`Now is the critical hour'
Kenney calls on feds to support $10B oil project
OTTAWA • Alberta Premier Jason Kenney says it is the “critical hour” for the Keystone XL pipeline, urging Ottawa to step up its support for the embattled project following years of regulatory delay.
His comments came after news reports that U.S. president-elect Joe Biden would scrap the $10-billion project on his first day in office on Wednesday. Biden has long voiced plans to revoke the permit for Keystone XL, but news of immediate action on the controversial pipeline nonetheless raised alarms in the core of the struggling Canadian oil industry.
“Now is the critical hour,” Kenney told reporters Monday. “If this really is a top priority, as it should be, then we need the Government of Canada to stand up for Canadian workers, for Canadian jobs, for the Canada-U.S. relationship right now, today and tomorrow.”
Oil producers in Western Canada have been struggling ever since commodity markets crashed in 2015, made worse by a lack of available pipeline capacity that has diminished the price of Canadian crude. Major projects like Keystone XL, the Line 3 replacement, and taxpayer-owned Trans Mountain expansion have languished for years due to legal and regulatory delays. Keystone XL was first proposed in 2008.
A failure to complete Keystone XL, proposed by Calgary-based TC Energy, would eliminate one of three pipelines that Prime Minister Justin Trudeau has often touted as critical conduits for the Canadian oil and gas sector. In 2013, before he became prime minister, Trudeau said he was a “steadfast” supporter of Keystone XL, and suggested it had been needlessly “caricatured” by opponents of the project.
The expectation of lower oil demand in coming decades has marginally reduced the need for major new pipelines, but many analysts say all three major projects might be needed to reduce dependence on rail cars and raise Canadian oil prices.
As for Ottawa’s role in promoting the project, some observers say the federal government has pushed the argument as far as it can go in an era of growing environmental and social concerns.
“I think Mr. Kenney was entirely off the mark with his comments,” said one senior industry source familiar with discussions between Ottawa and Washington. The person said the federal government has been a “huge proponent” of KXL in public and private, and that the decision by Biden to oppose the pipeline was largely due to political forces within Democratic Party ranks.
“The challenge that Canada has always been up against is that Mr. Biden was part of the Obama administration, which was opposed to KXL.” The person said a “massive progressive and aggressive wing” of the party is unlikely to support the project regardless of facts around pipeline safety or long-term oil demand.
However, Paul Lefebvre, parliamentary secretary to Seamus O’Regan, the minister of natural resources, said the Biden administration had not told the federal government of its decision.
Asked on the CBC’s Power & Politics program if the Biden administration had reached out directly to the federal government on the matter, Lefebvre said, “Right now the answer to that is no.”
Jack Mintz, senior fellow at the University of Calgary’s School of Public Policy, said Biden’s decision to quash Keystone XL is likely to cool Canada-U.S. relations on the energy file — an area where the two countries have long shared large plots of common ground.
“For someone who wants to work with his allies, this isn’t a very good start,” he said. “This is a slap in the face for Canada.”
“The U.S. has to ask itself what it’s going to achieve from blocking this pipeline.”
Whether Canadian heavy oil producers will need Keystone XL is an open question.
The Canadian Association of Petroleum Producers (CAPP) expects total oil output to reach 5.66 million barrels per day by 2030 and continue growing thereafter, which would create enough new capacity to necessitate Trans Mountain, Keystone XL and Line 3. Another projection, from the Parisbased International Energy Agency, sees Canadian production rising to roughly the same level but tapering off in 2030, which would necessitate only Line 3 and Trans Mountain.
Line 3, proposed by Calgary-based Enbridge, would replace an existing oil pipeline leading from northern Alberta to Wisconsin. The project was long seen as the Canadian pipeline with the clearest path to completion, but has been met with resistance by state-level regulators.
Trans Mountain, expected to start delivering 890,000 barrels of oil per day to a Vancouver port by the end of 2022, was purchased by Ottawa in 2018 after its previous owner threatened to walk away from the project. Keystone XL would carry 830,000 barrels per day of mostly heavy oil to refineries in Texas.
Industry representatives on Monday said scrapping Keystone XL would only intensify the U.S.'s dependence on oil supplied by countries operating under less environmentally-conscious regimes. Oil behemoths like Russia, which has few environmental restrictions in place compared with Canada, already supply oil to the U.S., analysts say, and are likely to supply more in coming years if Canadian export lines are blocked.
“Canadian oil products are subject to high environmental standards and a progressive carbon tax,” said Perrin Beatty, head of the Canadian Chamber of Commerce. “They are produced by companies that have set aggressive targets for net-zero emissions. Keystone XL furthers the new U.S. administration's climate action commitments by securing these products for the United States in place of oil from producers that do not adhere to those standards.”
According to a report by the Wall Street Journal, TC Energy this weekend said it would commit to using only renewables to power Keystone XL, part of an effort to appease the Biden administration. The company said it would invest US$1.7 billion on solar, wind and battery power to operate the pipeline, according to the report.
In November, the company inked a roughly US$785-million deal with five First Nations in the U.S. and Canada, giving them each a financial stake in the project.
Former U.S. president Barack Obama vetoed a bill to build Keystone XL in 2015, setting back the project after it had won a narrow decision in a Nebraska court. In 2017, President Donald Trump signed an executive order to again move ahead with the project.
Residents of Nebraska in particular have opposed the pipeline, saying it threatens crucial freshwater sources.