If Albertans had forgotten about the risks associated with Premier Jason Kenney’s decision to invest $1.1 billion US in the Keystone XL pipeline, plus $4.2-billion in loan guarantees, this week was a painful reminder of the treacherous business building pipelines has become.
This was an especially difficult week for the pipeline industry across North America as two lines were dealt headline-making setbacks and another major project was cancelled.
It began last weekend with developers of the $8 billion Atlantic Coast gas pipeline terminating the project amid cost, permitting and litigation uncertainties.
It continued Monday with the U.S. Supreme Court’s decision that left in place a lower court ruling that blocked a key environmental permit for the controversial Keystone XL pipeline — a decision the company said will continue to delay large portions of construction on the 1,947-kilometre project.
Calgary-based TC Energy vows to continue building the Canadian leg of the project while fighting the legal battle south of the border.
The news out of the U.S. courts didn’t shake Kenney’s public confidence in the project as he continued to tout the benefits of the Keystone XL pipeline.
“It immediately creates thousands of jobs,” he said during a news conference on Wednesday.
“But after the oil starts flowing, it’ll generate tens of billions of dollars that will benefit Albertans and generate government revenues for decades to come.”
Also this week, a U.S. judge ordered the Dakota Access pipeline to shut down and empty its oil in 30 days. According to the ruling, the U.S. Army Corps of Engineers violated the National Environmental Policy Act because it failed to produce an adequate Environmental Impact Statement for a segment of the project. The pipeline has been in operation since 2017.
In recent days, the state of Michigan also launched a website to keep the public abreast of its ongoing battle with Enbridge over the Line 5 pipeline.
The company shut down both legs of the pipeline last month after noticing a disturbance to an underwater anchor support in the Straits of Mackinac. The state wants to keep Line 5 closed indefinitely. A judge has allowed the west leg to reopen, but the other leg remains closed until more testing is finished.
Attention on climate change, oil spills
Developing large pipeline projects has become increasingly difficult in the last decade, especially with greater attention on climate change and spill concerns. And while building a new mine or power plant may impact a few nearby communities, pipelines can pass by hundreds of communities along a route.
The past week adds even more wrinkles to an already uncertain outlook for major pipeline development in North America.
Building an oil or natural gas pipeline will ultimately become more difficult in the wake of recent developments, said Stephanie Kainz, a senior associate with RS Energy Group in Calgary.
Although she’d never seen an order like the one telling the operator of the Dakota Access pipeline to stop flowing oil, Kainz said in her opinion, the biggest news was Keystone XL, which continues to be blocked from using a streamlined permitting process, called Nationwide Permit 12.
“The Supreme Court telling Keystone XL they can’t use Nationwide Permit 12 for their water crossings … really means that Keystone XL literally has to go the long way around the permitting process to cross every single water crossing,” Kainz said.
A spokesperson for TC Energy said Thursday that the company will seek authorization for the necessary permits and approvals to convene U.S. mainline pipeline construction in 2021 and maintain its 2023 in-service date.
The Keystone XL pipeline would provide a valuable outlet for Alberta crude to the world market, giving it direct access to the U.S. Midwest and down to the Gulf Coast, Kainz said. Building it should mean producers can fetch a better price for its crude and more royalties for Alberta.
But further delays mean the project could face big political headwinds, she said.
“I want to be very optimistic on it, but I think it definitely lowers the chances of it actually being completed, especially going into an election this fall,” she said. “Right now you’re banking on a Trump re-election in the midst of a pandemic.”
Biden opposed to Keystone XL
U.S. President Donald Trump has been a strong supporter of the Keystone XL project, but his opponent, Joe Biden, the presumptive Democratic nominee, has said he would tear up Trump’s approval of the pipeline if he wins the White House.
Kenney said he believes Biden can be persuaded to back the project, but the former vice-president has been unequivocal in his criticism of the pipeline, calling it “tarsands that we don’t need.”
James Coleman, an associate professor of energy law at Southern Methodist University in Texas, said pipeline developers will, on balance, view the past week positively because the U.S. Supreme Court did not stop other projects from using the nationwide permit.
For proponents of Keystone XL, he said, it’s also a “serious positive” that the court appears interested enough to look at the matter when it takes so few cases.
Still, he said he believes the odds of getting this pipeline built remain less than 50 per cent because of Biden’s chances of winning in November.
“It’s not going to be in service by the time he would be elected [this fall]. So, any individual [court] decision is playing on the margins of that basically bigger overall question, which is about the election.”
Coleman said the last week of news demonstrates for people outside of the energy industry just how difficult a business it is to build pipelines these days. It perhaps also underscores why government investment may be necessary to get such projects done.
“One thing you’re seeing is if you want to build energy transport infrastructure — doesn’t matter if it’s a power line or oil pipeline or natural gas pipeline — it is getting riskier,” Coleman said.
“One way to have even a chance of getting to build is to have government investment because that government investment provides patience that wouldn’t otherwise exist. And thus far, in the United States, we haven’t felt the need to invest in oil pipelines. I’m not sure that that’s far off.”
The question Kenney will ultimately have to answer is whether his big bet on Keystone XL was worth the gamble. It’s a bet that comes with considerable hurdles and uncertainty, with the cost for some also measured against climate change and the future of energy.
And even if the legal and regulatory hurdles are overcome, the outcome of a hotly contested election in a foreign country could decide the fate of the project — and with it, Alberta’s investment.
Source: CBC News