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Stakes are high for Keystone XL
Canada hopes for favorable Biden hearing on jobs, curbing GHG, trust in Canadian crude exports, could lose on environmental front Gary Park for Petroleum News
The odds-makers figure they have a sure winner in betting on Joe Biden putting Keystone XL out of its misery by ending 13 years of costly, tortuous struggles by TC Energy (previously TransCanada) to secure enough legal and regulatory victories in the United States to proceed with construction of the 1,600-mile pipeline.
Now everything hangs on whether the incoming president will stick to his pledge last May to waste no time scrapping permits for the US$14.4 billion project to ship 830,000 barrels per day of oil sands bitumen to Gulf Coast refineries.
And if Biden shows any wavering he’s likely to get a sharp jolt from his nominated Energy Secretary Jennifer Granholm, a former Michigan governor who is one of the hardest line anti-fossil fuel proponents in the Biden cabinet, coupled with a like-minded John Kerry, President Barack Obama’s Secretary of State and now Biden’s special presidential climate envoy with a seat at the cabinet table.
Canada’s lobbying campaign Against that formidable line-up, Canada has mounted a relentless government and industry lobbying campaign to remind Biden that Canada has set a net-zero target for greenhouse gas emissions by 2050, a clean fuel standard to reduce emissions by 30 million metric tons a year by 2030 and the promise of construction jobs that figure large in Biden’s immediate agenda.
The hope in Canadian quarters is that Biden will see a chance in Keystone XL to reward organized labor and construction unions for their financial and ballot-box support to help nudge him into the White House. That includes estimates of 42,000 direct and indirect jobs along the pipeline route.
Also on the table is Canada’s case as a long-term and reliable provider of oil and natural gas, not least as the leading source of crude imports into the United States.
Canada currently accounts for 48% of those imports, followed by Mexico at 7%, Saudi Arabia 6%, Russia 6% and Colombia 4%, with smaller portions from such dubious states and outright dictatorships as Algeria, Libya, Nigeria, Venezuela, Iran and Iraq.
Alberta hopes No one in Canada has more reason to hope that at the very least Biden will be open to negotiations than Alberta Premier Jason Kenney whose government has a C$1.5 billion equity stake in TC Energy and a C$6 billion financial commitment last spring to the project.
“If there is a cancellation (of permits by Biden) that will likely lead to a significant writedown on our investment. But I think we’ll have to wait and assess that in collaboration with TC Energy,” he said.
“I’m not going to start doing accounting based on a hypothesis. It’s our jobs to do everything possible to keep the project going,” he told the Calgary Herald.
TC Energy has taken its own steps to broaden its base of support for the pipeline by reaching an agreement with four key U.S. unions and selling an equity stake to Natural Law Energy, a group of five First Nations in Western Canada.
The Canadian government has also been making its case to the Biden transition team that the climate action measures Canada is implementing are part of a strategy that will measure up to global objectives.
They include a carbon tax and a clean fuel standard that Natural Resources Minister Seamus O’Regan said “will help us make the case for projects such as Keystone XL because it will help diversify our energy mix and reduce emissions.”
He said the pipeline is “an absolute priority” for the government of Prime Minister Justin Trudeau. “Getting access to new markets for our energy is one of the highest national priorities,” O’Regan said.
Project doubters, issues However, there is no shortage of doubters, including Phil Skolnick, an analyst with Eight Capital in New York, who said the array of former Obama administration figures in Biden’s inner circle convinces him that Keystone CXL is headed for the scrap heap.
He said there are also questions about whether Keystone XL is vital to Canadian oil producers, especially if Enbridge’s Line 3 and Trans Mountain are completed.
“It would be a long time before Canada needs another pipeline” if Trans Mountain comes into service at 890,000 barrels per day by late 2022 or early 2023, he said.
Chris Bloomer, chief executive officer of the Canadian Energy Pipeline Association, said tying a clean fuel standard to Keystone XL is like “trying to force a square peg into a round hole. I don’t understand where the link is.”
James Coleman, a professor in pipeline law at Southern Methodist University in Dallas, said Alberta and TC Energy, based on their U.S. approvals and the billions of dollars they have already invested, could file a claim against the U.S. government under the revised free trade pact if Keystone XL is scuttled by Biden.
Even so, he said, “no matter how good your facts are, no one has ever won one of these cases against the U.S.,” referring directly to more than 20 court and regulatory body battles British Columbia has lost in its softwood lumber fight with the U.S.
Whatever the arguments, Biden’s first move on such a pivotal bilateral issue could set the tone for Canada-U.S. relations at a time when Canada is desperate to start rebuilding that friendship after four years of endless turbulence in its dealings with Donald Trump.
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