Keystone XL, a US$8 billion oil pipeline that was scheduled to flow from Alberta to Nebraska, has been officially scrapped, the project’s owner, TC Energy, confirmed Wednesday.
Although Alberta is now on the hook for more than $1 billion in lost profits following the cancellation of the expansion pipeline, there is division over the effects of its termination. Industry experts are concerned about the effects of the waterfall on Canada’s economy, while environmentalists call the cancellation a victory.
“Canada has oil, but now we have fewer options to extract oil,” explained Richard Mason, an executive fellow at the Calgary School of Public Policy.
“Keystone would have provided greater flexibility for oil producers, but without it, refineries in the Gulf Coast could turn to other producers, such as Saudi Arabia or Colombia, for the product.”
The Keystone XL, a 1,947-kilometre pipeline, was designed to carry 830,000 barrels per day of crude oil from Hardisty, Alta., to Steel City, Neb. From there, it will connect to the company’s existing facilities to reach the US Gulf Coast – one of the largest oil refining centers in the world.
But Calgary-based company TC Energy scrapped it after comprehensively reviewing its options and consulting with the Alberta government. It comes months after US President Joe Biden revoked a key permit required for the US section of the 1,200-mile project.
Keystone’s demise follows the cancellation of Northern Gateway and TransCanada Corp’s Energy East, as well as delays at Trans Mountain, which the Canadian government bought from Kinder Morgan in 2019 for $4.5 billion.
Although the cancellation is a win for environmental groups and many Indigenous communities, there is an impact on Canada, including the loss of revenue and jobs and the need for a greater reliance on rail to ship the product.
loss of revenue
Oil sands are a huge resource in Canada. The country is the fourth largest producer and third largest exporter of oil in the world. according to the federal government.
And despite the cancellation of the Keystone pipeline, demand for Canadian oil still remains, Mason said.
He explained that over the years, Canada has produced a lot of oil, but because of the lack of pipelines, that meant the product was not making it to the refineries, meaning Alberta had to cut back on its oil production. Had to do
“Which means loss of revenue because we couldn’t bring it to market,” he said.
And now this is happening.
“We have a situation where COVID is mostly done and oil sands have increased production and shipping by 200,000 barrels a day and rail a day because we don’t have pipeline capacity, Which is more expensive,” Mason said. “Keystone would have provided greater flexibility for oil producers.”
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If all pipelines are full, refineries could drive down prices and producers in Alberta “have no choice,” he said.
Refineries, especially those in the Gulf Coast, he said, have the ability to bring in crude via ship, so they have the option of taking someone else’s oil if they don’t like the price Alberta is charging.
“So the keystone was not urgently needed, but part of getting back into a better balance, so we have options to access different markets and we won’t end up with major disruption or too much price pressure for buyers.”
Oil will still ship, but via rail
according to the federal governmentAs oil production in western Canada increased in 2018, it began to ramp up pipeline capacity, meaning that crude shipments by rail increased to fill the gap, more than double 2017 levels.
And with the cancellation of the Keystone pipeline, Canada’s reliance on rail to ship oil has increased, Mason said.
But, transportation of crude oil by rail is much more risky and costly than using pipelines.
For example, he said the Keystone pipeline to bring oil from Alberta to the Gulf Coast would cost $10 to $12 a barrel, while rail would cost $20. On top of that, Mason said that with more oil shipping via rail, that means derailments and winter storms are more likely to affect supplies.
“So generally it’s more expensive, which could mean less oil from Canada and more oil from elsewhere,” he said.
“Many environmentalists see pipeline cutting as a cut in oil supply, but the reality is that if you cut off oil supplies from Canada, oil will still move, but in a less efficient and less safe way.”
The Keystone project is embroiled in more than a decade of fighting that has pitted the energy industry against environmentalists and several indigenous communities opposed to the pipeline.
After its official cancellation on Wednesday, many environmentalists welcomed its demise, calling it a historic moment in the fight against climate change.
“This victory is thanks to the indigenous land defenders who fought the Keystone XL pipeline for more than a decade,” said Clayton Thomas Mueller, Canada’s senior campaign specialist at 350.org, in a statement.
“With the cancellation of Keystone XL, it is our turn to turn our attention to indigenous-led resistance to Line 3 and the Trans Mountain Torsand pipelines.”
Several environmental groups, such as 350.org., were strongly opposed to the project, considering the dependence on oil and gas incompatible with limited carbon emissions. The proposed path of the pipeline was Also criticized for endangering wildlife and destruction of habitats.
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