Thursday, April 16, 2020
Alberta Premier Jason Kenney was asked during Alberta’s economic-spending-asking-receiving- covid-health-mental health update Wednesday if his government had a response to the news that Keystone construction had been issued a stop order by a Montana district court judge.
The premier responded that he had not heard of any order halting KXL.
It was a surprise order that came just two weeks after a surprise announcement that Alberta was back in the business of picking Alberta’s economic winners and losers.
“Today, Alberta is taking control of its economic destiny,” Kenney said during a press conference with Russ Girling, TC Energy’s president and CEO.
Except – it wasn’t Alberta standing in its own way, especially where the Keystone project was concerned.
Shovels were in the ground in Alberta by April 1 and TC Energy also had shovels in the ground across the border in Montana on April 7 according to the Associated Press.
“Montana’s Department of Environmental Quality on (April 3) issued the final state permits the company needed, agency spokeswoman Rebecca Harbage said.”
Even the President of the United States had issued not one, but two Presidential Approvals for the project – in 2017 and again in 2019 – only to find that the courts had higher authority.
On Wednesday – one day before the scheduled hearing in front of Montana’s Supreme Court – U.S. District Judge Brian Morris of Great Falls rescinded a permit required by TC Energy to build through existing waterways. Morris also requested the U.S. Army Corps of Engineers – who granted the permit – conduct further environmental impact reviews.
Morris also issued the previous order which held up construction of the project in 2018.
Wednesday’s order does not affect work currently being done near the U.S./Canada border in the state.
Legal challenges aside, Alberta oil may find itself in another predicament as news came late Wednesday that the U.S. government was considering paying American oil producers to “leave it in the ground“.
The move is intended to alleviate a supply glut caused by increased production from Saudi Arabia and Russia’s recent price war, and decreased demand due to the world-wide health pandemic.
“The keep-it-in-the-ground plan would require billions of dollars in appropriations from Congress — and the administration just recently lost a bid in Congress to spend $3 billion buying oil for the government’s strategic reserve,” according to Bloomberg.
Current production is expected to exceed American storage capacity by June.
How does this affect Alberta?
Enbridge’s Line 3 cleared its final obstacle in Minnesota in February and expects to be fully operational in 2020.
Although good news two months ago, the additional capacity provided by Line 3 may not be beneficial for Keystone – or Alberta’s recent investment in the project.
Back in late August 2019, TC Energy itself had yet to commit additional financing for the project due to the challenges it was facing in the courts. Despite the fact that Kenney and Girling reassured Albertans during the March 31 spending announcement.
“There’s always some outlying regulatory or legal risk,” Kenney said.
“We know that this project has been subject to years of – I would call it “lawfare” – by interests trying to landlock Alberta and Canadian energy; however in the last few years we’ve seen TC Energy secure more and more permits. Some matters remain under review but the position of TC Energy… is that the project is in a position where it can proceed.”
On March 31, Western Canadian Select was trading at US$9.39/bbl and an end to the price war with Saudi Arabia and Russia had yet to be negotiated.
“With respect to Nebraska, those issues that are before the court are compensation -based; we have been granted easement over those properties, and the dispute is over compensation we provide to those landowners… so that won’t impede construction” Girling said.
“And in Montana, as you know the Presidential Permit has been challenged, and there’s been a couple of other challenges there as well, and those challenges will be heard in court… at the current time, we have all our permits to start construction.”
Girling added that the challenges in Montana were to permits issued by state departments, including the one by U.S. Army Corps Engineers.
This latest blockade is not the largest problem facing the project.
Adding in the market – which has too much oil to sell and not enough buyers – the U.S. administration was seen, in 2016, to be an ally to Canadian oil producers and to Keystone.
That was before the U.S. needed to curtail production in the country – which is where they find themselves today.
Bankruptcies in both the U.S. and Canada increased by more than 50 per cent in 2019. If unabated production continues it is likely to spur even more insolvencies.
And in the face of that, does anyone see the Trump administration coming to Canada’s aid to provide more capacity to ship Canadian oil to the U.S.?
There is no reason for America to support the expansion of Canada’s pipeline access beyond Line 3 at this time and the latest revocation of TC Energy’s construction permit could delay construction for another year or more.
Due to foreign-funded interests, a political veto and the Saudi price war, Kenney said of his government’s decision to spend $1.5 billion that “the market isn’t functioning properly so there are no prospective private sector bidders investors for Keystone XL.”
“This is our last chance – in other words, without this investment from Alberta, the pipeline would not be built.”
No, it wasn’t “our” last chance – it was Kenney’s last chance to provide the jobs, economy, and pipelines he promised.
This post contains opinion.
Deirdre is a freelance writer physically distancing in southern Alberta.
Connect: @Mitchell_AB, email@example.com