Temperatures are again rising among Canadian political and business leaders as they try to figure out what the Obama administration really wants in exchange for approving TransCanada’s Keystone XL pipeline.
One of the central issues on the line is whether Washington wants environmental concessions from Canada and what message President Barack Obama was conveying earlier this year when he said XL will get the go-ahead only if it “does not significantly exacerbate the problem of carbon pollution.”
The confusion in Canada is compounded by word seeping out of Washington that the State Department is quietly gathering information on whether shipment by rail is a viable alternative to the pipeline from the Alberta oil sands and North Dakota Bakken to Gulf Coast refineries.
Sources have said the State Department is extending the view it offered in March that halting XL would do little to put the brakes on oil sands output because crude-by-rail could almost pick up the 830,000 barrels per day, although the Environmental Protection Agency countered that higher shipping costs on rail would have an impact on the oil sands.
The State Department is believed to be questioning rail executives on supply-chain logistics, market dynamics and potential obstacles to the growth of crude-by-rail.
That review is holding up a final verdict on XL, which has been in limbo for more than five years.
Redford wants quid pro quo
Alberta Premier Alison Redford, who is making her fifth trip to Washington Nov. 11-14 to lobby for XL, said she plans to deliver one very clear message to U.S. lawmakers: Alberta will not raise its levy on greenhouse gas emissions unless the U.S. takes matching steps.
She said there “has to be a quid pro quo” when it comes to putting a price on carbon,” noting that Alberta already imposes a levy of C$15 per metric ton on carbon emitters who fall short of the province’s greenhouse-gas reduction targets.
Meanwhile, the Canadian government is working with Alberta on developing rules to help Canada meet its commitment to meet the Copenhagen Accord target of lowering GHGs by 17 percent by 2020 from 2005 levels.
In a blunt but unspecific warning, Redford said that if Obama turns down XL “it will have an impact on U.S.-Canada relations.”
Prentice: U.S. standards vary
Jim Prentice, now one of Canada’s top bankers after serving as a senior cabinet minister under Prime Minister Stephen Harper, told a Calgary forum Oct. 30 that carbon standards in various U.S. jurisdictions frustrated him during his time in government and remain an issue for Canadian energy companies.
He said the U.S. standards are a “real departure from free-market principles, they threaten the vitality of our continental energy marketplace and, arguably, they violate the spirit and letter” of the North American Free Trade Agreement.
Prentice said dozens of U.S. jurisdictions and states have developed “so-called low-carbon standards” designed to exclude heavy oil from their markets, while some have adopted renewable standards that effectively discriminate against Canadian exporters of hydro-power.
He said the proliferation of standards across the U.S. applies to some forms of energy, but not others, “to some kind of oil, but not others and to some pipelines, but not others, which is against the spirit and premise on which the world’s largest and most efficient energy marketplace has been built.”
Prentice said that if there is a desire for a North American low-carbon fuel standard, Canada and the U.S. should “get to the table and negotiate one. And if there are environmental implications, we should deal with those, but we should have a standard to every hydrocarbon, every molecule, every barrel of oil that lands or is produced in the continent.”
He said it is “difficult to overstate the importance to Canada (of the dramatic changes in U.S. light oil production), not just as it relates to the U.S. administrations ultimate verdict on the Keystone XL pipelines, but to every facet of our energy relationship.”
TransCanada Chief Executive Officer Russ Girling, speaking on XL during a third-quarter conference call Nov. 5, said he has “every confidence” the fifth environmental impact statement due from the U.S. State Department will endorse the four previous conclusions that the pipeline would have limited environmental impact and no material impact on greenhouse gas emissions.
He said XL “makes sense today and makes sense for many decades to come” after decades of free trade in energy between Canada and the U.S. and the fact that 3 million bpd of crude currently moves across the border.
Girling said he has “given up trying to predict” when the State Department will reach a verdict, adding that after five years of reviews in the U.S. “there’s nothing left to review.”
Alex Pourbaix, the company’s president of energy and oil pipelines, said that in the meantime TransCanada is looking at other pipeline opportunities to move crude from the Bakken formation in North Dakota and in the Texas Gulf Coast region.
But he said it is “too early to talk definitively” about what those projects might involve.
Cheney: Decision ‘foolish’
Former U.S. Vice President Dick Cheney, speaking at the same International Economic Forum of the Americas as Prentice, said the Obama administration’s decision not to approve Keystone XL was “foolish. There is no reason in the world why this pipeline should not be built.”
