California High Speed Rail and Keystone XL Pipeline

1. American Interest – Roelof van Ark, the chief executive, and Thomas Umberg, the chairman of the High Speed Rail Authority, announced they will step down from their posts as the odds against the project grow longer.

The highly indebted, cash strapped state has commitments of $3.3 billion of federal money in hand against the roughly $100 billion that the train is now estimated to cost (the price will certainly go even higher). Voters authorized almost $10 billion in bonds in a referendum, but that was when the train looked much cheaper and more federal funding was available. Since then the cost estimates more than doubled to $99 billion, ridership estimates have been slashed indicating that the completed system will require unending subsidies, and Congress has stopped voting new funds for high speed rail.

To make matters even worse, the federal funds that are available can only be used for a “spur” out into the Central Valley, rather than the main line from Los Angeles to San Francisco. The “spur” is the least needed, least wanted and least useful part of the system and will never generate significant traffic. There are, in other words, federal funds to help with the part of the system that nobody really wants, and the heavily indebted state must find at least $70 billion to fund the rest.

One recent poll now shows that 53 percent of voters now want the bond sales stopped, and only 33 percent want the state to go ahead. In a new referendum, 59 percent would vote to reverse the decision that authorized the state to assume new debt for the rail system.

Fresno to Bakersfield is the segment funded with the federal funds

2. The Keystone Pipeline System is a pipeline system to transport synthetic crude oil and diluted bitumen (“dilbit”) from the Athabasca Oil Sands in northeastern Alberta, Canada to multiple destinations in the United States, which include refineries in Illinois, Cushing oil distribution hub in Oklahoma, and proposed connections to refineries along the Gulf Coast of Texas. It consists of the operational “Keystone Pipeline” (Phase 1) and “Keystone-Cushing Extension” (Phase 2), and two proposed Keystone XL pipeline expansion segments.

The original Keystone Pipeline (which is done and operational) cost US$5.2 billion with the Keystone XL expansion slated to cost approximately US$7 billion. The Keystone XL is expected to be completed by 2012–2013 (if approvals are granted).

TransCanada Corp. plans to pay for the remaining $5 billion of its Keystone XL without issuing more debt since U.S. approval of the project was delayed until at least 2013. Transcanada would fund Keystone XL out of cashflow.

The Keystone XL will add 510,000 barrels per day (81,000 m3/d) increasing the total capacity up to 1.1 million barrels per day (170×10^3 m3/d).

The CEO of TransCanada Russ Girling touted the positive impact of the project by “putting 20,000 US workers to work and spending $7 billion stimulating the US economy.” This has been disputed by an independent study conducted by the Cornell ILR Global Labor Institute which found that while the Keystone XL would result in 2,500 to 4,650 temporary construction jobs, this impact will be reduced by higher oil prices in the Midwest which will likely reduce national employment

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