Keystone XL suddenly shapes up as the first test of whether the Nov. 4 mid-term election results will lead to a new mood of bipartisan cooperation between the Obama administration and the Republican-led Congress.
Now that they have control of both chambers, the Republicans seem eager to break the logjam on dozens of jobs bills that have been stalled in the Senate, with XL seen as one of the key sources of new employment.
TransCanada has estimated the project could employ 42,000 Americans during the construction phase, invest US$2 billion in wages across the U.S. and inject US$3.4 billion into the U.S. economy.
“I think Keystone will be one of the first bills we’ll be able to put up in the new Congress,” North Dakota Sen. John Hoeven told Reuters. “I’ve got a bill right now that’s got about 56 co-sponsors .... and with the election results, we’ll have over 60 who clearly support the legislation.”
Hoeven said there is a “good chance” of working with President Barack Obama to achieve XL approval, but indicated he is willing to attach approval to other “must-pass” energy legislation to gain the Presidential Permit that is the final obstacle in XL’s path.
TransCanada Chief Executive Officer Russ Girling signaled his endorsement of Hoeven’s remarks by issuing a statement declaring that after six years “it is time to break the gridlock on Keystone and move forward.”
Guarded optimism
Alberta Premier Jim Prentice said his optimism has grown as the “very encouraging” U.S. election results have yielded a “significant realignment of the legislative branch in the United States.”
But Prentice has also struck a wary note about XL, suggesting pipeline approval might have to wait until after the 2016 U.S. elections.
White House spokesman Josh Earnest applied some restraint to talk of an early ratification of XL, reiterating that the administration will wait on the Nebraska Supreme Court to rule on a dispute over jurisdiction of the pipeline’s route through the state before completing an evaluation of the project.
“Once some of those things are resolved, then the State Department can do their work evaluating whether or not this pipeline is in the national interest of Americans,” he told CNN.
Girling, speaking with analysts, suggested the national interest has never been in question.
He noted that over a prolonged period polls have shown that XL has had the support of two-thirds of Americans.
But the best forecast he could offer, while declining to set a new timeline for XL, was guarded. “We hope that the decision (on XL) will get made sometime or other.”
The market effect
For now, the years of delays have raised questions about whether XL is even needed, while an escalation in project costs to C$8 billion from C$5.4 billion has spread uncertainty over how long the pipeline’s committed shippers will remain on board.
Also surfacing is a troubling question over the likely demand for pipeline space out of the oil sands, which is being squeezed by the prospect of a long downturn in crude prices and the rapid growth of Bakken and Eagle Ford production.
The consulting firm of Wood Mackenzie has warned that capital spending in the oil sands next year could be dialed back to C$20 billion from C$28 billion this year as planning for a number of big-ticket projects gets placed in a holding pattern.
“Should lower oil prices persist the real impact will be on longer-term spending for the next wave of oil sands projects that have yet to be sanctioned,” said analyst Mark Oberstoetter, echoing the view of many observers who expect spending cuts are likely to impact work associated with future production growth.
“I think most people in town are obviously very concerned about the decline in oil prices,” said Enbridge Chief Executive Officer Al Monaco.
“The market is going to be pretty difficult to balance in the short-term, just given the increase in supply we’ve seen relative to the demand outlook generally on a global basis,” Monaco said.
However, he told analysts that “nobody’s jumping off a cliff yet,” partly because global refinery maintenance has reduced demand by up to 6 million barrels per day.
