Letter to State Dept 14-02-13 KXL

7/27/2019 Letter to State Dept 14-02-13 KXL

http://slidepdf.com/reader/full/letter-to-state-dept-14-02-13-kxl 1/5

Douglas A. GrandtPO Box 6603

Lincoln, NE 68506

February 13, 2014

Bureau of Energy Resources, Room 4843

Attn: Keystone XL Public CommentsU.S. Department of State2201 C Street NWWashington, DC 20520

Re: TransCanada permit application for the Keystone XL pipeline

Dear John Kerry and Barack Obama:

The FSEIS (Section 1.4 Market Analysis § 1.4.1.1 Introduction) clearly states vaguely, “The[Keystone XL] Project is unlikely to significantly affect the rate of extraction in oil sands....”

"The updated market analysis in the Supplemental EIS, similar to the market analysis sections inthe 2011 Final EIS and Draft Supplemental EIS concludes that the proposed Project is unlikely tosignificantly affect the rate of extraction in oil sands areas (based on expected oil prices, oil-sandssupply costs, transport costs, and supply-demand scenarios)."

If events materialize which seriously erode the authors’ expectations or quash enthusiasmand optimism for “expected oil prices, oil-sands supply costs, transport costs and supply-demand” this leaves the door open for an opposing conclusion—the Keystone XL pipeline islikely to significantly affect the rate of extraction. Mounting public disgust or a ban onCanadian or cross-border pipeline or rail projects could trigger abandonment of oil sands.

It appears that some people involved in the FSEIS preparation have felt as I do, questioningthe unsubstantiated conclusion of consultants to the D.O.S. FSEIS preparation efforts.

At the very end of Appendix C (Attachment 7, Email Correspondence) there is an email dated August 23, 2013, from Arjun N. Murti of Goldman, Sachs & Co. to Michael T. Brakke (D.O.S.)with responses to Mr. Brakke’s various requests for permission to “use, quote, cite, and/orappend certain excerpts” provided in a “Goldman Sachs analyses” and reports.

In Mr. Brakke’s August 21 email, item 2) Getting Oil out of Canada, he states the following:

a. We would like to use the following quote: “While we see significant demandfor Canadian heavy crude oil in the United States, in particular in the GulfCoast region, the main question at this time is whether sufficient pipelinetakeaway capacity will exist that crosses the Canada/ US border, withKeystone XL (TransCanada) and Alberta Clipper (Enbridge) the key projectsto watch, in our view (Exhibits 1-4). In the event that either the Keystone XL

newbuild or Alberta Clipper expansion (or both) encounter further delays, webelieve risk would grow that Canadian heavy oil/oil sands supply wouldremain trapped in the province of Alberta, putting downward pressure onWCS pricing on both an absolute basis and versus WTI” (page 2).

i. Over the phone you mentioned that this analysis has been occasionallymisinterpreted and we would welcome any written clarification you might wishto provide about the report’s conclusions, the audience it was intended for, andyour views on the outlook for oil sands production and rail transportation.// reply // [red highlighting added for emphasis]



Mr. Murti inserted the following response at the spot marked // reply // above:

On the quote, environmental groups mis-interpreted/mis-portrayed the quoteto imply a permanent halting of oil flows. That is not what we meant. We arereferring to the risk of project delays/deferrals until alternate transportationmodes are built (i.e., a different pipeline or new rail capacity). The word“trapped” was meant as a shorter -term consideration. We believe crude oilproduction in Canada will grow for many years/decades into the future given

the size of the resource and expected resource development economics.However, if Keystone XL and other key near -term pipeline projects face furtherdelay, there is a risk some projects could get pushed out in time.

[red highlighting added for emphasis]

Mr. Brakke asked a few more questions, the following being of much interest:

v. On page 15 the report mentions the estimates on rail capacity in WesternCanada that were taken into account in the report’s conclusions, by this are youreferring to loading capacity at facilities in Western Canada, or other factorsthat might cap capacity (such as availability of rail cars)? // reply // Wouldthose capacity estimates be influenced by the various announcements of newunit-train facilities that were made around Q2 earnings reporting time (such as

Keyera/Kinder Morgan; Gibson/USDG; Torq Transloading; CanexusBruderheim expansion; etc. If the rate of capacity additions were changed,would that impact the assessment of potential for bottlenecks and/or productionshut-in?) [red highlighting added for emphasis]

Mr. Murti inserted the following response at the spot marked // reply // above:

This refers to the entirety of the rail logistics chain...clearly rail loading facilitiesin Western Canada, rail cars, and rail offloading facilities at/near refineries inthe US are all needed. The timing, scope, cost, and magnitude of theinvestments clearly has a high degree of uncertainty, though the Bakkenexperience gives confidence that meaningful rail logistics infrastructure can beramped up with 12-36 months. [red highlighting added for emphasis]

Mr. Brakke asked four more questions, but this one is of particular interest:

b. Quote: “In the event WCS prices come under pressure, in particular in our bear casescenario, we would expect project delays/deferrals in the out years. While it can be difficult to delay/cancel mining oil sands projects mid-development given the large-scale, long lead time nature of oil sands mining, SAGD projects could more easily get pushed out as individual projects are typically smaller scale than mining, with CAPEX more easily adjusted.” (page 7) [red highlighting added for emphasis]

Mr. Murti responded: OK/correct.

Even a remote likelihood should demand a discussion of the elements that would precipitatesuch change and the likelihood of those elements occurring. There is too much at stake to

simply brush it off without serious contemplation. Lacking a solid, objective and transparentassessment of possibilities so far ignored, nobody can declare conclusively that the KeystoneXL (KXL) is in the National Interest.

With a comprehensive assessment, Keystone XL will be NOT IN THE NATIONAL INTEREST.

Sincerely yours,

Doug Grandt

Encl.: Arjun Murti’s August 23, 2013, email to Michael Brakke (Appendix C, Attachment 7)



From: Murti, ArjunSent: Friday, August 23, 2013 3:13 PMTo: Brakke, Michael TCc: Benes, Keith J; Nerurkar, NeeleshSubject: RE: sourcing Goldman Sachs analyses

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Arjun N. MurtiGoldman, Sachs & Co.

Disclosures applicable to research with respect to issuers, if any, mentioned herein are available through your Goldman Sachsrepresentative or at http://www.gs.com/research/hedge.html

From: Brakke, Michael T

Sent: Wednesday, August 21, 2013 7:34 PMTo: Murti, Arjun [GIR]

Cc: Benes, Keith J; Nerurkar, NeeleshSubject: sourcing Goldman Sachs analyses

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Letter to State Dept 14-02-13 KXL

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