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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--TransCanada Corporation (NYSE:TRP) (Calgary, Alberta) had a really bad week last week. On Thursday, the company decided to drop plans to build a port in Québec from the scope of its Energy East Pipeline project, which would bring crude oil eastward across Canada. Then, on Friday, President Barack Obama denied TransCanada the presidential permit to build the Keystone XL Pipeline, a 1,179-mile, crude-oil pipeline that would have brought up to about 830,000 barrels per day of oil sands crude oil to the U.S.
Industrial groups, including the oil industry, and Republicans on Capitol Hill sharply criticized the president's decision, but environmental organizations welcomed it. Several oil analysts, however, simply shrugged: The decision was neither surprising nor particularly significant, given all that has happened to the oil industry in the seven years since TransCanada first applied for a presidential permit to build the $5.3 billion project. For more on the Keystone XL project, see November 4, 2015, article - Despite KXL Pipeline Pause, TransCanada Still has Plenty of Project Irons in the Fire; November 6, 2015, article - Some U.S. Producers, Refiners May Have Good Reason to Oppose Keystone XL Pipeline; and May 28, 2014, article - Has the Keystone XL Pipeline Project Become a Zombie?
Obama's decision, coming one year before the 2016 presidential elections, could be reversed if a Republican is elected president and TransCanada refiled for a presidential permit. All Republican presidential candidates support building Keystone XL, but both Democratic candidates, former Secretary of State Hillary Clinton and Sen. Bernie Sanders, oppose it.
Flanked by Secretary of State John Kerry and Vice President Joe Biden, Obama said he agreed with the State Department's determination that building the Keystone XL pipeline was not in the national interests of the U.S. In a Friday press conference, the president cited the State Department's "extensive public outreach and consultation with other Cabinet agencies" over Keystone XL. But he failed to mention that agency's Final Environmental Impact Statement, released in early 2014, that found construction of the Keystone XL pipeline would not meaningfully contribute to climate change because Canadian oil sands crude oil likely would be brought to market by other means, including competing pipelines, rail cars or ships.
Instead, in his Friday statement, Obama cast his decision as evidence that the U.S. is "continuing to lead by example" on climate change, ahead of next month's U.S. summit on climate change: "Today, the United States of America is leading on climate change with our investments in clean energy and energy efficiency. America is leading on climate change with new rules on power plants that will protect our air so that our kids can breathe. America is leading on climate change by working with other big emitters, like China, to encourage and announce new commitments to reduce harmful greenhouse gas emissions. In part because of that American leadership, more than 150 nations representing nearly 90% of global emissions have put forward plans to cut pollution."
The president continued: "America is now a global leader when it comes to taking serious action to fight climate change. And frankly, approving this project would have undercut that global leadership. And that's the biggest risk we face--not acting. ... Because ultimately, if we're going to prevent large parts of this Earth from becoming not only inhospitable but uninhabitable in our lifetimes, we're going to have to keep some fossil fuels in the ground, rather than burn them and release more dangerous pollution into the sky."
Obama acknowledged the proposed pipeline, which would have brought crude oil from Hardisty, Alberta, to Steele City, Nebraska, had become hugely symbolic to both its supporters and opponents. "For years, the Keystone (XL) Pipeline has occupied what I, frankly, consider an overinflated role in our political discourse. It became a symbol too often used as a campaign cudgel by both parties rather than a serious policy matter. And all of this obscured the fact that this pipeline would neither be a silver bullet for the economy, as was promised by some, nor the express lane to climate disaster proclaimed by others."
Russ Girling, president and chief executive of TransCanada, said he was "disappointed with the President's decision to deny the Keystone XL application. Today, misplaced symbolism was chosen over merit and science--rhetoric won out over reason."
"The U.S. consumes over 7 million barrels per day more oil than it produces and will continue to do so for decades, even despite U.S. oil production increases," Girling continued in a statement released November 6. "It is disappointing the administration appears to have said yes to more oil imports from Iran and Venezuela over oil from Canada, the United States' strongest ally and trading partner, a country with rule of law and values consistent with the U.S. Today's decision deals a damaging blow to jobs, the economy and the environment on both sides of the border."
Girling said TransCanada would continue to assess its options for Keystone XL, including potentially filing a new application for a presidential permit, though no date was provided for any potential refiling. He emphasized the company was not abandoning the Keystone XL project.
Critics and supporters of that controversial pipeline project had lots to say about the President Obama's decision. House Speaker Paul D. Ryan (R-Wisconsin) criticized the president's denial of a permit: "This decision isn't surprising, but it is sickening. By rejecting this pipeline, the president is rejecting tens of thousands of good-paying jobs. He is rejecting our largest trading partner and energy supplier. He is rejecting the will of the American people and a bipartisan majority of the Congress."
Terry O'Sullivan, general president of the Laborers' International Union of North America (Washington, D.C.), said the move "is just one more indication of an utter disdain and disregard for salt-of-the-earth, middle-class working Americans... The president may be celebrated by environmental extremists, but with this act, President Obama has also solidified a legacy as a pompous, pandering job killer."
C. Jeffrey Eshelman, senior vice president for operations and public affairs at the Independent Petroleum Association of America (IPAA) (Washington, D.C.) said: "President Obama's decision puts politics and pandering to activists above American jobs and more energy from our friends in Canada. It increases our reliance on oil from cartels like OPEC and doesn't acknowledge the benefits of the pipeline such as union labor and associated revenues that would flow to the U.S. treasury."
In a statement, the U.S. Chamber of Commerce, a longtime backer of the Keystone XL project, said: "In delaying and rejecting the Keystone XL pipeline, President Obama has put politics before the best interests of the country. Rejecting Keystone breaks two promises the president made--to put jobs and growth first, and to seek bipartisan solutions. This needless decision, based in part on the President trying to improve his political position before next month's international climate policy negotiations in Paris, is the latest in a number of administration actions that have undermined America's energy revolution, slowed growth, and cost good-paying jobs. It is politics at its worst--and Americans are paying the price."
But climate activist Bill McKibbon, founder of 350.org, said in an interview with National Public Radio: "This is the first time that a world leader has stopped a major fossil fuel project because of its effect on the climate. It's the first time that the power of big oil's been broken like that even a little, and that's a pretty astonishing thing."
While acknowledging the symbolism of Obama's decision, McKibbon said Obama decision also was important substantively because it keeps more than 800,000 barrels per day "of the dirtiest oil on Earth" off the market. "It's important because the opposition to this and other pipelines has completely stopped what was the planned doubling, tripling, quadrupling of the tar sands mining complex up there. Investors have pulled out billions and billions of dollars. And it's significant because it's launched a thousand other such fights all over the place."
McKibbon said the president's denial of a permit for Keystone XL would go a long way to keeping Canada's oil sands crude oil in the ground: "This will delay them enough that no one's ever going to really go back for tar sands oil again. With each month that passes, a solar panel gets 2% or 3% cheaper. So while we're holding the fossil fuel industry in check, the engineers in the renewable energy world are undercutting them from the other side."
'Not that big a deal in the grand scheme of things'
But oil-industry analysts, who are removed from positions of advocacy or opposition, largely shrugged their shoulders at Obama's decision. Pavel Molchanov, an energy analyst at the investment advisory firm Raymond James, told The Washington Post: "The Keystone XL decision was a foregone conclusion. ... The administration had already telegraphed its opposition, and even the company behind the project recently said that this it was looking to freeze its permit application.
"This project, somewhat bizarrely, took on an almost mythical status as the ultimate political hot potato between Republicans and Democrats. But in actuality, it is simply not that big a deal in the grand scheme of things--not for U.S. refiners, and not for oil sands producers. This may be the only pipeline that most Americans have heard of mentioned on TV, but the reality is that new pipeline projects are being approved, and built, on a regular basis."
Rusty Braziel, president of energy consultants RBN Energy (Houston, Texas), told The New York Times: "Keystone XL is not nearly as important as it seemed to be a few years ago. For Gulf refineries, it is not a huge deal."
Tom Kloza, global head of energy analysis at Oil Price Information Service (Gaithersburg, Maryland), told the Times: "In terms of distribution and what people will pay (for gasoline), Keystone doesn't really mean much," predicting more Canadian oil "will go by rail to some places or by pipeline to others."
Andy Lipow, president of Lipow Oil Associates (Houston, Texas), added: "The urgency for the (Keystone XL) pipeline is certainly down because oil prices are $45 and not $100 a barrel, and you are seeing a decline of investment in Canada, which means that increases in expected future growth are simply not going to be there."
A day prior to the Keystone XL announcement, Girling, TransCanada's chief executive officer, said the company would shrink the scope of its $1 billion, 1.1 million-barrel-per-day Energy East pipeline project by removing the planned construction of an export port at Quebec. That decision was reached after gathering input from a broad range of stakeholders. The company will amend its pipeline application with Canada's National Energy Board in the fourth quarter, Girling said November 5, adding this would push back the in-service date for the pipeline to 2020.
In his November 5 statement, Girling said trimming the scope of the Energy East project "demonstrates our dedication to listening and delivering a vital infrastructure project that will provide significant economic benefits to all provinces along the pipeline's route. We will do this while maintaining our commitment to environmental stewardship and the safe, responsible development of this pipeline." For more on the Energy East pipeline, see October 2, 2015, article - Big Canadian Pipelines: Energy East Offers Alternative Access to Markets; June 2, 2014, article - TransCanada Shifts Focus from KXL to Energy East, from Gulf Coast to East Coast; and September 11, 2013, article - Market Says 'Oui' to TransCanada's Energy East Crude-Oil Pipeline.
"TransCanada remains committed to ensuring a Canadian crude-oil supply connection to the Suncor (NYSE:SU) (Montreal, Quebec) and Valero (NYSE:VLO) (San Antonio, Texas) (Jean Gaulin) refineries in Québec, helping to minimize the pipeline's impact on the environment, while continuing to focus on pipeline safety and maximizing the project's economic benefits for Canadians," Girling added.
"Pipelines remain the safest and least greenhouse gas-intensive way of transporting crude oil to market," he said, echoing an assertion made several times during the Keystone XL permit application process. "By approving and building the Energy East Pipeline, we will create the capacity to displace the equivalent of 1,570 rail cars of crude oil per day to Eastern Canada."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
Industrial groups, including the oil industry, and Republicans on Capitol Hill sharply criticized the president's decision, but environmental organizations welcomed it. Several oil analysts, however, simply shrugged: The decision was neither surprising nor particularly significant, given all that has happened to the oil industry in the seven years since TransCanada first applied for a presidential permit to build the $5.3 billion project. For more on the Keystone XL project, see November 4, 2015, article - Despite KXL Pipeline Pause, TransCanada Still has Plenty of Project Irons in the Fire; November 6, 2015, article - Some U.S. Producers, Refiners May Have Good Reason to Oppose Keystone XL Pipeline; and May 28, 2014, article - Has the Keystone XL Pipeline Project Become a Zombie?
Obama's decision, coming one year before the 2016 presidential elections, could be reversed if a Republican is elected president and TransCanada refiled for a presidential permit. All Republican presidential candidates support building Keystone XL, but both Democratic candidates, former Secretary of State Hillary Clinton and Sen. Bernie Sanders, oppose it.
Flanked by Secretary of State John Kerry and Vice President Joe Biden, Obama said he agreed with the State Department's determination that building the Keystone XL pipeline was not in the national interests of the U.S. In a Friday press conference, the president cited the State Department's "extensive public outreach and consultation with other Cabinet agencies" over Keystone XL. But he failed to mention that agency's Final Environmental Impact Statement, released in early 2014, that found construction of the Keystone XL pipeline would not meaningfully contribute to climate change because Canadian oil sands crude oil likely would be brought to market by other means, including competing pipelines, rail cars or ships.
Instead, in his Friday statement, Obama cast his decision as evidence that the U.S. is "continuing to lead by example" on climate change, ahead of next month's U.S. summit on climate change: "Today, the United States of America is leading on climate change with our investments in clean energy and energy efficiency. America is leading on climate change with new rules on power plants that will protect our air so that our kids can breathe. America is leading on climate change by working with other big emitters, like China, to encourage and announce new commitments to reduce harmful greenhouse gas emissions. In part because of that American leadership, more than 150 nations representing nearly 90% of global emissions have put forward plans to cut pollution."
The president continued: "America is now a global leader when it comes to taking serious action to fight climate change. And frankly, approving this project would have undercut that global leadership. And that's the biggest risk we face--not acting. ... Because ultimately, if we're going to prevent large parts of this Earth from becoming not only inhospitable but uninhabitable in our lifetimes, we're going to have to keep some fossil fuels in the ground, rather than burn them and release more dangerous pollution into the sky."
Obama acknowledged the proposed pipeline, which would have brought crude oil from Hardisty, Alberta, to Steele City, Nebraska, had become hugely symbolic to both its supporters and opponents. "For years, the Keystone (XL) Pipeline has occupied what I, frankly, consider an overinflated role in our political discourse. It became a symbol too often used as a campaign cudgel by both parties rather than a serious policy matter. And all of this obscured the fact that this pipeline would neither be a silver bullet for the economy, as was promised by some, nor the express lane to climate disaster proclaimed by others."
Russ Girling, president and chief executive of TransCanada, said he was "disappointed with the President's decision to deny the Keystone XL application. Today, misplaced symbolism was chosen over merit and science--rhetoric won out over reason."
"The U.S. consumes over 7 million barrels per day more oil than it produces and will continue to do so for decades, even despite U.S. oil production increases," Girling continued in a statement released November 6. "It is disappointing the administration appears to have said yes to more oil imports from Iran and Venezuela over oil from Canada, the United States' strongest ally and trading partner, a country with rule of law and values consistent with the U.S. Today's decision deals a damaging blow to jobs, the economy and the environment on both sides of the border."
Girling said TransCanada would continue to assess its options for Keystone XL, including potentially filing a new application for a presidential permit, though no date was provided for any potential refiling. He emphasized the company was not abandoning the Keystone XL project.
Critics and supporters of that controversial pipeline project had lots to say about the President Obama's decision. House Speaker Paul D. Ryan (R-Wisconsin) criticized the president's denial of a permit: "This decision isn't surprising, but it is sickening. By rejecting this pipeline, the president is rejecting tens of thousands of good-paying jobs. He is rejecting our largest trading partner and energy supplier. He is rejecting the will of the American people and a bipartisan majority of the Congress."
Terry O'Sullivan, general president of the Laborers' International Union of North America (Washington, D.C.), said the move "is just one more indication of an utter disdain and disregard for salt-of-the-earth, middle-class working Americans... The president may be celebrated by environmental extremists, but with this act, President Obama has also solidified a legacy as a pompous, pandering job killer."
C. Jeffrey Eshelman, senior vice president for operations and public affairs at the Independent Petroleum Association of America (IPAA) (Washington, D.C.) said: "President Obama's decision puts politics and pandering to activists above American jobs and more energy from our friends in Canada. It increases our reliance on oil from cartels like OPEC and doesn't acknowledge the benefits of the pipeline such as union labor and associated revenues that would flow to the U.S. treasury."
In a statement, the U.S. Chamber of Commerce, a longtime backer of the Keystone XL project, said: "In delaying and rejecting the Keystone XL pipeline, President Obama has put politics before the best interests of the country. Rejecting Keystone breaks two promises the president made--to put jobs and growth first, and to seek bipartisan solutions. This needless decision, based in part on the President trying to improve his political position before next month's international climate policy negotiations in Paris, is the latest in a number of administration actions that have undermined America's energy revolution, slowed growth, and cost good-paying jobs. It is politics at its worst--and Americans are paying the price."
But climate activist Bill McKibbon, founder of 350.org, said in an interview with National Public Radio: "This is the first time that a world leader has stopped a major fossil fuel project because of its effect on the climate. It's the first time that the power of big oil's been broken like that even a little, and that's a pretty astonishing thing."
While acknowledging the symbolism of Obama's decision, McKibbon said Obama decision also was important substantively because it keeps more than 800,000 barrels per day "of the dirtiest oil on Earth" off the market. "It's important because the opposition to this and other pipelines has completely stopped what was the planned doubling, tripling, quadrupling of the tar sands mining complex up there. Investors have pulled out billions and billions of dollars. And it's significant because it's launched a thousand other such fights all over the place."
McKibbon said the president's denial of a permit for Keystone XL would go a long way to keeping Canada's oil sands crude oil in the ground: "This will delay them enough that no one's ever going to really go back for tar sands oil again. With each month that passes, a solar panel gets 2% or 3% cheaper. So while we're holding the fossil fuel industry in check, the engineers in the renewable energy world are undercutting them from the other side."
'Not that big a deal in the grand scheme of things'
But oil-industry analysts, who are removed from positions of advocacy or opposition, largely shrugged their shoulders at Obama's decision. Pavel Molchanov, an energy analyst at the investment advisory firm Raymond James, told The Washington Post: "The Keystone XL decision was a foregone conclusion. ... The administration had already telegraphed its opposition, and even the company behind the project recently said that this it was looking to freeze its permit application.
"This project, somewhat bizarrely, took on an almost mythical status as the ultimate political hot potato between Republicans and Democrats. But in actuality, it is simply not that big a deal in the grand scheme of things--not for U.S. refiners, and not for oil sands producers. This may be the only pipeline that most Americans have heard of mentioned on TV, but the reality is that new pipeline projects are being approved, and built, on a regular basis."
Rusty Braziel, president of energy consultants RBN Energy (Houston, Texas), told The New York Times: "Keystone XL is not nearly as important as it seemed to be a few years ago. For Gulf refineries, it is not a huge deal."
Tom Kloza, global head of energy analysis at Oil Price Information Service (Gaithersburg, Maryland), told the Times: "In terms of distribution and what people will pay (for gasoline), Keystone doesn't really mean much," predicting more Canadian oil "will go by rail to some places or by pipeline to others."
Andy Lipow, president of Lipow Oil Associates (Houston, Texas), added: "The urgency for the (Keystone XL) pipeline is certainly down because oil prices are $45 and not $100 a barrel, and you are seeing a decline of investment in Canada, which means that increases in expected future growth are simply not going to be there."
A day prior to the Keystone XL announcement, Girling, TransCanada's chief executive officer, said the company would shrink the scope of its $1 billion, 1.1 million-barrel-per-day Energy East pipeline project by removing the planned construction of an export port at Quebec. That decision was reached after gathering input from a broad range of stakeholders. The company will amend its pipeline application with Canada's National Energy Board in the fourth quarter, Girling said November 5, adding this would push back the in-service date for the pipeline to 2020.
In his November 5 statement, Girling said trimming the scope of the Energy East project "demonstrates our dedication to listening and delivering a vital infrastructure project that will provide significant economic benefits to all provinces along the pipeline's route. We will do this while maintaining our commitment to environmental stewardship and the safe, responsible development of this pipeline." For more on the Energy East pipeline, see October 2, 2015, article - Big Canadian Pipelines: Energy East Offers Alternative Access to Markets; June 2, 2014, article - TransCanada Shifts Focus from KXL to Energy East, from Gulf Coast to East Coast; and September 11, 2013, article - Market Says 'Oui' to TransCanada's Energy East Crude-Oil Pipeline.
"TransCanada remains committed to ensuring a Canadian crude-oil supply connection to the Suncor (NYSE:SU) (Montreal, Quebec) and Valero (NYSE:VLO) (San Antonio, Texas) (Jean Gaulin) refineries in Québec, helping to minimize the pipeline's impact on the environment, while continuing to focus on pipeline safety and maximizing the project's economic benefits for Canadians," Girling added.
"Pipelines remain the safest and least greenhouse gas-intensive way of transporting crude oil to market," he said, echoing an assertion made several times during the Keystone XL permit application process. "By approving and building the Energy East Pipeline, we will create the capacity to displace the equivalent of 1,570 rail cars of crude oil per day to Eastern Canada."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
