Industry Intel (FEB, 2018) PIPELINE POLITICS

 

 

The TransCanada Keystone XL Pipeline has been a trending subject over the last 5 years. There are many reasons why this development has been a political process between Canada and the United States with many influencing factors from both countries.  This month’s Industry Intel highlights some of these influences how these decisions will affect Alberta, and the Canadian economy.

 

The Keystone pipeline is an oil pipeline system that transcends throughout Canada and into the United States which was commissioned in 2010 and is now owned solely by TransCanada Corporation. In the article “Welcome to Steele City, Population 61 and Energy Central USA” Russel Hubbard states that “the demand for Canadian crude is so robust that TransCanada has proposed an additional pipeline, the long-debated Keystone XL originating in Canada, running south and also terminating in Steele City. This pipeline would bring almost a million barrels a day to the region”. Hubbard, R. (2014, July, 7th) Welcome to Steele City, population 61, and Energy Centrale USA. Retrieved from (http://www.omaha.com/money/welcome-to-steele-city-population-and-energy-central-usa/article_e6a4cbd0-c90a-5da8-8d90-3e74235928a2.html).

 

The current established Keystone pipeline transports about 600,000 barrels a day to Steele City where the region is already set up to receive crude oil. “The Keystone XL is a proposed 36-inch-diameter crude oil pipeline, beginning in Hardisty, Alta. And extending south to Steele City, Neb.” (December, 2017) Retrieved from http://www.keystone-xl.com/kxl-101/project/. This extension was proposed by TransCanada and waited approval and acceptance from many stakeholders in the region for what felt like forever.

 

With the price of oil changing the market receiving approval for this size of a project was looking les likely.  The Keystone XL phase of the pipeline (Phase IV) would essentially duplicate the Phase I pipeline which had TrasCanada feeling pretty good about its position for development. On Monday November 20th  the State of Nebraska (the last state along the route to give its approval), rejected the original proposed route and instead approved the “mainline alternative route for this stretch of the pipeline, which is a slightly different path from the preferred route first proposed by TransCanada. (December, 2017) Retrieved from http://www.cbc.ca/news/business/nebraska-keystone-1.4409960  Both routes however, end up at the same location in Steele City, Nebraska and both routes would bring a great project to TransCanada and to the country itself.

 

This was a great addition to the project portfolio for TransCanada and would offer a great source of development and economic benefit for the country once construction and development broke ground. As with many large projects that propose development across two countries there are bound to be some hurdles and although it seemed all those were overcome there was further controversy ahead. 

 

The agricultural community has been hit hard with a number of developments, mass corporations taking over their lands and increasingly long seasons of drought in both the US and Canada.  When the approved construction was announced this community was standing up for their land.  A farmer, Art Tanderup whose land is based in the proposed route for Keystone XL pipeline said in a release that “we are disappointed that the commission approved Keystone XL, and have chosen to place the route through the most fragile soils and over through the Ogallala Aquifer...” (December 2018) Retrieved from (http://www.cbc.ca/news/business/nebraska-keystone-1.4409960)

 

Large developments like this are bound to intrude on environmental and natural landscapes that build communities and culture.  The Keystone XL project advocated to impact the least amount of environmental disruption as possible and the agricultural community in Nebraska. This pushed the project back again further while conversations and negotiations were made to come to a reconciliation on the development of the pipeline and the impact on the environment.

 

There are always parties of opposition for large projects like this and every voice and stakeholder has to be heard for the project to move forward.  This is something TransCanada values immensely when they are proposing new developments and is also why they are a leader in environmental preservation and why they have positioned Canada as the least impacting country in the world with pipeline infrastructure projects.  With parties of opposition there are always those in favor of the developments and in the United States there is an understanding that additional infrastructure developments will add value to the communities that surround them. The article ‘Keystone XL Lost Opportunities Tour: Steele City, Nebraska’, explains that if the Keystone XL Pipeline were built, “a new school in Glasgow, MT would be paid by taxes from the pipeline instead of from property owners. Bakken Crude oil would be entering the pipeline in Baker, MT and help it become a regional energy hub. A North Dakota field that held 220 miles of steel pipe would be empty. Business owners in Murdo, SD would have hotels, restaurants, and RV parks open year-around to serve the workers building the pipeline. At the Doolittle/Wagner Ranch, cattle would be grazing on land that you’d never know had a pipeline running beneath it, and Winner, SD would have new transmission lines to attract the wind power industry.”(December, 2017) Retrieved from https://www.uschamber.com/above-the-fold/keystone-xl-lost-opportunities-tour-steele-city-nebraska.

 

The controversy begins with whether the impacts of this development will outweigh the benefits and if there is a long term gain that impacts all stakeholders involved. The above points prove that over time there are many advantages to the new infrastructure projects developed that connect and develop energy security between Canada and the US.  The process in communicating and delivering this information to everyone involved is what delays projects further and creates a longer process.

 

These pipeline politics are positioned with any other large infrastructure developments throughout Canada and the US with Kinder Morgan’s pipeline, and the Energy East pipeline as further examples of a long process of trying to communicate and work with all stakeholders of the projects development.

 

The Keystone XL project means a lot to Canada in terms of overall benefits of transportation and delivering a product that is in high demand to a neighbouring country.

 

 “If a pipeline does go ahead- a possibility that now seems at least marginally more likely following Nebraska’s decision- the benefits to Canada’s oil industry are clear. A new export line would eliminate current transportation bottlenecks, shrink the discount that Western Canadian barrels fetch compared to world prices, and remove a constraint on potential production growth from the oilsands.”(December, 2017) Retrieved from http://business.financialpost.com/commodities/energy/what-the-building-of-keystone-xl-pipeline-will-mean-for-canada-and-the-canadian-energy-industry.

 

In addition to the actual transportation benefit of the pipeline “most of the employee compensation from Keystone XL would be concentrated in Alberta. But other provinces would also see an upstick in activity. A report in July 2012 by the Canadian Energy Research Institute (CERI) found that worker compensation in Ontario- mostly in its manufacturing sector-would rise nearly $10.68 billion between 2011 and 2035 if the project goes ahead. British Colombia would see $4.58 billion in employee compensation over the period, while Quebec would see $2.27 billion, according to CERI estimates.” (December, 2017) Retrieved from http://business.financialpost.com/commodities/energy/what-the-building-of-keystone-xl-pipeline-will-mean-for-canada-and-the-canadian-energy-industry.

 

As an industrialized nation and an economy that relies heavily on fossil fuels the development of Keystone XL would benefit both the Canadian and American economy.  This project would create thousands of jobs and contribute to the overall prosperity of each nation.  There are still many politics and stakeholders to contribute to this development which make it increasingly difficult to come to a decision however; we are hopeful a favourable conclusion awaits us.

 

 

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