Trump gives go-ahead on pipelines
U.S. PRESIDENT GIVES CANADA’S OILSANDS HIS SUPPORT
U.S. President Donald Trump delivered on his promise to approve the Keystone XL pipeline, signing an executive order Tuesday to advance its construction and giving Canada’s battered oilsands industry his support.
“We are going to renegotiate some of the terms” of the Keystone XL project, Trump said to reporters. “And if they like (them) we will see if we can get that pipeline built — a lot of jobs, 28,000 jobs, great construction jobs.”
He took the same action on the Dakota Access pipeline project, saying that it would be “subject to terms and conditions negotiated by us.” He decreed that American steel should be used for pipelines built in the United States.
Trump’s move on the proposed KXL, which would send an additional 800,000 barrels a day of Alberta oil to refineries in the U.S. Gulf, comes as governments in Ottawa and Alberta remain ambivalent about the deposits, preferring to restrain production growth by capping carbon emissions and to encourage green energy.
Prime Minister Justin Trudeau, while claiming to be a supporter of KXL, told an Ontario town hall earlier this month that Canada should “phase out” the oilsands as part of the country’s transition away from fossil fuels. Trudeau said Tuesday that he “misspoke,” and that petrochemicals from the oilsands will continue to be valuable.
By approving Keystone XL, Trump is effectively responding: “If Canada doesn’t want the oilsands, we’ll take them,” and hardwiring them into his America First Energy Plan, a document unveiled on the first day of his presidency with the express aim to reduce dependence on other foreign oil.
The action undoes KXL’s rejection by former president Barack Obama, who regarded Canadian oil as “foreign” and “dirty,” and who encouraged activism against pipeline projects as a way to choke fossil fuel production.
Trump has invited TransCanada Corp., the proponent of Keystone XL, to “promptly re-submit its application to the Department of State for a presidential permit for the construction and operation of the Keystone XL pipeline, a major pipeline for the importation of petroleum from Canada to the United States.”
TransCanada said it appreciates the invitation.
“We are currently preparing the application and intend to do so,” the company said in a statement. “KXL creates thousands of well-paying construction jobs and would generate tens of millions of dollars in annual property taxes to counties along the route as well as more than $3 billion to the U.S. GDP. … KXL represents the safest, most environmentally sound way to connect the American economy to an abundant energy resource.”
Last June, the company launched a legal challenge under the North American Free Trade Agreement (NAFTA) to recoup US$15 billion in damages from the U.S. government, which it says rejected it after seven years of review “because President Obama wanted to prove his administration’s environmental credentials to a vocal activist constituency.” Many pipeline opponents vowed Tuesday to continue the fight.
Retired TransCanada executive Dennis McConaghy, who wrote a book about Keystone XL’s seven-year saga to win U.S. approval (its launch was held in Calgary Tuesday), said it’s a good sign that the company has to re-submit for approval.
“This is probably being done in a fashion that ensures legal robustness of this Trump-related permit so it will stand up against legal challenges,” he said. “If they had tried to use the existing regulatory record, that would have been more legally contentious.”
The order is “enormously facilitating” for KXL, McConaghy said.
It promises the secretary of state would “take all the actions necessary and appropriate to facilitate its expeditious review,” and to reach a final permitting determination within 60 days.
Alberta premier Rachel Notley welcomed the decision, but said she remains committed to getting pipelines built to the Canadian coast and Asian markets.
Notley said she is concerned by Trump’s statement that he wants to renegotiate the terms of the deal. “It comes down to what is meant by renegotiating those terms,” she said. “We need to look into that and monitor that very closely, and we will continue to do so on behalf of Alberta industry and Alberta interests.”
Matt Letourneau, spokesman for the Institute for 21st Century Energy at the U.S. Chamber of Commerce, said Keystone XL’s rejection by Obama was political and it’s an easy project for the new administration to advance to create jobs and infrastructure.
“There is a very solid evidence put together on this nine-year review and we think it will stand up to any scrutiny under the law,” he said. “Hopefully it won’t be politicized again.”
Tim McMillan, president and CEO of the Canadian Association of Petroleum Producers, said Trump’s announcement “means responsibly-produced Canadian oil will have access to more markets, which means Canadians will be getting better value for their resources.”
Trump’s move on KXL puts the spotlight on Kinder Morgan’s Trans Mountain expansion, which has received Trudeau’s approval but continues to face legal challenges from First Nations and environmentalists. It would be a national shame if KXL moves forward, while Trans Mountain, an all Canadian project, keeps getting stalled.
Tim Pickering, founder of commodities trading firm Auspice Capital Advisors, estimates KXL could reduce the discount on Canadian oil by $2 a barrel, but Trans Mountain would be the real game changer and could cut it by $5 a barrel because it opens a new market. About 99 per cent of the oil exported by Canada ends up in U.S. refineries.
“No kidding (Americans) are going to approve KXL,” Pickering said. “They’d be out of their minds not to approve it. We are their largest supplier and their cheapest source of oil. They are getting a great deal.”
TransCanada will have to re-assure itself that shippers are still interested in supporting KXL, given the significant exodus of major oil companies from the oilsands industry, a consequence of the oil price crash but also of Canada’s more stringent environmental policies. They, too, need re-assessment, since the major reason they came into being was to win support for pipeline approvals.