Why Canada Can’t Afford To Kill Keystone XL


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Michael Bastasch DCNF Managing Editor
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The victory of Liberal Party leader Justin Trudeau in Canada’s election Monday sparked a firestorm of speculation over the fate of the Keystone XL oil pipeline.

The answer is that Trudeau, no matter how much he cares about global warming, will continue to push for Keystone XL’s approval. This is because Canada can’t afford to have oil and gas projects crushed under the torrent of global warming politics. Canada’s economic growth depends on oil and gas exports — a fact even Trudeau knows.

Environmentalists claim Trudeau’s victory over Conservative Prime Minister Stephen Harper is a huge blow to fossil fuel production in Canada. The newly elected prime minister can’t afford to abandon a major energy project. But in fact, Trudeau supports the pipeline and has said he will work with the Obama administration to approve the pipeline. Trudeau said he’ll find ways to ease President Barack Obama’s environmental concerns about the project.

“One of the things that has been a challenge in the relationship between Canada and the U.S. is it has been focused on a single point of disagreement,” Trudeau said Tuesday, referring to Keystone XL. “I certainly feel Canada could have taken a different tack towards issues on energy and environment over the past 10 years, and that’s what I’m focused on now.”

Harper was criticized for not doing enough to appease Obama by limiting Canada’s carbon dioxide emissions. Trudeau’s Liberal Party, on the other hand, plans on pushing green energy and working with the U.S. on fighting global warming. While the green agenda seems to be at the forefront of Liberal Party’s ambitions, the stability of the oil, gas and mining sectors are undoubtedly weighing on Trudeau’s mind. These industries make up more than one-quarter of Canada’s $1.6 trillion economy.

Canada’s energy sector is one of the country’s main sources of economic growth since the global recession of 2009, especially in provinces like Alberta where 70 percent of the country’s oil and 80 percent of its natural gas is produced. Albertan oil sands production boomed as high oil prices drove investment into the region.

Albertan oil sands, which would be transported by the Keystone XL pipeline to Gulf Coast refineries, added more to Canada’s economy in 2013 than the entire province of Saskatchewan, according to a study by the consulting firm IHS.

But Canada’s economy took a huge as oil prices collapsed more than 60 percent from June 2014, meaning high cost oils were less economical to produce. That has caused some to doubt the viability of oil sands production and the need for the Keystone XL pipeline.

Canada’s oil and gas industry, however, does expect oil sands production to grow 30 percent through 2020, despite low oil prices. The fact is that oil sands producers will become more efficient at pulling the stuff out of the ground, and pipelines will be needed to get the oil to markets.

TransCanada, the company looking to build Keystone XL, argues the project will go ahead even with low crude oil prices.

“The fundamentals of Keystone are as sound today as they were seven years ago,” Paul Miller, TransCanada’s executive vice president told reporters earlier this year.

“We all recognize that in the oil business, there is always going to be price fluctuation. That’s a normal part of the business cycle,” Miller said. “The need for pipelines and pipeline development — even in this price environment — remains unchanged from a long-term perspective.”

Keystone XL may be even more crucial to the Alberta’s oil industry since it’s more efficient than rail or trucking to transport crude thousands of miles across North America. Environmentalists argue the infrastructure is exactly why Keystone should be blocked.

“Oil prices going low gives the president a landing place to reject the pipeline because Canada needs cheap and big infrastructure,” Jane Kleeb, founder of the anti-pipeline group Bold Nebraska, told Politico last year as oil prices plunged. “When oil prices are high, producing the expensive and high-carbon tar sands makes sense. But now that oil is low, the only way tar sands will continue to expand is if Canada gets big pipelines.”

But even if the Obama administration decides to veto the project, TransCanada and Canadian officials will still try to find a way to get Albertan oil to market. Other pipeline companies have proposed alternative routes to take oil sands to market. One alternative being considered by TransCanada called Energy East would take oil from Alberta to ports on Canada’s east coast.

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