RIP KXL; what’s next?

Alberta vents at Biden, Trudeau, plans legal action; others argue KXL ‘not needed’

Gary Park

for Petroleum News

President Joe Biden has dug his heels in. And Canadian Prime Minister gets the message.

That’s where things stand for Keystone XL.

Trudeau, during a 30-minute phone chat with Biden on Jan. 22, raised the issue of his government’s disappointment that the new U.S. administration wasn’t even willing to revisit discussions on the pipeline.

All he got by way of consolation was being the first foreign leader to have a one-on-one with Biden.

That left Alberta Premier Jason Kenney to lash out at Biden for refusing to even hear the case for KXL or acknowledge that the pipeline was a different project from the one that the U.S. leader, when he was vice president, joined President Barack Obama in revoking six years ago.

War on trade issues?

Trudeau was apparently unable to even argue that the Alberta oil sands sector, which was going to supply 80% of KXL’s volumes of 830,000 barrels per day, has made sizeable strides in reducing its GHG emissions by 30% per barrel over the past decade, that TC Energy was going to achieve net-zero emissions on KXL operations by 2025, that TC and the Alberta government were working to create an equity interest for U.S. and Canadian First Nations, that the pipe for the pipeline would be manufactured in the U.S. and that killing KXL would raise U.S. reliance on OPEC crude.

Even if KXL is in fact doomed, Canadian oil producers retain a tight grip on their 50% share of U.S. oil imports, with the U.S. Energy Department estimating shipments at 3.8 million bpd and analysts forecasting that those volumes could reach 4.2 million-4.4 million bpd over the next few years.

Pipeline expansions currently underway in the U.S. are expected to raise capacity in the Lower 48 by 950,000 bpd before 2025, including an expansion of the existing Keystone line from 590,000 bpd to 760,000 bpd.

Excess export capacity?

Wood Mackenzie research director Mark Oberstoetter said in a note that assuming other pipelines in the works “go ahead on schedule - we will be over-piped. If you add them all up, you can make the argument KXL was not needed.”

Having confined itself to voicing disappointment at the loss of jobs for KXL, the Trudeau government left its ambassador to the U.S., Kirsten Hillman, to explain why Canada has no choice but to turn its attention to other pressing bilateral issues.

She said it was apparent in the Biden-Trudeau chinwag that there was no hope of Biden walking back his decision.

“I think we now need to focus on moving forward with (the Biden) administration and there are so many ways in which we are going to be aligned with them to our mutual interest. I’m eager to get going on that,” Hillman said.

She expressed confidence that Canada remains the “best partner” for helping Americans meet their energy needs and transitioning to a clean economy.

A joint panel is being formed to explore those possibilities, with Canada clinging to hope that its fast-emerging expertise on reducing greenhouse gas emissions carbon capture and storage, and using its abundant gas resources to develop hydrogen will find a role in developing those initiatives.

Many observers are certain that the days of mega-pipelines to the U.S. are over, but they are not ruling out increased crude-by-rail shipments (which are legal provided they do not involve laying new rail lines) and tanker shipments to Gulf Coast refineries when the Trans Mountain pipeline expansion starts shipping crude out of the Port of Vancouver.

Moving into the spotlight is the proposed Alaska-to-Alberta rail project which could carry up to 1 million bpd of crude bitumen for tanker shipment from Alaska to Asia and the chances of reviving TC Energy’s Energy East (strongly opposed by Quebec) to deliver 1.1 million bpd of crude bitumen to Atlantic Canada for refining and export.

Thus, the debate goes on.