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Robert Jones, TransCanada Vice President, Says Asian Markets An Option If U.S. Rejects Keystone XL

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ROBERT JONES TRANSCANADA
Robert Jones, TransCanada Corp.'s Vice President for Keystone Pipelines, smiles as he addresses the Rotary Club of Oklahoma City, in Oklahoma City, Tuesday, Jan. 10, 2012. Jones said Canadian oil producers will certainly look to Asian markets if the Obama administration fails to approve the Keystone XL pipeline project. (AP Photo/Sue Ogrocki) | AP

OKLAHOMA CITY (AP) — If the U.S. government doesn't approve plans for the 1,700-mile Keystone XL oil pipeline from Canada to Texas, Canadian oil producers will look to Asian markets, a company executive said Tuesday.

Robert Jones, TransCanada Corp.'s vice president for Keystone pipelines, said that while the company prefers to ship oil from the tar sands in western Canada to Gulf Coast refineries in Texas, he acknowledged Asian markets, particularly China, are an attractive option.

"China's economy is growing at a rate of 9 to 11 percent every year, so they are very interested in buying Canadian oil," Jones said during a meeting of the Downtown Rotary at the Petroleum Club in Oklahoma City. "Personally, I think it makes much more sense for us to continue to develop oil in the nation and keep it within the continent, because it benefits both countries and it's just efficient. However, if the border is shut to Canada, we will go west. We will go to Asian markets. There's no question about that."

A payroll tax bill President Barack Obama signed into law last month includes a Republican-sponsored provision that sets a Feb. 21 deadline for Obama to make a decision on whether to approve the pipeline. The project has been a politically thorny issue for Obama because it pits two key Democratic constituencies against each other — unions that support the jobs it would create and environmental groups concerned the pipeline could foul underground and surface water supplies and increase air pollution around refineries.

Meanwhile, TransCanada on Tuesday released a breakdown of the 20,000 jobs the company says the $7 billion Keystone XL project would create in the U.S., including 13,000 in construction and 7,000 in manufacturing.

"These are new, real U.S. jobs," TransCanada's President and CEO Russ Girling said in a statement. "Thirteen thousand Americans would be put to work constructing our Keystone XL project. Seven thousand more jobs would be created in the U.S. manufacturing sector, making the materials needed to build Keystone XL."

Opponents of the project say those figures are inflated, and a State Department report last summer said the pipeline would create up to 6,000 jobs during construction.

The project suffered a setback when Nebraska lawmakers voted to delay construction over concerns it could threaten the environmentally sensitive Sandhills region of northern Nebraska that supplies water to eight states. Jones said Tuesday the company is working closely with the Nebraska Department of Environmental Quality to develop an alternative corridor in that state.

"I anticipate that to happen fairly quickly though, so we can get public comment and feedback and then start acquiring the property easements that we need to get through Nebraska," Jones said.

The pipeline has enjoyed tremendous support in Oklahoma, even from independent oil producers who say the southern section of the Keystone XL that runs from the pipeline hub in Cushing to refineries in the Gulf would relieve a glut of oil supply at Cushing that is driving down the price of Oklahoma crude oil.

"Increasing amounts of crude oil at the Cushing pipeline hub has outpaced outgoing pipeline capacity there, forcing more oil into storage and glutting the local market," said Mike Terry, president of the Oklahoma Independent Petroleum Association. "The result is Oklahoma Sweet crude oil has become less valuable. Today, Oklahoma Sweet trades for $10 less (per barrel), and has traded for as much as $28 less, than crude oil produced on the Louisiana coast or in the North Sea."

OIPA estimates that a $10-per-barrel price difference costs royalty owners an estimated $1.5 million per day and costs the state about $75 million annually in gross production and income taxes.

Gov. Mary Fallin, who visited Tuesday with Jones and other executives from Oklahoma oil and gas companies, sent a letter to Obama asking him to immediately approve the Keystone XL project.

"The pipeline represents an enormous and undeniable opportunity for job-creation and economic stimulus at a time when the nation is sorely in need of both," Fallin wrote. "The creation of the pipeline will also help to ensure our nation's future energy needs are met with resources from politically stable regions of the world right here in North America."

The next phase of the Keystone XL project is to build the section from Cushing to the Gulf Coast, and TransCanada already has secured 99 percent of the rights of way in Oklahoma, Jones said.

Three construction crews of about 700 workers each would start building at three locations "and literally march about 200 miles until they were complete," he said.

Even though the company has the necessary permits needed to start construction in Oklahoma and Texas, Jones said work on that part of the project cannot begin until all a federal permit are issued.

"You can't get ahead of yourself," he said. "It's the domino effect. You really do need to get that one permit."

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Sean Murphy can be reached at www.twitter.com/apseanmurphy

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