Providing coverage of Alaska and northern Canada's oil and gas industry
May 2020

Vol. 25, No.22 Week of May 31, 2020

XL showdown shapes up

Biden: Keystone XL will face 3rd presidential reversal if he captures White House

Gary Park

for Petroleum News

If Joe Biden moves into the White House in January he could immediately find himself in a cross-border sniping exchange with Canada.

In a statement issued by his campaign office on May 17, the presumptive Democratic nominee has promised to” once and for all” end a battle that began 12 years ago when TC Energy (then TransCanada) sought approval to build the Keystone XL pipeline from Alberta to Nebraska, where it would feed into a connection to U.S. Gulf Coast refineries.

The declaration said stopping XL “was the right decision” by former president Barack Obama in 2015 and “it’s even more important today” that a Biden administration should “rip up” President Donald Trump’s 2017 approval of the US$14 billion project.

Biden later called the Alberta “tar sands” a resource “we don’t need ... because it is a very, very high pollutant,” trampling over evidence that bitumen can be produced in Alberta with lower greenhouse gas emissions than California’s heavy oil and even some conventional crude from the Middle East and Africa.

He said it is not his intention to shut down all oil projects the moment he takes office, adding “we’re going to transition gradually to a clean economy.”

Keystone XL “is just not rational ... it does not economically, nor, in my view, environmentally make any sense,” Biden said.

A Biden spokeswoman said the “denial of science (by Trump over carbon emissions from XL) will end on Day 1 of the Biden presidency” regardless of a pressing need by Gulf Coast refineries for 830,000 barrels per day of heavy crude to replace lost feedstock from Venezuela.

XL ‘most strategic’ of lines

Dennis McConaghy, a former TransCanada executive vice president, said that because of its size XL is the “most strategic” of the three major crude pipelines out of the oil sands - including the Trans Mountain expansion to a tanker terminal on the Pacific Coast and Enbridge’s Line 3 to Superior, Wisconsin - that are under all at various stages of construction.

He said XL’s potential value in higher oil prices and higher royalties for Alberta make the province’s combined US$5.3 billion of equity investment and loan guarantee worthwhile, even though they have been widely portrayed as a dangerous gamble.

A spokesman for TC Energy said “no pipeline project in the history of the industry has been studied more than Keystone XL.”

“More than a half-dozen (U.S.) Environmental Impact Studies have been done on Keystone XL over the past 10 years,” including the latest U.S. Department of State impact findings released in December 2019, which effectively endorsed the pipeline and prompted TC Energy to resume construction in the U.S., backed by Alberta’s US$1.1 billion equity investment and US$4.2 billion of loan, the spokesman said.

Jennifer Rowland, a financial analyst with Raymond James, said it is easier for TC Energy to continue with construction in the U.S. knowing it has the backing of a substantial loan guarantee from the Kenney government.

The TC Energy spokesman said that during peak construction aimed at completion of the pipeline in 2023, the project would employ 10,400 construction workers in the U.S. and 2,800 in Canada.

Keystone XL is “an important North American energy infrastructure project that will spur billions of dollars in new private sector investment and create thousands of high-quality jobs at a time of unprecedented economic uncertainty and unemployment,” he said.

Trudeau: not a death blow

Canadian Prime Minister Justin Trudeau, not known for his backing of energy mega-projects, said he would not view the election of Biden as a death blow for Keystone XL, promising he would advocate for completion of the pipeline.

“It’s long been a position of mine that we need to get our resources to new markets safely and securely and that’s why I’ve always advocated for Keystone XL,” he told reporters.

Alberta Premier Jason Kenney took an even harder line in what shapes up as a cold war by promising he will go to court and file a free trade lawsuit under the newly ratified United States-Mexico-Canada agreement that supplants NAFTA.

He said his government will “use every legal means at our disposal to protect our fiscal and economic interests” and will intensify his lobbying of U.S. lawmakers.

Kenney said Biden will have a tough time answering to unions, especially when the U.S. emerges from the COVID-19 pandemic anxious to create jobs and investment and to separate the U.S. from its dependence on OPEC crude.

Many legal observers note that whoever wins the U.S. presidential election in November wields decisive power over the fate of XL.

“There’s not really any legal limit on a president’s ability to get rid of a pipeline, even if it’s been built,” said James Coleman, an energy law professor at Southern Methodist University in Dallas.

He said Biden could even force TC Energy to dig up and remove any or all sections of XL that had been completed.

But Coleman also said TC Energy has the legal right to sue the U.S. government if Biden scraps the permits issued for XL.

Legal and political analysts view XL as the ultimate symbol in the U.S. and Canada of the climate change debate and believe Biden will exploit the issue to win over followers of Senator Bernie Sanders.

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