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It cuts both ways
API estimates cross-border crude flow accounts for 15% of liquids supply needs
Gary Park for Petroleum News
In his first five months as Montana’s Attorney General, Austin Knudsen has wasted no time tackling President Joe Biden’s decision to scuttle the Keystone XL pipeline, teaming up with other states in mounting a legal challenge against the move.
Interviewed on CTV’s Alberta Prime Time, he accused Biden, who entered the White House as a self-proclaimed pro-union president, of throwing 4,000 pipeline workers “under the bus” and potentially costing Montana US$127 million a year in lost wages, taxes and benefits.
Knudsen welcomed positive backing from Saskatchewan Premier Scott Moe, whose province’s oil producers stood to gain access to 20% of the 830,000 barrels per day link to Texas Gulf Coast and Oklahoma refineries.
He said Moe has expressed a willingness to join forces with the 17 U.S. states that have filed the lawsuit against the Biden administration.
Court action The court action claims that only the U.S. Congress can grant or reject permits for oil pipelines that cross an international border, not a presidential administration.
Knudsen said he would welcome having Alberta Premier Jason Kenney and KXL owner TC Energy participating in the suit.
“The president lacks the power to enact his ‘ambitious plan’ to reshape the economy in defiance of Congress’s unwillingness to do so,” the lawsuit states.
Scott Lincicome, a North Carolina-based U.S. trade lawyer, said KXL was conceived before the U.S. was energy self-sufficient and was justified as a project of national security for the U.S.
API report At the same time, a report by the American Petroleum Institute, API, noted that cross-border petroleum trade between the U.S. and Canada has doubled since 2010 - with liquids shipments flowing south across the border climbing to 5.5 million barrels per day in 2019 from 2.75 million bpd in 2010 and reaching a total value of US$96 billion a year - driving home the critical role energy infrastructure plays between the two countries.
Canada supplied 58% of U.S. heavy crude imports in 2019, most of it headed to refiners in the U.S. Midwest and Gulf Coast, while U.S. crude accounted for 72% of imports into Eastern Canada.
With the surge in U.S. production since 2010, shipments to refiners in Canada rose 10-fold to 500,000 bpd in 2019.
“It is staggering to consider that each country relies on the other for approximately 15% of total petroleum liquids supply,” API Senior Vice President Frank Macchiarola told an online investment symposium held earlier in April by the Canadian Association of Petroleum Producers.
Smooth flow upended But what was once a smoothly functioning two-way flow has been upended by the revocation of KXL’s permits, the threat by Michigan Gov. Gretchen Whitmer to shut down Enbridge’s 540,000 bpd Line 5 which supplies 55% of her state’s propane needs and fierce opposition to Enbridge’s Line 3 replacement which is scheduled to come on stream in 2022.
Phil Skolnick, an analyst with Eight Capital, said there is both a strong appreciation of the importance of the cross-border trade, especially among Gulf Coast refiners, or “no appreciation at all” from those focused on the impact of fossil fuels on climate change.
Alberta Energy Minister Sonya Savage conceded to the symposium that her government and the industry “needs to do more to ensure (oil and natural gas) are accepted by the public in the United States and a broader range of policymakers.”
Craig Bryksa, chief executive officer of Crescent Point Energy, said the loss of KXL is a “blow to the sector,” but he believes Canadian exporters will have enough pipeline capacity over the medium-term if Line 3 and Line 5 advance.
“But I guess it doesn’t matter if you’re on the north or south side of the border, there will be some challenges in getting that infrastructure built,” he said.
Macchiarola told the Globe and Mail that “at the end of the day, policymakers are responsive to the public. If the public understands what’s at stake with these decisions on infrastructure, they will in turn influence the decision makes to rethink the (KXL, Line 5 and Line 3 decisions) and re-examine the issues from different perspective.”
He said API, through its report by ICF Resources, “is trying to provide that different perspective.”
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