dirk Lammers
ASSOCIATED PRESS
SIOUX FALLS, S.D.–As oil hovers around $90 (U.S.) a barrel, the race is on to tap more heavily into the world's second-largest oil reserve, and South Dakota – a major ethanol producer that typically sits on the alternative side of the fuel industry – is finding itself at the crossroads of two major oil projects.
One is a 590,000-barrel-a-day pipeline with plans to deliver Canadian crude to Patoka, Ill. and Cushing, Okla. The other is a proposed refinery that would be the first new U.S. refinery location in more than 25 years.
Supply for both projects would come from the oil sands of northern Alberta, home to some 175 billion barrels of crude, putting the region second only to Saudi Arabia in terms of the world's oil reserves.
U.S. refiners are converting their plants to handle thicker Canadian crude, and pipeline specialists such as Calgary-based TransCanada Corp. are looking to connect supply with demand.
TransCanada plans to begin construction this spring on the Keystone pipeline, a 3,456-kilometre route passing through the Dakotas, Nebraska, Kansas and Missouri.
Robert Jones, a TransCanada vice-president and director of the Keystone project, said transporting crude oil by rail or trucks is less environmentally friendly than moving it underground.
New pipelines are critical infrastructure if North America is to achieve greater energy independence, he said.
"The U.S. refiners have to do something to respond to increasing energy demands in the U.S.," Jones said. "So their choices are, import more oil offshore from foreign sources, or look to Canada and have a reliable source of crude oil to supply the refineries."
Jones said TransCanada already has firm, long-term contracts for nearly 500,000 of the 590,000 barrels that will be transported along the route each day.
That means passage along Keystone is nearly booked, and the line won't be able to supply South Dakota's other potential oil project – the Hyperion Energy Center.
Privately held Hyperion Resources of Dallas wants to build a 400,000-barrel-per-day oil refinery in either Elk Point – which sits less than 80 kilometres from the planned Keystone route – or in another undisclosed Midwest site.
The refinery would be built to handle Canadian crude and the most obvious way to get it to a refinery is by pipeline, said J.L. (Corky) Frank, a Hyperion project executive.
