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A section of TransCanada Corp.’s Keystone XL pipeline project. Canada is winning the battle for U.S. market share in oil, and, under President Barack Obama, the United States has been cutting its reliance on imported crude – all at the same time and all without Keystone XL. Today, with the project as uncertain and divisive as ever, it’s time for Canadians to ask if they want their elected officials to keep spending money, time, effort and diplomatic capital trying to persuade Washington that one pipeline is necessary for both economies. (Nathan VanderKlippe/The Globe and Mail)
A section of TransCanada Corp.’s Keystone XL pipeline project. Canada is winning the battle for U.S. market share in oil, and, under President Barack Obama, the United States has been cutting its reliance on imported crude – all at the same time and all without Keystone XL. Today, with the project as uncertain and divisive as ever, it’s time for Canadians to ask if they want their elected officials to keep spending money, time, effort and diplomatic capital trying to persuade Washington that one pipeline is necessary for both economies. (Nathan VanderKlippe/The Globe and Mail)

energy

It may be time to step back on Keystone XL project Add to ...

Canada is winning the battle for U.S. market share in oil, and, under President Barack Obama, the United States has been cutting its reliance on imported crude – all at the same time and all without Keystone XL.

It has been five years, one global financial crisis, two U.S. elections and countless shuttles to Washington by officials from Ottawa and Alberta since TransCanada Corp. filed its initial application with regulators in the United States to build the pipeline

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Today, with the project as uncertain and divisive as ever, it’s time for Canadians to ask if they want their elected officials to keep spending money, time, effort and diplomatic capital trying to persuade Washington that one pipeline is necessary for both economies.

With several alternative export proposals to the United States and elsewhere being floated, perhaps the federal and provincial governments should take a step back, push Keystone XL down on the public agenda and let TransCanada and its shippers take the lead on touting their proposal.

A year ago, many in the oil patch were confident Keystone XL was just a presidential vote away. If Republican candidate Mitt Romney won, the thinking went, the project was a sure thing: he had already served notice that “that pipeline from Canada” was a go. If Mr. Obama was re-elected, then he would no longer be concerned about alienating the environmentally conscious faction of his base, and the pipeline would proceed.

Instead, Mr. Obama’s victory has led to even more stalling, and even Canadian officials now doubt a decision will be made before 2014. This is despite intense lobbying by Prime Minister Stephen Harper, Alberta Premier Alison Redford and various federal and provincial ministers to press a case that U.S. politicians must know by heart – that Keystone XL offers jobs and energy security, from a country with the highest environmental standards.

Has it worked? Mr. Obama, who has final say, recently scoffed at the project’s job-creation estimates and suggested Canada has to do more to prove its claims on carbon emissions from the oil sands.

Such comments appear to have prompted a letter to Mr. Obama from Mr. Harper, offering to team up on joint action to reduce carbon emissions from the countries’ oil and gas sectors as a way to smooth an approval for the $5.3 billion (U.S.) pipeline. Federal officials have declined to confirm the existence of the correspondence, but have pointed out that the Prime Minister brings up Keystone XL every time the two leaders speak. Yet the energy industry is making it work without Keystone. While the saga has played out, U.S. reliance on imported oil has fallen and shipments from Canada – on existing pipelines and increasing numbers of rail cars – keep grabbing a bigger share of the market.

The numbers are remarkable. In the past decade, U.S. oil imports from all suppliers have fallen 8 per cent, a drop of about one million barrels a day, and are down nearly 23 per cent from their 2005 peak, according to the U.S. Energy Information Administration. Shipments from the OPEC producers alone are also down 8 per cent since 2002.

In that time, imports of oil and petroleum products from Canada surged by 50 per cent, to average nearly three million barrels a day in 2012. Canadian crude and fast-rising supplies of U.S. tight oil are combining to push out the competition.

Sure, projections for Canada’s oil production show that much more export capacity will be needed, and shortly. But will a continued government push for one pipeline make a difference?

On Wednesday, Natural Resources Minister Joe Oliver, just back from New York and Washington, reminded a Calgary audience that polls show the majority of Americans support the project, as do governors of states through which Keystone would be buried. He said all the data has been hashed over and two environmental assessments for the project by the U.S. State Department had concluded that the oil sands would get developed regardless of whether the pipeline is built.

With that in mind, Ottawa and Edmonton may want to consider backing off now and letting a well-funded industry sort out how to do that, with or without Keystone XL. It’s doubtful it would take five years.

 
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