A Plug in the Pipeline: Keystone XL Revival Tempered by Tariff Talk

Information Evaluation

President-elect Donald Trump has vowed to situation a day-one government order to revive federal approvals for the proposed Keystone XL Pipeline whereas additionally pledging to slap tariffs on Canadian imports.

“You may have, on one hand, [Trump] saying he desires free commerce to cut back power costs for customers, whereas on the identical time, however, threatening to throw tariffs on the barrel that will, presumably, circulate by way of that pipeline, rising costs for customers.”

The president-elect’s musings about imposing a 25 % tariff on Canadian imports reveals he’s making use of that leverage, Johnston mentioned, which has “everybody north of the border” discussing methods “to additional diversify our threat away” from america as a result of, proper now, almost all pipelines beeline south.

Canadian producers yearly promote greater than $150 billion in petroleum merchandise to america, “our greatest, and in some instances, solely buyer for nearly each good this nation produces,” she writes.

That relationship not works, Baiton mentioned. “Due to this reliance on one buyer, Canada has little negotiating energy with the Individuals,” she writes, calling for initiatives to “construct a tariff-proof economic system.”

“It’s time to construct extra transportation routes to new markets, LNG export services, pipelines and port expansions, so we’re not beholden to a single buyer,” Baiton mentioned.

Johnston mentioned “it’s potential” Trump’s promised government order will shortly induce Canadian producers into resubmitting a brand new pipeline proposal to open extra pipeline entry and broaden delivery capability.

However for some, doing so “type of raises a query,” he mentioned. “Why would [Canadian producers] additional double down on U.S. dependence now when that dependence is getting used” to induce commerce concessions?

TC Vitality needed XL to spice up its delivery capability by as much as 730,000 bpd of Alberta tar sands crude to refineries and export delivery terminals in Texas and Louisiana.

Though XL secured federal approvals in 2014, President Barack Obama in 2015 vetoed its allow. On his Jan. 20, 2017, inauguration, Trump restored XL’s approval. 4 years later, President Joe Biden revoked Trump’s restoration.

That makes no matter regulatory aid Trump bestows posthumous as a result of resurrecting Keystone would require a brand new sponsor packaging and submitting a brand new utility.

A Will, A Method

Whereas XL sputtered, Trans Mountain, which has constructed pipelines over the Northern Rockies and operated a port terminal in Burnaby, British Columbia, because the early Fifties, launched an initiative to almost triple Alberta producers’ entry to the Pacific.

With an enlargement from 300,000 bpd to 890,000 bpd accomplished in Could 2024, the 610-mile TransMountain Pipeline from Edmonton to Burnaby supplies entry to refineries and an expanded port Canadian producers sought in proposing XL in 2008.

The Canadian Affiliation of Petroleum Producers maintains that even with TransMountain’s tripled capability, it solely provides about 10 % to the oil volumes transported out of Alberta, noting that till LNG Canada goes on-line, “99 % of our pure fuel exports will nonetheless head south of the border.”

LNG Canada Improvement, Inc., a five-company three way partnership led by Shell, is about to open its $18 billion LNG storage plant and export terminal in Kitimat, British Columbia, in mid-2025.

General, he mentioned, demand for Canadian crude goes to be robust, more and more “by Gulf Coast refiners for that heavier crude oil.”

That’s why Canadian producers “nonetheless love entry to the Gulf” and why it can stay a most popular vacation spot, with pipelines the popular technique of supply, Flynn mentioned.

“That’s the place all of the refineries are and the place the ships are already geared to export in all places on this planet,” he mentioned.

And that’s why, “whether or not or not this pipeline will get constructed, there shall be different pipelines coming down from Alberta, one other pipeline alongside the identical route,” he mentioned.

“Simply, it’s not known as ‘Keystone.’”

‘The Actual Irony’

The EIA’s September replace famous that “refiners on the U.S. West Coast have been key patrons of the brand new export volumes” being shipped from Burnaby, together with 498,000 bpd in July 2024, a document excessive and 115 % spike from July 2023.

“And there’s the true irony in all this,” Texas Tech College Division of Economics Professor Michael Noel mentioned.

“The oil was going to go. The oil was going to maneuver. We wanted the oil. The oil was going to get right here,” he mentioned. “And the oil is right here. However we simply discovered a way more costly option to do it.”

Noel informed The Epoch Instances that XL principally tracked by way of “good flat floor” in Montana, the Dakotas, and Nebraska the place it’s “rather a lot simpler, cheaper, safer to pump oil.”

“Now that oil goes up and over the Rocky Mountains to the Pacific Ocean” through the TransMountain Pipeline, “a really costly pipeline” spanning peaks and “very tough to entry” wilderness, he mentioned.

“You understand that gravity works, proper? So it’s much more costly to really transfer that oil from Alberta to Vancouver” than it could be to Nebraska, Noel mentioned.

In Burnaby, close to Vancouver, that Alberta tar sands oil is transferred to barges and shipped principally to California or Gulf Coast refineries.

U.S. West Coast refineries alone accounted for simply greater than half of all maritime crude exports from western Canada, the EIA reported in September.

“So, as a result of we’d like the oil, the oil was at all times going to get right here,” Noel mentioned. “The oil is right here, you simply raised your worth.”