Why Alberta is throwing billions behind the Keystone XL pipeline

TC Energy to start building Keystone XL pipeline after Alberta government invests $1.1B US

With the vitality sector nonetheless reeling from weeks of financial turmoil, Alberta’s United Conservative authorities introduced Tuesday it’s throwing its monetary heft behind the long-delayed Keystone XL pipeline.

The funding of $1.5 billion, plus a $6-billion mortgage assure, goals to speed up development of the large mission and was warmly greeted by a sector determined for some excellent news. 

Nonetheless, the enormity of the funding can even elevate many questions — together with, why now? 

However as with many issues in Alberta over time, the reply can usually be discovered on the intersection of oil, authorities and politics. Now, the stakes really feel greater than ever for an business with an unsettled future.

“You keep in mind what the [UCP] slogan of the election marketing campaign was, proper? It was economic system, jobs, pipelines,” says Duane Bratt, a political scientist at Mount Royal College. “This suits all three of these.”

Tough time in oil patch

For business, there’s little query the mission is required.

Alberta’s oilpatch has struggled so as to add pipelines to carry extra oil out of the province, partially as a result of political and authorized hurdles they’ve confronted in Canada and the USA.

The ensuing pipeline bottlenecks led to an oil glut that is punished costs for oil out of Western Canada.

With a price ticket of $eight billion US, Keystone XL would carry 830,000 barrels of crude a day from Hardisty, Alta., to Nebraska. That oil would then finds its means to Texas refineries on the Gulf Coast.

“I’ve all the time been skeptical about authorities intervention out there however our failure to get pipelines constructed has been a failure of presidency coverage and politics, not of markets,” Premier Jason Kenney stated. (Artwork Raham/CBC)

Oil costs are dismal immediately due to the financial influence of COVID-19 and an oil value conflict between Saudi Arabia and Russia — with Alberta oil buying and selling nicely beneath $10 US per barrel. However the sector’s expectation is that costs will finally enhance, after financial exercise restarts.

As soon as the present gloom is gone, analysts see the mission as enhancing market entry and the worth Alberta producers get for his or her oil.

“It is giving us extra entry to these [Gulf Coast] refineries and to an even bigger demand sector,” stated Stephanie Kainz, senior affiliate, RS Vitality Group. 

“Which means which you can deliver on extra initiatives and undoubtedly, hopefully, infuse extra capital into the province and into the Canadian vitality sector.”

Way forward for sector is unsure

There are numerous questions about what the Canadian vitality sector will appear to be when the present disaster is over. Keystone XL’s future appeared unsure, no less than within the view of Premier Jason Kenney. That is why, in his opinion, authorities needed to get entangled.

With no potential non-public sector bidders for the mission, Kenney stated Alberta’s funding was wanted or the pipeline wouldn’t be constructed, no less than within the foreseeable future.

“I’ve all the time been skeptical about authorities intervention out there however our failure to get pipelines constructed has been a failure of presidency coverage and politics, not of markets,” Kenney informed reporters on Tuesday.

In making the announcement, Kenney might — and did — level to the choices of governments of the previous.

Politics and oil go hand in hand

Although many Albertans could name themselves free-marketers, their governments have usually waded into the vitality enterprise in vital methods.

As Kenney famous himself, former premiers Ernest Manning and Peter Lougheed made key investments to assist develop pure fuel and the oilsands industries, respectively.  

Slightly extra just lately, Ed Stelmach prompted massive waves throughout the business when he tried to make good on his political promise to get extra money from vitality royalties.

College students protesting in opposition to the proposed Keystone XL pipeline in Washington, DC, in 2014. The mission has confronted opposition from environmental and Indigenous teams over time. (Nicholas Kamm/AFP/Getty Photos)

That is clearly not a part of Kenney’s playbook, however politics seems to be at play right here as nicely. 

As famous by Mount Royal College’s Bratt, constructing pipelines was a key a part of the premier’s election marketing campaign final yr and the federal government would have understood the blowback of letting Keystone fall off the desk.

“This might would have been unhealthy for the business, for the Alberta authorities — significantly a authorities that’s so aligned to the oil and fuel sector,” Bratt stated.

For a premier that additionally promised jobs, the pipeline mission is vital. The federal government says the work in Alberta will create over 1,400 direct and 5,400 oblique jobs in Alberta throughout development.

Funding brings each monetary and political danger

However as with all politics, there may be additionally danger.

For one, Bratt wonders in regards to the optics of investing a lot cash in a pipeline whereas the identical authorities seems to be to tighten spending in areas like training.

Alberta NDP Chief Rachel Notley had questions in regards to the enterprise case for the mission, calling for the federal government to be clear about the way it got here to the choice to make such an enormous funding.

The federal government can be sure to be challenged by these Albertans who imagine the economic system should grow to be extra diversified and that such {dollars} might have gone a great distance in serving to elsewhere.

There are authorized dangers, too.

Efforts to advance the pipeline has been stymied by years of political, environmental and Indigenous opposition.

James Coleman, a regulation professor at Southern Methodist College in Texas, says the mission nonetheless faces authorized hurdles that might journey up the mission within the U.S. That features a problem now earlier than a U.S. District Courtroom in Montana launched by environmental and Indigenous teams. 

“Many of the states that [the pipeline] is passing by have permitted or are typically beneficial towards this pipeline, however that does not imply that there won’t be some authorized danger,” he stated.

“You may by no means predict what a court docket is going to do.”

Kenney, alternatively, is following the footsteps of a few of his predecessors — combining the pursuits of the oil business and with these of the province.

It might have labored for governments up to now however there are few ensures within the vitality sector lately.  And the query now — for the UCP and residents — is whether or not the funding will repay for Albertans.

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