What You Need to Know About the Keystone XL Pipeline
Today (18 Nov 2014) at 6:15pm EST the US Senate will vote on the approval of the Keystone XL pipeline. As an unbuilt commodity sitting in limbo for the last 6 years, the decision to face more delays or scrap the project has been an area of focus for the TransCanada and the Alberta energy industry for years. The topics at the heart of the debate include environmental concerns, political strategies, jobs economy, presidential support from Obama, the destinations of the barrels of Canadian oil – and with so many issues at play it’s impossible to predict which direction the Republican controlled US Senate will go, though Alberta Premier Jim Prentice seems to be positive, being quoted this week saying “We’re hopeful, we’re optimistic. You know the growth of bipartisan support for the Keystone pipeline is really encouraging. There’s momentum and the future will take care of itself.”
The TransCanada proposed Keystone XL pipeline would carry 830,000 barrels per day (bpd) of Alberta oil from Canada to the Gulf of Mexico. This plan conceived six years ago was an effort to supply US customers with Canadian oil, lessening the American dependency on oil from countries such as Saudi Arabia and Venezuela and lowering gas prices in the US. Overall Alberta Oil Sands seems like a better alternative, however in the last six years the US shale revolution has changed the market, beginning to replace heavier crudes with their lighter and sweeter alternative. The result has been rerouted oil flows and changed refineries, lessening the critical need for Canadian oil to the US in the process. Additionally, the environmental impact of the pipeline has been widely disputed following the 17,000 page report on the environmental impact completed by the US State Department. Ambiguous as a whole but essentially stating that the Albertan oil will be produced regardless of which pipeline it’s transported in, therefore having little to no affect on the increase of greenhouse gasses.
Alberta is once again up against a wall in our effort to transport our land-locked oil to the countries and customers that are dependent on other sources, many of who do not support the same environmental and moral standards as Alberta oil upholds. The oil sands industry is reliant on rail to fill the gaps (Canadian Pacific is expected to haul 200,000 carloads of crude in 2015 – up from 120,000 in 2014).
The Keystone bill still has to jump through a few hoops before passing as law. As the pipeline crosses international borders a presidential permit is required for approval. This has given President Obama an unusual amount of power in the approval process and with his sentiments falling on the side of the opposition, it’s difficult to anticipate if the outcome of the Senate’s decision will stand or be further challenged by the president. His remarks at a press conference over the weekend have caused the balance of the senate to become further destabilized, asking that Americans “Understand what this project is: It is providing the ability of Canada to pump their oil, send it through our land, down to the Gulf, where it will be sold everywhere else. It doesn’t have an impact on U.S. gas price”.
Another snag in the approval of Keystone XL is a pending legal case with the Supreme Court of Nebraska, placing an unusual amount of influence in the state’s hands. In 2013 Nebraska Governor Dave Heineman gave approval to the pipeline’s routing without the Nebraska Public Service Commission review, resulting in the legal battle. While Nebraska doesn’t have the power to annex the pipeline, the result of this case could send TransCanada back to the drawing board.
Ultimately Canadian oil and the Alberta oil sands are already fully integrated into the North American energy infrastructure. Would Keystone XL be a benefit to the Alberta energy market? Absolutely. But as a project with so many moving parts we’re not about to put all our eggs in the Keystone XL basket.