Keystone XL: same old US footdragging
The Keystone XL pipeline issue has dragged on for six years, a political clash between the Koch Brothers oil barons and the green movement against the oil sands. In coming days President Obama must veto the bill or it becomes law. If he vetoes the bill, it’s still not over and can be overridden with a two-thirds vote.
This torturous process, by the way, is nothing new. The St. Lawrence Seaway transformed both economies but was stillborn from the 1930s, due to Presidential foot dragging. Finally, Prime Minister Louis St. Laurent said Canada would create a Seaway that bypassed the U.S. to the Great Lakes so Washington got its act together and the Seaway opened in 1954 with great fanfare.
Today is no different. Canadian interests have realized that waiting for Washington to decide anything is like watching paint dry in a steam bath.
Oil companies have been doubling railway capacity to work around the Keystone obstructionism and by the end of this year three times as much oil will be shipped this way from Canada and North Dakota as would have flowed through Keystone. Others work on ways to bypass the U.S. market altogether.
Three proposals merit attention. One is to ship oil by rail 2,400 kilometers through a corner of B.C. Northwest Territories and Yukon to Alaska’s super tanker port at Valdez. This ingenious idea launched a new approach to the Keystone problem and was first proposed in 2011 by a First Nations consortium called G Seven Generations Ltd. (G7G).
This group offers two major benefits: First Nations and Native Americans along the railway route have approved the scheme (and will be 50-50 partners) and, secondly, Washington is completely bypassed because cross border rail transport doesn’t require a Presidential permit.
Alberta has put $1.8 million into a feasibility study into this, due to be released in March. Preliminary estimates were that costs would be similar to pipeline costs but there are skeptics. However, that doesn’t matter. Higher costs are better than stranded resources.
Another idea, floated this week by Alberta Premier Jim Prentice, is to build a pipeline through the Northwest Territories and Yukon to Valdez. The benefits would be that B.C. would be bypassed and the territories and state are onside in principle, but the problem is that it too must obtain a President permit.
That makes it a non-starter unless Alaska, suffering from declines in oil production, fully backs the project and has the necessary muscle to get it through Washington. Its Governor Bill Walker is an independent and may garner support from both parties.
So far, Alaska’s response has been pitch-perfect from a Canadian viewpoint. A wire service this week quoted Walker’s spokesman in an email as saying he “welcomes all constructive dialogue on growing Alaska’s economy, and looks forward to sharing experiences with another world-class energy-producing region.”
Another interesting, initially modest proposal is NWT Premier Bob McLeod’s “Arctic Gateway” that would ship oil by rail to Hay River then by barge to the port in Tuktoyaktuk for seasonal shipping. It would be a reversal of the Mackenzie Valley Pipeline that was proposed 40 years ago and approved, but that has never happened because of Ottawa’s foot dragging.
Initially, amounts would be 100,000 barrels a day, but additional infrastructure could justify a sizeable oil pipeline from Fort McMurray to the Arctic for year around export, said Premier McLeod in a CBC interview. This would launch economic development in the Arctic region where huge reserves have been discovered.
The sad saga of Keystone underscores an important historical fact: The Americans look after their own interests first and Canada has failed to build infrastructure to tap its northern resources and to diversify into new markets.
This neglect is now coming home to roost as leaders and industry scramble. And the Canadian public must face the fact that each of these new proposals will require massive support from taxpayers just as was required to build the oil sands industry, Newfoundland’s offshore, Quebec’s hydro electric complex and many other nation-building projects.
Canada must realize, as St. Laurent did, that a nation-state must take matters into its own hands and invest in itself. Nobody else will.
Financial Post published Feb. 14, 2015