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Roxana • A major oil pipeline between Canada and the U.S. seemed like a pretty good idea five years ago.

Crude oil prices were rising as global demand increased dramatically. The entire oil market was stretched to near capacity. A proposal by Calgary-based TransCanada to build a pipeline linking Canada's vast oil fields to the Midwest seemed like the right play.

Then Hurricane Katrina hit the Gulf Coast, crippling more than 25 percent of America's crude oil production and roughly 15 percent of its refining capacity. Suddenly, that pipeline idea skyrocketed to celebrity status among oil producers. Within months of Katrina's wrath, TransCanada had locked up contracts for 83 percent of the pipeline's capacity for an average of 18 years.

Today, the Keystone pipeline stretches 2,151 miles at a cost of $5.2 billion, proving to be one of the longest and most expensive pipelines ever built in North America. It starts from Alberta's Athabasca tar sands and passes through the St. Louis area at the ConocoPhillips' Wood River refinery in Roxana.

And the oil is expected to begin flowing next month — moving about a half-million barrels a day, enough to supply about 2 percent of the country's daily demand.

"We're trying to link the free world's largest source of crude oil with the largest refining market in the world — and that's the U.S. market," said TransCanada Vice President Robert Jones, who heads the Keystone project. "It's just a natural marriage."

Just not exactly the best timing.

Much has changed since the project broke ground and oil approached $150 a barrel. The global economic slump slashed demand, and oil prices plummeted. Energy firms focused more on renewable energy. And, most recently, the BP spill has raised serious concerns over U.S. oil dependency and the environmental risks involved in extracting and delivering it.

"The tar sands and the gulf spill are symptoms of the same thing: We're running out of easy oil, and the oil industry is forced to go to extreme measures to meet the need," said Simon Dyer, oil sands program director with the Pembina Institute, a Calgary-based sustainable energy think tank. "There's a lot of recognition that we need to move to a clean energy future. The oil sands is leading us in the opposite direction. There's a real disconnect there."

Canada is already America's largest foreign oil supplier. Its tar sands represent the second-largest oil reserves in the world behind Saudi Arabia. The U.S. will need reliable sources for oil for years to come, energy analysts say, and the Keystone pipeline provides stability as other foreign options remain problematic.

"I think we would much rather pay the Canadians for the oil than pay (Venezuelan President) Hugo Chavez or his regime or some other less stable areas of the Middle East," said Lanny Pendill, a senior energy analyst with Edward D. Jones & Co.

critics' concerns

The tar sands are a combination of clay, sand, water and bitumen — a heavy black asphalt-like hydrocarbon that can be refined to make asphalt, gasoline, jet fuel and other chemicals.

For years, the tar sands were an afterthought among producers because of the high cost of extracting the oil. Unlike conventional crude, tar sands oil is not drilled, but instead is strip mined or forced out of the ground, often by injecting high-pressure steam, solvents or hot air into the sands.

Native Canadian tribes claim the destructive mining methods used in the tar sands, which cover an area about the size of Florida, devastate forests and wetlands they consider sacred ground.

Environmentalists say that the crude that will ooze down the Keystone pipeline is the dirtiest on the planet and that the method used to extract it is among the most environmentally destructive.

Critics note that the pipeline, which runs from Hardisty, Alberta, to Wood River and then on to a storage terminal in Patoka, Ill., was built to less-rigid safety standards. They contend it poses a threat to land, wildlife and the fresh water sources for millions of people.

And they point to studies that show that the excavation, refining and use of the extra-heavy tar sands oil requires more energy and produces more greenhouse gases than conventional petroleum. This comes at a time when the United States is seeking to cut carbon emissions.

"It shows how desperate we have become to even consider this," said Susan Casey-Lefkowitz, an attorney with the Natural Resources Defense Council, an advocacy group that sued unsuccessfully to block the project. The council claimed the government failed to consider what adverse impacts extracting, refining and burning the heavier crude would have on the environment.

"It's exactly facilities like Wood River that are going to have additional water and air pollution, and that's going to affect places like St. Louis," Casey-Lefkowitz said. "Even though they say they put safeguards in place to control pollutants. ... We don't think they're getting them clean enough. A clean refinery is something you don't really see."

The NRDC, the Sierra Club and the United Steelworkers were among those who unsuccessfully opposed a U.S. Department of Transportation waiver of federal pipeline safety regulations that allowed TransCanada to use a thinner, cheaper steel in rural areas. Keystone officials and regulators say the thinner pipe is safe and well within industry standards.

Still, many landowners and public officials, especially in the Dakotas, expressed concerns about leaks, spills and potential contamination.

Dennis Walaker, mayor of Fargo, N.D., opposed a state permit for the project because he feared the pipe could contaminate the city's drinking water. The project went forward after TransCanada agreed to put a quick-response team near Fargo and increase the thickness of the pipe in some locations. The route, however, didn't change.

"Did we get everything we wanted? No, we didn't." Walaker said. "There are legitimate concerns anytime you have a pipeline close to a drinking water supply. Whatever is man-made, there shall be some concerns about it."

It was a similar story in Highland, where officials expressed concern about plans to run the pipeline beneath Silver Lake, the primary source of drinking water for the town's 10,000 residents. The company initially offered $18,000 for the easement.

The city eventually got TransCanada to pay $250,000 to help improve the lake's water quality, buy the city $100,000 worth of emergency response equipment and train the fire department to respond to a pipeline breach.

"(The company) understood there is a concern," City Manager Mark Latham said.

Although the project drew strong public opposition in several states, the pipeline drew relatively little public attention in Missouri and Illinois.

"I was surprised there was so little interest," said Robert Stout, of the Missouri Department of Natural Resources, which oversaw construction of the pipeline. He credited TransCanada's aggressive public relations campaign.

"Where they ran into potential conflict, they got on the ground and talked to people and satisfied their concerns."

jobs, tax revenue

It took TransCanada more than two years to acquire all the necessary state and federal permits for the pipeline. Construction took another two years.

Proponents say the project generated thousands of construction jobs and provided a short-term boost for the economies of many communities along the route. TransCanada officials estimated the project will generate $13.8 million in property taxes to Missouri the first year it's operational. Illinois does not levy property taxes on pipelines.

The 30-inch-diameter pipe, which crosses about 280 miles and 10 counties in Missouri and 60 miles and four counties in Illinois, is buried about 4 feet underground in most places. Pump stations are situated about every 50 miles to push the oil along at a walking pace. A barrel that leaves storage tanks at Hardisty would take about 35 days to reach Patoka.

In Missouri, almost all the pipeline route is privately owned and, except in Troy and St. Charles, runs through mostly agricultural areas.

The pipeline cuts diagonally through Lincoln County from the northeast, then burrows across northern St. Charles County before plunging 65 feet beneath the Mississippi River and surfacing in Hartford, just a short distance from Roxana. It skirts Edwardsville on its way to Patoka.

The Wood River refinery is in the midst of a $3 billion expansion that will allow it to process more of the heavier crude.

Still, demand has ebbed for Keystone crude.

Whereas the common expectation is for a pipeline to be 85 percent to 90 percent utilized, the pipelines from the tar sands, including Keystone, will be operating at about 60 percent of capacity by 2013, said Chad Friess, energy analyst with UBS Canada.

"We sort of built something we didn't need," Friess said "Or more accurately, earlier than we needed it."

Meanwhile, a few Keystone customers now are suing to get out of their long-term contracts, claiming TransCanada misled them by building too much too fast at too great a cost.

Despite the criticisms and relatively soft market, TransCanada stands by the merits of its project. "No regrets," said Jones, the TransCanada vice president in charge of the pipeline. "The premise of the project hasn't changed."

Meanwhile, most analysts agree that TransCanada made a good long-term investment. In fact, plans are in the works to extend the pipeline so it will one day be able to carry about 1.1 million barrels a day all the way to Gulf Coast refineries.

Eventually, the demand for that level of oil production will return, Friess said. "At the end of the day, there's not a lot of things we can do to reduce the consumption of oil except to cut our usage."

That's not happening anytime soon, Friess said, adding that, in time, Keystone and other pipelines will be fully utilized. "At some point, we're going to have enough oil to fill them."

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