How Canada's emissions cuts could spur Keystone XL pipeline approval

TransCanada Corp. has written to U.S. Secretary of State John Kerry arguing that new Canadian rules on emissions should persuade him to approve the construction of the much-delayed Keystone XL pipeline.

The proposed US $6.4 billion project would carry an estimated 830,000 barrels of Canadian crude oil per day from Hardisty, Alberta, to Steele City, Nebraska, then link up with Keystone’s existing line, which would take the oil on the final leg to the Texas coast of the Gulf of Mexico.

Keystone XL is strongly opposed by environmentalists both in the United States and Canada, and President Obama says he won’t approve the project until he’s convinced it won’t seriously contribute to climate change. (Related: Criminal Charges Filed In Lac-Megantic Oil Train Disaster)

But in a letter to Kerry and other State Department officials, Kristin Delkus, TransCanada’s general counsel, pointed to new policies on carbon emissions in Canada, specifically a federal rule issued in May to cut emissions down to 70 percent of their 2005 levels within 15 years.

Further, Delkus wrote, Canada’s federal government also has joined other members of the Group of Seven industrial nations to reduce reliance on fossil fuels by between 40 percent and 70 percent by 2050.

Delkus, who also serves as TransCanada’s executive vice president, also cited a new rule imposed by Alberta’s provincial government run by the reformist New Democratic Party that will double the penalties for exceeding carbon emissions allotments to US$24 per metric ton by 2017.
“Any decision on the pending Presidential Permit application should take all of these factors and developments into account,” Delkus wrote. (Related: Brazil A Victim Of Oil Prices And Its Own Hype)

The letter also argues that the chiefs of some of the biggest companies involved in Alberta’s oil sands industry have publicly come out in favor of such stricter carbon pricing. Delkus said they include Suncor Energy and Cenovus Energy, both Canadian concerns, as well as European giants with operations in Canada, including Total of France and the Anglo-Dutch company Royal Dutch Shell.

The TransCanada letter also reminded Kerry that the oil sands of Alberta will be developed regardless of any U.S. government opposition to the pipeline project. Therefore, it argued, not building Keystone XL would have no effect on controlling CO2 emissions overall.

In an effort to bolster Delkus’ letter, Alex Pourbaix, TransCanada’s president of development, issued a separate statement urging Kerry’s agency to approve the pipeline. (Related: How Greece Crisis Could Drag Oil Prices Down)

“We are asking the U.S. State Department to consider these recent developments that add to the abundance of evidence already collected through seven years and 17,000 pages of review that Keystone XL will not ‘significantly exacerbate’ greenhouse gas emissions,” Pourbaix wrote, quoting Obama.

And in concluding her letter, Delkus wrote, “Clearly the developments with respect to Canadian, Alberta, North American, and international [greenhouse gas] policy, as well as recent industry positions and technological developments, are all consistent with the [U.S.] president’s stance on not exacerbating the risk of climate change, as is TransCanada’s own clean energy footprint.”

In February, the U.S. Congress passed legislation supporting the construction of Keystone XL, but Obama responded with a veto. Since then, one of Kerry’s jobs is to review final opinions on the pipeline project and send the president his recommendation on whether or not to allow it. The secretary faces no deadline, however.

By Andy Tully of Oilprice.com

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