TransCanada Files Regulatory Application for Keystone Oil Pipeline Project

TransCanada's subsidiaries, TransCanada PipeLines Limited (TCPL) and TransCanada Keystone Pipeline GP Ltd. (Keystone), have filed an application with the National Energy Board (NEB). The application seeks approval to transfer a portion of TransCanada's Canadian Mainline natural gas transmission facilities to the Keystone Oil Pipeline project for the purposes of transporting crude oil from Alberta to refining centers in the U.S. Midwest.

"The Keystone Oil Pipeline project is an innovative and cost-competitive proposal to transport a significant amount of new Canadian crude oil to key U.S. markets in late 2009," says Hal Kvisle, chief executive officer. "Crude oil shippers have recognized the value of our proposal by committing to long-term transportation contracts. The conversion of a small segment of our extensive natural gas pipeline system to crude oil transmission service maximizes the use of an existing asset while maintaining sufficient capacity on our Mainline system to serve forecasted demand for gas transportation."

The Keystone Oil Pipeline project is a proposal to build a 2,960-kilometer (1,830-mile) pipeline that will have a nominal capacity to transport approximately 435,000 barrels per day of crude oil from Hardisty, Alberta, to U.S. Midwest markets at Wood River and Patoka, Illinois. The pipeline can be expanded to a nominal capacity of 590,000 barrels per day with additional pump stations. The Canadian portion of the project involves the construction of approximately 370 kilometers (230 miles) of new pipeline and the conversion of approximately 860 kilometers (530 miles) of existing TransCanada Canadian Mainline pipeline facilities from natural gas to crude oil transmission service. The U.S. portion of the project includes approximately 1,730 kilometers (1,070 miles) of new pipeline construction.

In January 2006, TransCanada announced it had secured firm, long-term commitments from shippers for transportation of 340,000 barrels of crude oil per day with an average duration of 18 years. Shippers have also expressed strong interest in a proposed extension of the Keystone Oil Pipeline south to the refining hub of Cushing, Oklahoma. A binding open season will be held on the Cushing Extension later in 2006.

As part of the transfer application, TCPL is also seeking approval to reduce the Canadian Mainline rate base by the net book value (NBV) of the transferred facilities and Keystone is seeking approval to add the NBV of the facilities to the Keystone Oil Pipeline rate base. The transfer application is the first of two major regulatory applications required to obtain approvals necessary to construct the Canadian portion of the Keystone Oil Pipeline. Keystone will apply to the NEB for a certificate of public convenience and necessity to construct the required new facilities later this year once environmental assessment work is completed in the summer of 2006.

Earlier this year, TransCanada filed with the U.S. Department of State an application for a Presidential Permit authorizing the construction, operation and maintenance of the cross-border facilities associated with the proposed Keystone Oil Pipeline. The pipeline will also require approvals from a variety of U.S. agencies at the state and local levels. Public and stakeholder consultation, detailed environmental assessments and field studies, and further engineering work will continue throughout 2006. Construction is proposed to begin in late 2007, with commercial operations scheduled to commence by the fourth quarter of 2009.