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CALGARY, OTTAWA, CALGARY – Canada’s oil sands companies are warning that a U.S. rejection of the Keystone XL pipeline would slam the door on their plans to expand exports into the lucrative American market.
In a measure of the substantial national and corporate interest riding on the controversial TransCanada Corp. project, both supporters and opponents are attempting to raise the stakes on a Washington approval verdict that had been expected by year-end, although it may now be delayed.
For industry, that has translated into increasingly dire warnings over the consequences of a decision on the $7-billion project to be made by U.S. President Barack Obama, who earlier this week said he will personally weigh in.
This week, some of the highest-ranking executives in the Canadian oil patch publicly detailed potential alternatives to Keystone XL amid a sharpening rhetoric that included a blunt caution: For some, an unfavourable decision will effectively close off the U.S. to future crude export growth, shutting down an option that has long underpinned Canada’s oil sands expansion plans.
“It’s pretty clear if Keystone doesn’t go ahead, that U.S. markets are not in favour of having Canadian oil,” Steve Laut, the president of Canadian Natural Resources Ltd., said Thursday. “If Keystone doesn’t get approved, would any other pipeline get approved? That’s the question you have to ask yourself.”
Such deliberation speaks to the profound consequences associated with Keystone XL. The U.S. has been virtually the sole export market for Canadian crude in the country’s entire history as an energy producer. Today, Canada is the top source of U.S. energy imports. A change in that relationship would have sweeping consequences.
Keystone XL would carry 700,000 barrels a day of Canadian and northern U.S. crude to refineries on the Gulf Coast, and is a critical plank underlying the immense expansion plans under way in Alberta’s oil sands. Mr. Laut – and, indeed, much of the Canadian oil patch – continues to believe Mr. Obama will give the $7-billion project his blessing.
But it’s clear that industry is increasingly concerned amid the growing discord in the U.S. This week, for example, Nebraska legislators tabled draft rules that could force TransCanada to change the pipeline’s route, which could delay its construction by more than three years, and potentially kill the project. And the State Department suggested a decision may not be made by the end of the year, the date it has been aiming toward.
Pipeline supporters have warned that the loss of the Keystone project will force Canada to turn to Asian, notably Chinese, markets. Natural Resources Minister Joe Oliver – who has lobbied aggressively to win American support for the project – travels to China this week. The minister will attend a mining conference there, but will also meet with senior Chinese government officials and company executives from the energy sector.
“It is a strategic priority of the government to diversify our energy markets, including markets in Asia,” said Patricia Best, Mr. Oliver’s spokeswoman.
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