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Vol. 21, No. 47 Week of November 20, 2016
Providing coverage of Alaska and northern Canada's oil and gas industry

New Keystone XL hope

Trump’s election opens door to pipeline approval, demands for larger profits slice

GARY PARK

For Petroleum News

When Donald Trump occupies the White House in two months he is widely expected to waste no time urging TransCanada to reapply for permits to build the US$12 billion Keystone XL pipeline.

But Tim Pickering, president of Calgary-based Auspice Capital, is among those who doubt that Trump will give an open-ended approval to the project.

“There’s a big caveat that he’s going to extract a pound of flesh,” said Pickering, noting that TransCanada has “had a lot of flesh extracted already.”

The optimism is based on what Keystone can contribute to helping Trump deliver on some elements of his campaign promises along with initiating a major shift in U.S. energy policy.

Topping that list are measures to achieve oil self-sufficiency, create jobs and reject President Barack Obama’s bold steps to tackle climate change by imposing new environmental regulations.

Strings unclear

To that end, Trump asserted during the campaign that he would “absolutely approve (Keystone XL), 100 percent.”

What strings he might attach are unclear, beyond his suggestion that the U.S. might seek a greater share of the pipeline profits, which most analysts think is improbable.

“I want the developers of (Keystone XL) to give the United States a big, big chunk of the profits or even an ownership position, like I do in business. That’s what I do,” Trump said during a January speech.

“At the crux of Trump’s strategy is a rejection of climate change policies,” said Hilary Novak, associate, global energy and natural resources, with the New York-based Eurasia Group.

“The energy advisers he has surrounded himself with are people form industry who I think will advise him to basically approve the pipeline without making it too onerous on TransCanada,” she said.

Bob Skinner, with the School of Public Policy at the University of Calgary, warned that if Trump demanded an increase of 30 percent in U.S. financial benefits he “would basically be saying there will be no pipeline.”

Stage for showdown

If he clears the way for the pipeline to deliver 830,000 barrels per day (with up to 200,000 bpd drawn from the Bakken field), he will also set the stage for a showdown with indigenous communities and environmentalists, whose disruption of the Dakota Access pipeline are a preview of the tactics that might be attempted.

The top Republican in the U.S. Senate, majority leader Mitch McConnell, used his first meeting with Trump after the election to ask for swift action to get the pipeline back on the rails, saying he made the request during his Capitol Hill meeting with the president-elect on Nov. 9.

TransCanada - which has support from Canadian Prime Minister Justin Trudeau and Alberta Premier Rachel Notley, both of whom are strong advocates of carbon taxes - “remains fully committed” to the 1,200 mile system and is now evaluating ways to engage the Trump administration, said a company spokesman.

He noted that Keystone XL will create 42,000 direct and spin-off jobs, would generate “tens of millions of dollars in annual property taxes” along the right of way and give a US$3 billion boost to the U.S. Gross Domestic Product.”

The legal challenge

TransCanada has given no indication at what point it would be willing to withdraw a legal challenge through the North American Free Trade Agreement seeking US$15 billion in compensation from the U.S. government.

Martha Hall Findlay, president of the Canada West Foundation, said the project would be a “win-win for industry on both sides” of the Canada-U.S. border.

That would apply especially to oil sands producers who could see the price differential between West Texas Intermediate and Western Canada Select shrink by about US$5-US$6 a barrel, said Trevor Tombe, an economics professor at the University of Calgary, who estimated that a US$4 shift would increase annual revenues for the companies by C$1.5 billion a year.

Jeff Gaulin, a vice president with the Canadian Association of Petroleum Producers, said export pipelines from Western Canada are operating at their limit of 4 million bpd and facing demands for an additional 850,000 bpd from oil sands projects over the next five years, followed by an additional 750,000 bpd by 2030.



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