TransCanada Corporation (NYSE:TRP) (TSE:TRP)’s ambitious and controversial Keystone XL project is still waiting for the approval of the U.S. State Department. Meanwhile, oil refineries have lost patience, as they have started looking for alternative ways. In fact, they don’t really care about the Keystone XL pipeline, as Ben Lefebvre of The Wall Street Journal put it.

Keystone XL pipeline

What made Keystone XL lose steam?

Companies are increasingly using railroads to carry heavy crude from Canada to oil refineries on the Gulf Coast. That has diminished the necessity of Keystone XL project. According to the American Association of Railroads, railroad crude oil transportation from Canada jumped 20% in the first seven months of this year, compared to the same period a year ago.

Meanwhile, Enbridge Inc (NYSE:ENB) (TSE:ENB) made a smart move. It began to expand its existing pipeline to carry heavy crude from Canada to south. Since Enbridge Inc (NYSE:ENB) (TSE:ENB) is using its existing pipeline rights, it doesn’t need to get the State Department approval. Enbridge Inc (NYSE:ENB) (TSE:ENB) will bring the oil from Canada to the Midwest, from where it will be sent to the Gulf Coast through Seaway pipeline.

Moreover, oil production in the United States has increased over the past few years, so refiners don’t require huge quantities of heavy crude from Canada to continue meet demands. Refiners say that the light oil produced in North Dakota and Texas is  much easier to process than Canadian heavy crude oil.

About ten years ago, TransCanada Corporation (NYSE:TRP) (TSE:TRP) proposed the Keystone Xl project to carry 830,000 barrels of heavy crude from Canada to the U.S. refineries along the Gulf of Mexico every day. TransCanada Corporation (NYSE:TRP) (TSE:TRP) remains optimistic that the project will be approved by the end of this year. The Environmental Protection Agency has harshly criticized the project for the possible carbon emission and its impact on the environment. President Obama rejected TransCanada Corporation (NYSE:TRP) (TSE:TRP)’s application last year. The company applied again after revising the route.

Refiners lose hope over Keystone XL

Refiners no longer care about the project. Valero Energy Corporation (NYSE:VLO) had spent billions of dollars to upgrade its refineries along the Gulf Coast. Valero Energy Corporation (NYSE:VLO) had signed a contract with TransCanada Corporation (NYSE:TRP) (TSE:TRP) to receive oil from Keystone XL pipeline. But now Valero Energy Corporation (NYSE:VLO) is upgrading rail terminals at the same refineries to receive more heavy crude oil.

Cenovus Energy Inc (NYSE:CVE) (TSE:CVE) is also making other plans. The company will send 175,000 barrels of crude oil to Canada’s west coast through a Kinder Morgan Energy Partners LP (NYSE:KMP) pipeline, and another 200,000 barrels per day to the east coast through Energy East pipeline.

TransCanada Corporation (NYSE:TRP) (TSE:TRP) shares were up 0.39% to $43.44 at 10:50 AM EDT.