Ties to Russia may scuttle Tillerson

In his book, McConaghy writes that Obama’s KXL rejection was “a triumph of symbolism over substance and reasonable expectation of due process” that occurred after becoming “a highly politicized emblem for the American environmental movement.”

Calgary-based TransCanada, the proponent of KXL, is saying little publicly about a revival of KXL while the transition in Washington is under way.

The energy company had to take a $3-billion writedown following Obama’s rejection after a seven-year review and followed up with a challenge against the U.S. government under NAFTA to recoup US$15 billion in damages.

But behind the scenes, TransCanada’s legal and commercial teams are likely working overtime to assess whether KXL still has shipper support and on what terms it could go ahead, McConaghy said.

McConaghy, who retired from TransCanada in mid2014, said the company is likely looking at what a revival could look like from a regulatory and legal perspective, while waiting to see who is appointed by Trump to oversee the project.

The company’s legal team would want to ensure a revived KXL is insulated from litigation, he said. “Don’t underestimate, when this thing moves forward toward approval, the U.S. environmental movement will do everything it can to legally challenge that,” McConaghy said. “You can count on that.”

TransCanada would also have to resolve outstanding litigation in Nebraska. The fight against KXL started in the state, where landowners were concerned about its impact on the Ogallala aquifer.

A further hurdle is that the firm would have to re-assemble the team responsible for KXL, which was likely reassigned after its rejection, McConaghy said.

If Tillerson gets the top job at the State Department, which was responsible for KXL’s review, it would be a bonus for the pipeline.

Tillerson is said to be the front-runner for the job, although blowback due to his ties with Russia could scuttle that.

TransCanada did not reveal which companies made commitments to ship on KXL, but in his book McConaghy said many were U.S.-controlled.

Exxon Mobil’s Canadian affiliate, Imperial Oil Ltd., is one of the top developers of oilsands leases in Alberta, which would make Tillerson very familiar with the oilsands and the KXL debacle.

In 2008, Tillerson called the oilsands “a tremendous resource opportunity to meet our energy needs.” Indeed, if Tillerson gets the State appointment, Canada’s oil and gas sector would find itself with more support in Washington than in either Edmonton or Ottawa, where governments are more concerned about reducing oilsands impacts.

KXL opponents have expressed outrage that Trump might bring KXL back from the dead. But having launched other oilsands battlefronts following the KXL defeat — in the West against Kinder Morgan’s now-approved TransMountain expansion; in the East against TransCanada’s Energy East; on the coasts against oil tankers — they are the ones looking like they are under siege.