Keystone Pipeline Project Moving Toward Completion

Construction on TransCanada Corporation’s long-distance, large-diameter C$5.2 billion Keystone crude oil pipeline reaching from Canada’s Alberta oil fields to markets in the U.S. Midwest is grinding to completion after more than two years of intensive construction activity.

The Keystone construction scope involved building a 2,148-mile, 30- and 36-inch pipeline to transport up to 590,000 bopd from the terminal and storage facilities at Hardisty, Alberta to markets at Wood River and Patoka, IL and on to Cushing, OK.

Mobilization of equipment and services, including construction, for the project started in 2008. Site of first construction was in North Dakota at the U.S.-Canadian border in May 2008 with Canadian construction getting under way during June 2008. Completion on the pipeline section to Cushing is scheduled for the fourth quarter of 2010.

Although Keystone is several months from completion, TransCanada has started filling completed sections of the pipeline system.

Originally, the Keystone system was a partnership between TransCanada and ConocoPhillips. However, TransCanada became the lone owner and operator in June 2009 through a purchase transaction.

TransCanada also received approval in March 2010 from the National Energy Board in Canada for a proposed Keystone expansion project. This expansion is a planned 1,959-mile, 36-inch crude oil pipeline stretching from Hardisty, Alberta and moving southeast through Saskatchewan, Montana, South Dakota and Nebraska. It will link up with a portion of the Keystone Pipeline being built through Kansas to Cushing, and facilitate take away capacity from U.S. hubs located on the pipeline. The pipeline will then continue on through Oklahoma to a delivery point near existing terminals in Nederland, TX, to serve the Port Arthur, TX, marketplace.

Contracts
In the U.S., UniversalPegasus International and Trow Engineering Consultants were contracted to handle design, engineering and construction management for the project. UniversalPegasus also provided inspection services while Trow also handled an environmental inspection this year. Construction contracts were awarded to Henkels & McCoy, Inc., Michels Corp., Price Gregory International and Sheehan Pipe Line Construction Co.

Henkels & McCoy, Inc. was assigned Spread 1, which consisted of laying 130 miles of 30-inch pipe from the U.S.-Canadian border to a point in Barnes County ND. Michels handled Spreads 2 and 3, consisting of 275 miles of 30-inch. Spread 2 picked up where the first spread left off and ran to a point in Day County, SD. Spread 3 extended into Hutchinson County, SD.

Price Gregory was contracted for Spreads 4 through 7, and Sheehan built Spread 8. This work extended from Hutchinson Country, SD through Nebraska and Missouri to Wood River and Patoka. The 295 miles of Phase II (Spreads 9, 10 and 11) extend from Illinois through Nebraska and Kansas to Cushing, OK. Price Gregory worked on Spreads 9 and 11 and Sheehan worked on Spread 10.

For the most part, the mainline route from the U.S.-Canadian border to Illinois and the Cushing section covered good pipeline construction terrain consisting of rolling hills, flat land and farm land with some rock. Trenching for the line was performed using conventional methods.

While the work was reasonably standard, the project was not without a number of challenges. For example, the route crosses countless road crossings and required 24 directionally drilled river and stream crossings along the mainline and six directionally drilled rivers on the Cushing section. The river crossings were contracted to Laney Directional Drilling and Southeast Drilling. Pre-construction activity provided the biggest challenges, such as working with 4,500 landowners and acquiring permits in six different states.

Pump stations
Keystone’s overall design initially called for 43 pump stations, including 16 stations in Canada plus the Hardisty Terminal. The U.S. mainline stretch has 23 stations installed and the Cushing section required four stations. On average, three pumping units are located at each station with an estimated 4,000 horsepower per unit.

TransCanada designated the stations by groups with Canada’s Group 1 stations located in Alberta, Group 2 in Saskatchewan, and Group 3 and Group 4 in Saskatchewan and Manitoba. The U.S. groups include Group 1 and Group 2 in North Dakota and South Dakota; Group 3 and Group 4 in Nebraska and Kansas and Group 5 in Missouri and Illinois. Installation contractors for the stations included Monad, Whaler Industrial Contracting, Inc. and Lockerbie & Hole Eastern, Inc. in Canada, and Industrial Company Wyoming, Willbros, and Jones-Blythe Construction Co. in the U.S. NUSCO Northern was the contractor for the storage tanks at the Hardisty terminal.

Keystone’s Cushing activity is considered part of Phase II of the overall project. Extending 295 miles from Steele City, NE to Cushing, the 36-inch pipeline is in the final stages of construction. The extension will connect to storage and distribution facilities at Cushing, a major crude oil marketing/refining and pipeline hub.

In addition, this phase will include construction of the four pump stations and an expansion of additional pumping units for 22 of the 23 pump stations as part of Phase I in the U.S. In Canada, Phase II also will include construction of seven pump stations and additional pumping units for seven of the 16 initial pump stations built to support Phase I.

Labor agreement for Keystone XL Pipeline
In a related development, TransCanada Corporation recently announced a Project Labor Agreement for a significant portion of U.S. construction of the proposed US$7 billion Keystone Gulf Coast Expansion Pipeline Project (Keystone XL). The agreement will provide TransCanada with a trained and ready workforce in the U.S. to construct Keystone XL. During construction, the project is expected to create over seven million hours of labor and over 13,000 new jobs for American workers.

The Project Labor Agreement is with the Laborers International Union of North America, the International Brotherhood of Teamsters, the United Association of Journeymen and Apprentices of the Plumbing and Pipefitting Industry of the United States and Canada, AFL-CIO, the International Union of Operating Engineers and the Pipeline Contractors Association.

“The proposed Keystone XL pipeline will have a significant impact on the North American economy through the thousands of manufacturing and construction jobs it is creating,” says Russ Girling, TransCanada president and chief executive officer. “This project is entirely paid for with private sector dollars and is shovel ready.”

“It’s our job to weld sections of Keystone Pipeline that will extend across several states and transport hundreds of thousands of barrels of oil daily for decades to come,” said William Hite, general president of the United Association of Journeymen and Apprentices of the Plumbing and Pipefitting Industry of the United States and Canada, AFL-CIO.

“This project will also play an important role in linking a secure and growing supply of Canadian crude oil with the largest refining markets in the United States, significantly improving North American energy security,” added Girling.

The Keystone expansion project is a planned 1,959-mile, 36-inch crude oil pipeline stretching from Hardisty, Alberta and moving southeast through Saskatchewan, Montana, South Dakota and Nebraska. It will link up with a portion of the Keystone Pipeline that is being built through Kansas to Cushing, OK, and facilitate take away capacity from U.S. hubs located on the pipeline. The pipeline will then continue on through Oklahoma to a delivery point near existing terminals in Nederland, TX, to serve the Port Arthur, TX, marketplace.

Also proposed is an approximate 47-mile pipeline to transport crude oil from Liberty County, TX, to the Houston area.

The proposed project will also require new facilities at the Keystone Hardisty Terminal, including: three operational storage tanks, an initiating pump station and interconnections with existing pipeline systems in the Hardisty area. The Keystone Gulf Coast Expansion includes construction of an additional eight pump stations in Canada and 30 pump stations in the United States.

TransCanada received approval in March 2010 from the National Energy Board in Canada for the proposed Keystone expansion project. When completed, the expansion project will increase the commercial capacity of the Keystone Pipeline System from 590,000 bpd to approximately 1.1 MMbpd. The US$12 billion system is 83 percent subscribed with long-term, binding contracts that include commitments of 910,000 bpd for an average term of approximately 18 years.

Plans call for the entire project to be completed in 2013.

The Laborers International Union of North America represents half a million workers in the heavy construction and building construction trade, the International Brotherhood of Teamsters represents 1.4 million professionals in the private and public sector, the United Association of Journeymen and Apprentices of the Plumbing and Pipefitting Industry of the United States and Canada, AFL-CIO represents 300,000 members across North America in the plumbing and pipefitting industry, and the International Union of Operating Engineers represents 400,000 operating engineers, who work as heavy equipment operators, mechanics, and surveyors in the construction industry, and stationary engineers, who work in operations and maintenance in building and industrial complexes, and in the service industries.

TransCanada is a leader in the development and operation of North American energy infrastructure including natural gas and oil pipelines, power generation and gas storage facilities. TransCanada’s network of wholly owned natural gas pipelines extends more than 37,000 miles, tapping into virtually all major gas supply basins in North America. TransCanada is one of the continent’s largest providers of gas storage and related services with approximately 380 Bcf of storage capacity. For more information visit: http://www.transcanada.com/

Keystone Project Highlights
• Total length is 2,148 miles;
• 1,379 total miles of new pipeline was built in the U.S., including 1,084 miles of the U.S. mainline from the U.S.-Canadian border to markets in Wood River and Patoka as Phase I and 295 miles from Nebraska to Cushing as Phase II;
• The Canadian portion included construction of 232 miles of pipeline and the conversion of 537 miles of existing TransCanada pipeline from natural gas to crude oil transmission;
• The new line has a 30-inch outer diameter to Illinois and increases to 36 inches from Nebraska and Kansas to Cushing;
• The pipeline was buried with a minimum depth of cover of four feet, depending on land use;
• Initial nominal capacity is 435,000 bpd with the capability of increasing capacity to 590,000 bpd; and
• Estimated operating pressure for the new pipeline sections is 1,440 psi. The converted section will operate at its current approved allowable operating pressure of 880 psig.

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