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After more than a dozen years of planning and permit disputes,
TC Energy said on 9 June it has terminated the Keystone XL pipeline
that would have brought Canadian oilsands crude through the US to
refineries on the Texas Gulf Coast.
The project was first proposed by TransCanada Corp. (renamed TC
Energy) and ConocoPhillips in July 2008. TC Energy later bought out
ConocoPhillips' share.
The project, which would have transported as much as 830,000 b/d
of crude across 1,200 miles, had been in serious doubt since 20
January, when President Joe Biden revoked the presidential permit
that had been issued by his predecessor, Donald Trump, in March
2019. The Trump permit, which reversed a decision by Barack Obama
in November 2015 to reject the cross-border permit, allowed TC
Energy to begin construction in the US.
Source: TC Energy
Revoking the permit was one of
Biden's climate-related executive actions on his first day in
office, indicating the approach the administration would take
toward fossil fuel projects.
A few days before Biden took office, TC Energy announced a plan
to make the pipeline fully powered by renewable energy and thus
significantly reduce its GHG emissions, and to buy energy credits
or carbon offsets for the balance of the emissions.
When that promise didn't seem to sway Biden or environmental
groups that opposed the project, TC Energy said in May it was
suspending construction activity and took a $2.2-billion writedown.
In all, the project's estimated cost was about $8 billion.
In announcing the cancellation, TC Energy President and CEO
Francois Poirier referenced the company's commitment to GHG
reductions. "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 lifecycle. 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," he said.
Canada oilsands and carbon emissions
For Canada's oil industry, the cancellation of the pipeline is a
significant blow. Alberta Premier Jason Kenney said on 9 June he is
"frustrated with the circumstances surrounding" the cancellation,
which was to be a major new outlet for Alberta crude. The
provincial government invested more than C$1.3 billion
(approximately US$1.07 billion) in the project in 2020 to assist TC
Energy with construction.
But the US opposition to moving oilsands crude shows the
challenge that the resource has in the newly carbon-aware global
energy market.
The industry is responding to that challenge, as IHS Markit
noted the significant progress that producers have made. "In
Canada, the carbon intensity of oilsands operations has been
reduced by 20% over the past decade," IHS Markit wrote in a report
last year.
Much more is coming, as the five producers who represent
approximately 90% of Canada's oilsands production announced on 9
June the Oil Sands Pathways to Net Zero initiative.
"The goal of this unique alliance, working collectively with the
federal and Alberta governments, is to achieve net-zero GHG
emissions from oil sands operations by 2050 to help Canada meet its
climate goals, including its Paris Agreement commitments and 2050
net-zero aspirations," said Canadian Natural Resources, Cenovus
Energy, Imperial, MEG Energy, and Suncor Energy in a joint
statement.
The plan is anchored by a carbon capture, utilization, and
storage (CCUS) hub near Cold Lake, Alberta, into which several
pipelines will deliver captured carbon for sequestration. "The
proposed CCUS system is similar to the multi-billion-dollar
Longship/Northern Lights project in Norway as well as other CCUS
projects in the Netherlands, UK, and US, all of which involve
significant collaboration between industry and government," the
companies said.
In addition, the companies envision electrification of
operations, energy efficiency, and process improvements to reduce
and eliminate carbon emissions.
Canada has the world's third-largest oil reserves and stringent
oil production regulations and standards. At the same time, it is
one of the few countries with a national carbon tax, though its nationally determined
contribution (NDC) under the Paris Climate Agreement is a
relatively modest 30% GHG reduction from 2005 levels by 2030.
Canada's Prime MInister Justin Trudeau announced in April at the
Climate Leaders Summit that he intends to raise that commitment to
40-45% GHG cuts, but a new NDC has not yet been filed.
The Alberta government was among three provinces that sued to
oppose the carbon tax, but the tax was ruled constitutional in
March.
Keystone and beyond
In the US, environmental groups applauded TC Energy's
announcement and said that the Biden administration must continue
its tough scrutiny of major hydrocarbon projects. "The cancellation
of Keystone XL is a reminder that this project was never needed and
never in the public interest, and that it is time for the fossil
fuel era to rapidly come to a close," David Turnbull, strategic
communications director with Oil Change International, said in a 9
June written statement.
Environmental groups also see the announcement as indicative of
their rising strength in opposition to new fossil fuel projects.
"The termination of this zombie pipeline sets precedent for
President Biden and polluters to stop Line 3, Dakota Access, and
all fossil fuel projects," Kendall Mackey, campaign manager of
350.org's Keep It in the Ground campaign, said on Twitter.
But the American Petroleum Institute (API) and the Global Energy
Institute of the US Chamber of Commerce pointed out the jobs and
economic development that the project would have generated. "It's
unfortunate that political obstructionism led to the termination of
the Keystone XL pipeline," Robin Rorick, vice president of
midstream and industry operations at API, said.
Republicans in Congress blamed Biden for "killing thousands of
good-paying American jobs." TC Energy had estimated 10,000-11,000
jobs would have been created during the height of construction.
However, the company said that operation of Keystone XL would
require only about 50 full-time-equivalent jobs, some in
Canada.
Representative Kelly Armstrong, Republican-North Dakota, who
represents the state through which much of the project would have
traversed, called the termination "a win for environmental
extremists and a loss for American workers. President Biden's
rescission of the pipeline's permit in January was a signal to
activists across the country that his administration will not
defend American energy jobs and that their political attacks on
energy infrastructure are OK with him."
The revocation was one of a number of actions in the January
executive order, said Steve Weiler, partner at law firm Dorsey
& Whitney. Biden suspended oil and natural gas leases in the
Arctic National Wildlife Refuge (ANWR); directed federal agencies
such as the Federal Energy Regulatory Commission and Bureau of Land
Management "to capture the full costs of greenhouse gas emissions
as accurately as possible" in environmental reviews and permitting
decisions; and directed all agency heads to "immediately review and
… take action to address the promulgation of federal regulations
and other actions during the last four years that conflict with
these important national objectives." This month, the ANWR
suspension was extended by Biden, pending completion of a
comprehensive analysis of the National Environmental Policy
Act.
"Given the Biden administration's all-government approach to
combatting climate change, fossil fuel projects will likely have an
uphill battle to obtain any required federal government permits or
authorizations," Weiler said.
Two exceptions that Weiler noted are the Dakota Access Pipeline
in the Upper Plains and Line 3 in the Upper Midwest. In those
cases, the Biden administration has not stepped in to halt
operation (Dakota Access) or construction (Line 3) of crude
pipelines that have been the sites of protests by activists. In the
case of Line 3, media accounts say that hundreds of protesters in
Minnesota have been arrested in recent days.
When it comes to oil pipelines, the administration faces a set
of competing challenges of environmental goals and economic growth.
Line 3, for example, is an Enbridge project that would replace an
existing 282-mile pipeline segment that was installed on the
western edge of Minnesota in the early 1960s and is now showing
signs of corrosion and cracking, with a new 340-mile pipeline,
according to company filings with the state.
Environmentalists opposed the project, despite its safety
benefits, because it would enable Enbridge to increase volumes to
760,000 b/d of crude (Canadian oilsands crude), compared with
390,000 b/d under currently restricted operations.
In its application, Enbridge said the
proposed pipeline will directly generate almost no additional GHGs:
376 mt of direct GHG per year. But it would generate an additional
453,000 mt of indirect GHGs, Enbridge said. The direct GHG total is
far less than delivering the higher amount of crude by
supplementing the pipeline with rail or truck deliveries.
Environmentalists counter that the true GHG impact is more than
190 million mt per year, when the lifecycle impact of Canadian
oilsands crude is taken into account.
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