Keystone XL future may depend on U.S. vote
CALGARY — Alberta Premier Jason Kenney and Prime Minister Justin Trudeau have faced off on major energy issues in recent years, but experts say they will need to present a united front on the often-challenged, long-delayed Keystone XL pipeline if former vice-president Joe Biden wins the White House.
Votes were still being counted in key states including Pennsylvania, Georgia, Michigan and Arizona on Thursday, but Biden was leading U.S. President Donald Trump in electoral college voting and appeared to have a higher likelihood of winning the election.
A new president in the White House would have direct implications for the Canadian oil industry as TC Energy Corp.’s Alberta-to-Nebraska Keystone XL pipeline faces the risk of being cancelled if Biden takes the White House. The differences between Trump’s de-regulating policies on energy and Biden’s intention to transition away from the oil industry will also have wider implications for Canadian oil producers and global crude markets.
“We recognize that currently vice-president Biden has (certain) views on Keystone XL and we believe there are a lot of American jobs connected to that,” said Tristan Goodman, president of the Explorers and Producers Association of Canada, an energy industry group.
Goodman said he hopes that, if Biden wins, he would meet with Trudeau and Kenney before taking a decision on Keystone XL and said the Canadian energy industry “will work with whichever administration is sitting.”
Earlier this year, Alberta’s government invested $1.5 billion in the Keystone XL project and offered up $6 billion in funding for the 2021 construction season in order to kickstart construction on the line.
Kenney has long been critical of Trudeau’s weak support of Keystone XL when former U.S. President Barack Obama cancelled the pipeline’s permit in 2016, but will need to work with Ottawa to prevent a cancellation of the project by a potentially new administration in Washington.
“Little Alberta can’t stand on its own against a cranky U.S. government, but Canada as a whole can present a common front and find common ground with America on enough issues such that Keystone XL becomes just one piece of a bigger picture,” said Ken Hughes, a former Alberta energy minister and current chair of Calgarybased Alpine Insurance and Financial Inc.
Hughes, who was the province’s oil and gas minister when Keystone XL during the Obama presidency, said that Alberta and Canada will need to offer progress on environmental issues such as methane emission reductions as it pushes for a potential Biden administration not to block Keystone XL.
In a speech Wednesday, Kenney told Alberta’s small-town mayors and county reeves that the province chose to invest in Keystone XL as an insurance policy against the risk that another key export pipeline, the Trans Mountain Expansion, was not delayed further.
“We sent a message with that investment. We are not going to passively sit by allowing others to seek to land lock Alberta’s energy,” Kenney said.
But the risk to a Keystone XL delay or cancellation is higher than delays for the TMX project, which is currently under construction in British Columbia.
“I think Keystone XL will just be cancelled. I just don’t see it happening under a Biden win,” said Phil Skolnick, an analyst with Eight Capital in New York.
Others believe a Biden administration is more likely to frustrate the US$14.4-billion pipeline project with regulatory delays.
“What Biden can do is either create new environmental review processes on the project or slow walk normal course permit issuances,” said Dennis McConaghy, a former TC Energy executive who oversaw the pipeline project during the Obama years.
“The trouble with Keystone XL is that it’s valuable to the United States, but it’s so symbolic to the environmental movement,” McConaghy said, adding that a Biden administration without a Democratic majority in the Senate would likely focus its efforts on frustrating Keystone XL rather than pursuing a Green New Deal, which would require legislation.
The pipeline needs a U.S. presidential permit as it crosses the international border, but the president also has the executive power to rescind it, too.
Biden’s vice-presidential running mate Kamala Harris has supported a Green New Deal, which would use billions of dollars in federal money to invest heavily in renewable energy infrastructure in the U.S.
However, the Democrats appear to have underperformed in the Senate races, which means Republicans could retain control of the Senate, and counter some of the green energy policies that Democrats are keen to embark upon.
In addition to a potential Keystone XL cancellation, a Biden victory would have dramatic implications for the oil market in North America and globally, as the U.S. is the world’s largest oil producing country and Biden has signalled it would remove tax incentives for the industry.
The former vice-president had also indicated a willingness to engage with Iran in new nuclear negotiations, which could lead to an additional 1.9 million barrels of oil per day of oil from the Middle East country flooding the market, adding to the supply amid lacklustre global demand.
“It is our base case that Biden administration leads to Iran pushing for 1 million barrels per day into the market by the fourth quarter of next year and that’s a major headwind for the oil market,” said Michael Tran, managing director, global energy strategy at RBC Capital Markets.
Tran said that one other area where Biden could please his environmental base is with more stringent efficiency standards of gasoline- and dieselburning vehicles.
“This is what I think is the silent killer of oil demand. It’s not as sexy as electric vehicles,” Tran said. “If you want to take carbon emissions down, the policy on the efficiency side is something that people haven’t talked enough about.”
As the battle for the White House dragged on, a TD Economics report Wednesday said there’s likely to be heightened volatility in financial markets and a lower likelihood that an American fiscal stimulus is passed and enacted by early 2021, given the expected standoff between Republicans and Democrats in Congress.