A cadre of Canadian industry executives descended on America's oil capital Tuesday to deliver a unified message in defence of the politically charged Keystone XL pipeline.
Faced with fierce opposition from environmentalists targeting the project, top officials from the largest oil sands producers took the stage at a high-profile conference to deliver a litany of counter-arguments, while stressing the U.S. will continue to be reliant on imports of Canadian heavy crude.
Industry leaders included the outgoing chief executive officer of Imperial Oil Ltd., Bruce March; Suncor Energy Corp. CEO Steven Williams; Cenovus Energy Inc.'s senior vice-president Drew Zieglgansberger, and Alex Pourbaix, TransCanada's president for energy and oil pipelines.
The Keystone XL project is "vital to the continued development of the North American energy market," Mr. March said at the conference.
The executives' message in Houston reinforces mounting efforts by Canadian politicians to get a green light from the U.S. for Keystone XL, which would bring Alberta crude to the U.S. Gulf coast and help alleviate a pipeline bottleneck that is weighing heavily on oil prices in Canada.
Mr. March and Mr. Williams have both travelled to Washington in recent weeks to state their case, and the Suncor CEO met with recently installed Secretary of State John Kerry. On Wednesday, Natural Resources Minister Joe Oliver will be one of the keynote speakers at the CERAWeek conference, which draws senior energy executives and policy makers from around the world.
The political furor surrounding the Keystone XL pipeline ratcheted higher last week when the U.S. State Department issued a draft report that suggested the construction of the pipeline in itself would not affect expansion plans in the oil sands, and hence the greenhouse gases emitted by the sector.
Environmentalists immediately challenged the report's finding that oil sands expansion – and hence greenhouse gas emissions from the sector – does not hinge on construction of Keystone XL. Activists in the U.S. insist the Obama administration's decision on the pipeline represents a litmus test for the president's seriousness on climate policy.
At the conference Tuesday, the Calgary-based executives walked a careful line in describing the controversial pipeline as a key piece of needed infrastructure, but not one that would make or break oil sands expansion plans.
Imperial's Mr. March said the industry will need all the various proposed pipelines, including plans by TransCanada Corp., Kinder Morgan Inc. and Enbridge Inc. to build new projects going west, east and south from Alberta.
At the same time, Mr. March said rail will play a growing role, as the industry has ordered enough new rail cars to match the 830,000 barrel-per-day capacity of the Keystone XL line by 2015.
That increasing reliance on rail brings its own risks, including the potential for a major derailment that could bring political resistance to transporting crude on tracks that run through population centres.
The Calgary-based executives made the case that the U.S. will remain dependent on Canadian imports, despite booming production of light oil from unconventional, tight plays.
And they aggressively echoed the State Department's much-criticized conclusion that the oil sands' expansion does not depend on the fate of any one pipeline project.
"The oil sands are going to be developed and we will find a way to get it to markets," Suncor's Mr. Williams said.
He said oil sands producers will not be squeezed out of the U.S. market by rising production of light crude from the Bakken in North Dakota, Eagle Ford in Texas and similar tight oil plays, despite talk of growing American energy independence.
"I'm very optimistic the U.S. will still require oil imports from Canada, particularly heavy oil, for as long as we can see," he said.
But oil sands producers will have to be even more vigilant about keeping costs under control as competition for markets becomes increasingly fierce, said Cenovus vice-president, Mr. Zieglgansberger. He said his company's two major oil sands projects – Foster Creek and Christina Lake – earn a reasonable rate of return at less than $45 (U.S), which is cheaper than most tight, light oil projects.
Cenovus is looking to drive down costs even further through improvements in energy efficiency at its operations, and those energy savings would also mean a reduction in greenhouse gas emissions.
Both Cenovus and Imperial Oil say their new projects are approaching conventional oil production in terms of greenhouse gas emissions per barrel, though those results are not common across the industry.
While the State Department said emissions from the oil sands are 17-per-cent higher than the average crude refined in the U.S., the Calgary executives say the comparison should be made against other sources of heavy crude, since the absence of Canadian imports would mean higher imports of heavy crude from Venezuela, Mexico and Saudi Arabia.
As well, critics of the Keystone XL pipeline should beware of "unintended consequences," TransCanada's Mr. Pourbaix said. Moving the crude by rail and barge and truck would not only increase the risk of accident, but would drive up GHG emissions.
If opponents succeed in defeating TransCanada's pipeline project, "you may actually have achieved the exact opposite of what you intended to do," he said.