Alberta is mounting a new offensive on the Keystone XL project, sending its Premier to Washington and naming a new trade envoy to the U.S. as concerns grow that the controversial pipeline may falter.
Next week, Alison Redford will travel to New York and the U.S. capital to defend the province against an increasingly loud opposition. Critics have succeeded in stirring considerable concern over the $7-billion pipeline, which is designed to deliver 700,000 barrels a day from Canada to refineries on the U.S. Gulf Coast.
“We have a spotlight on us and we need to embrace that spotlight,” Ms. Redford said Wednesday. “It’s time for Alberta to send the message that we’re prepared to lead on what we’re proud of.”
With the new Premier will be Dave Bronconnier, the former Calgary mayor just named the province’s new representative in Washington. It’s clear their trip – and his role, which will last only nine months – are strategically important for a province anxious to see that a piece of energy infrastructure vital to the expansion of Canadian oil production is built.
“What we need to be doing is keeping a watchful eye on the file and making sure that we’re advocating as we can on behalf of the project,” Ms. Redford said.
The $7-billion TransCanada Corp. pipeline has been the subject of intense environmental scrutiny and protest. Less than two months ago, Prime Minister Stephen Harper called its approval a “no-brainer.” But Keystone XL now appears to be faltering. Multiple reports this week have suggested the U.S. State Department, which is reviewing the project, will force TransCanada to reroute the pipe away from the Sand Hills, an ecologically sensitive region in Nebraska. Such a move could mean rewriting parts of the environmental permit application and result in a years-long delay – and, importantly, push off a final decision until after the 2012 U.S. presidential election.
That possibility has not unnerved Canadian federal leaders, who are maintaining a cautious approach with Keystone XL. Speaking from Shanghai Wednesday, Natural Resources Minister Joe Oliver told reporters, “there are always doomsayers.” The Canadian government is struggling to determine how serious the threat is, but Mr. Oliver continues to believe a decision on Keystone XL will be made before the U.S. election a year from now.
Those doomsayers, however, have an increasing number of adherents in the energy sector itself, where “extreme pessimism” about Keystone is taking root, said Robert Johnston, the director of energy and natural resources for risk consultancy firm Eurasia Group.
Mr. Johnston has handicapped odds on the pipeline’s approval. Previously, he suggested there was an 80-per-cent chance of approval by January, 2012. Earlier this week, he dropped that to 60 per cent by the first half of next year. He was surprised when industry clients told him those odds were too high.
He cautioned, however, that perception and reality could be quite different. “My reality is it’s still more likely than not to get approval, on a slower timetable,” he said. “The big question is, is that timetable pre-election or post-election?”
TransCanada said this week killing Keystone “would be a tragedy.” The American Petroleum Institute said Wednesday even delaying a decision would be “reckless.”
But doubts are already hitting TransCanada shares, which amid the numerous attacks in the past two weeks have fallen 7 per cent. Shares of rival Enbridge Inc. has been flat in that time. Jennifer Stevenson, vice-president and portfolio manager for energy with Goodman & Company Investment Counsel, calculates that Keystone XL is worth between $4 and $5 a share to TransCanada. The company’s shares are down more than $3 since Oct. 27.
More downward movement is possible, especially if Keystone XL is delayed, said Anil Tahiliani, portfolio manager of North American equities with McLean & Partners Wealth Management Ltd.
The fact that a decision has been so long in coming – and could be even longer – “just breeds more uncertainty for investors, because this is a major platform for TransCanada going forward,” he said.
The prospect of Keystone XL foundering is deeply concerning to industry and investors, because without it, Canada stands to run out of export pipeline room in just a few years.
The “big concern is that you’ve got all this production coming online from the oil sands that has nowhere to go,” said Duncan Anderson, managing director and senior portfolio manager with Manulife Asset Management.
“For Canadian producers, there’s definitely a lot at stake. If there’s no alternatives found, then we’re going to have a lot of production that’s landlocked.”
With files from reporter John Ibbitson in Ottawa