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TC Energy said this week that it has terminated plans to complete the transborder Keystone XL Pipeline which has faced legal battles and permitting challenges for more than a decade. The Calgary-based pipeline operator halted construction on the project on 20 January, the day that US President Joe Biden took office and in one of his first acts as chief executive revoked the pipeline's permits. TC Energy's CEO, François Poirier, issued a statement that said the company values the experience it gained, and relationships made with various stakeholders while pursuing the ill-fated project. "Through the process, we developed meaningful indigenous equity opportunities and a first-of-its-kind, industry-leading plan to operate the pipeline with net-zero emissions throughout its life cycle. We will continue to identify opportunities to apply this level of ingenuity across our business going forward, including our current evaluation of the potential to power existing US assets with renewable energy," Poirier said in the statement.
TC Energy confirmed on Wednesday that it has halted the construction of its Keystone XL pipeline after newly inaugurated US President Joe Biden canceled the project's federal permit in one of his first executive actions. Biden announced that he would revoke the pipeline's approval last May during his presidential campaign. Calgary-based TC Energy said pending unspecified "intervening actions" the move will eliminate thousands of jobs and result in a major financial loss. "The decision would overturn an unprecedented, comprehensive regulatory process that lasted more than a decade and repeatedly concluded the pipeline would transport much needed energy in an environmentally responsible way while enhancing North American energy security," the pipeline operator said in a statement. The cancellation comes less than a year after Biden's predecessor, US President Donald Trump, approved the federal permits in March to allow the transborder pipeline to be built.
Each edition of the Olympic Games brings together remarkable athletes, volunteers, and spectators of all nationalities in a long-anticipated competition. While Brazil just finished hosting its first summer Olympics in the coastal city of Rio de Janeiro, in the world of oil and gas megaprojects another type of competition is in play--that of market share. More akin to a marathon race than a sprint, Olympic-sized oil and gas megaprojects take years to come to fruition and require billions of dollars in development costs. Not every planned megaproject will make it to the finish line. What does it take for these ultraambitious projects to succeed?
There are about 180,000 miles of oil pipeline in the United States, but all of this mileage put together has not generated 1% of the controversy as a pipeline that would add a mere 1% to the total--the Keystone XL Pipeline connecting Alberta's oil sands to refineries in Texas and Louisiana. Since it crosses an international boundary, Keystone requires US State Department approval, which has not been forthcoming under the Obama administration. Keystone has become a cause célèbre on both sides of the political aisle. President Obama has made numerous statements criticizing the pipeline and has vetoed the legislation mandating its approval. Conversely, Republican Senate Majority Leader Mitch McConnell had promised to make Keystone the first legislative priority in Congress when he took office.
Opponents of the Keystone XL pipeline vowed on 10 August to block construction of the controversial project if Nebraska regulators approve the proposed route later this year. Nebraska regulators wrapped up a final public hearing a day early on 10 August on TransCanada's proposed Keystone XL pipeline after 4 days of contentious exchanges between lawyers. They will make their final decision by 23 November. After the hearing, two dozen landowners and other pipeline opponents vowed nonviolent civil disobedience if the commission rules in favor of TransCanada. The action, they said, would be similar to months-long protests in North Dakota led by the Standing Rock Sioux tribe against the Dakota Access pipeline.
A US federal judge in Montana ruled this month that the US Army Corps of Engineers violated the law when it approved Nationwide Permit 12, a key water crossing permit for TC Energy's Keystone XL tar-sands pipeline and many other pipelines nationwide. The ruling comes in response to a lawsuit filed by Northern Plains and other conservation groups last year which challenged the Corps' failure to adequately analyze the effects of pipelines authorized under the permit, including Keystone XL, on local waterways, lands, wildlife, and communities. The ruling prohibits the Corps from using the Nationwide Permit 12 fast-tracked approval process for any pipelines nationwide. The ruling also comes less than a month after TC Energy said it would proceed with construction of the $8-billion Keystone project. The ruling does not shut down work that has begun at the US-Canada border crossing in Montana, according to attorneys in the case.
A US judge canceled a key permit on 15 April for the Keystone XL oil pipeline that's expected to stretch from Canada to Nebraska, another setback for the disputed project that got underway only recently following years of delays. Judge Brian Morris said the US Army Corps of Engineers failed to adequately consider effects on endangered species such as pallid sturgeon, a massive, dinosaur-like fish that lives in rivers the pipeline would cross. The ruling, however, does not shut down work that has begun at the US/Canada border crossing in Montana, according to attorneys in the case. Pipeline sponsor TC Energy will need the permit for future construction across hundreds of rivers and streams along Keystone's 1,200-mile route. "It creates another significant hurdle for the project," said Anthony Swift with the Natural Resources Defense Council, one of the groups that challenged the permit.
There are about 180,000 miles of oil pipeline in the United States, but all of this mileage put together has not generated 1% of the controversy as a pipeline that would add a mere 1% to the total— the Keystone XL Pipeline connecting Alberta’s oil sands to refineries in Texas and Louisiana. Since it crosses an international boundary, Keystone requires US State Department approval, which has not been forthcoming under the Obama administration.
Keystone has become a cause célèbre on both sides of the political aisle. President Obama has made numerous statements criticizing the pipeline and has vetoed the legislation mandating its approval. Conversely, Republican Senate Majority Leader Mitch McConnell had promised to make Keystone the first legislative priority in Congress when he took office.
Many arguments have been advanced against Keystone. First and foremost, opposition to the pipeline rests on environmental objections. Environmentalists deem crude oil produced from Canadian oil sands to be uniquely damaging due to its carbon intensity when compared with other types of crude. When the environmental arguments failed to gain considerable traction, opponents shifted to economic arguments. These include assertions that Keystone will not reduce at-the-pump gas prices in the US, and that most Keystone oil will be exported.
Unfortunately, these political and environmental arguments have created more heat than light. A straightforward economic analysis of Keystone demonstrates that its benefits will not be as great as its advocates say, but they will be material. The environmental effects are likely modest and outweighed by the economic benefits.
The Economics of Keystone
The direct economic effect of Keystone is quite straightforward. It would reduce the cost of transporting crude oil from Canada to the US Gulf Coast. Without Keystone, rail is the most economical way to transport the oil to the Gulf refineries. US government reports estimate that rail shipment costs about USD 10/bbl more than transportation via Keystone. This means that the benefits in terms of reduced transportation costs are on the order of USD 8 million/day, which is USD 10/bbl multiplied by the 830,000 BOPD Keystone can transport in lieu of more expensive trains.