TransCanada has fought activists for years over its Keystone XL pipeline. And in March this year, Donald Trump gave it the go-ahead. But now TransCanada can’t find oil companies that wants to use the pipeline. Oil prices are too low. And activists haven’t given up the fight to protect their land. John Dyer reports from Boston.
Activists tried for years to stop the Keystone XL pipeline, staging protests, lobbying the United States government and filing lawsuits claiming the pipeline would infringe on Native American sacred sites, pollute fragile Western plains environments and hurt wildlife.
Now the market has done what those efforts could not.
Few oil companies are signing up to use the Keystone XL pipeline because of the low cost of oil, the Wall Street Journal reported on Thursday.
Shrinking profit margin
When Alberta-based TransCanada first requested the U.S. Department of State for a permit to run a new pipeline across the Canadian border in 2008, the price of oil was $130 a barrel. Now it stands at around $45 a barrel, shrinking the profit margin for companies that would use the pipe.
“A lot of water has gone under the bridge over the last seven or eight years since we proposed that project with respect to where energy prices are today,” TransCanada Chief Executive Officer Russ Girling said at a May investors’ conference. “So it all sort of complicates the negotiation.”
Many of those investors are concerned about the pipeline that would run 2,700 kilometres miles from Alberta to south eastern Nebraska before joining existing pipelines that lead to refineries on the Gulf of Mexico.
The company has spent $3 billion to date on Keystone XL. It’s projected to cost $8 billion, or around $1 billion more than initially forecast. Last year, TransCanada took a $2 billion write-down of expenses related to the work.
Vowing to push on with the project, TransCanada executives have said they wants 90 per cent of the pipeline’s capacity filled by the time they end construction. Recently, they said they foresee construction starting as early as next year and finishing in 2020.
Rail remains an option
The Wall Street Journal did not say exactly how many companies had signed up to the use the pipeline.
But any pipeline customers have also opted to sign contracts with railroads that carry oil, saying rail companies, unlike pipelines, don’t demand long-term contracts even though their shipping is three times more expensive than pipelines, the newspaper reported.
“Though transportation of crude oil by pipeline is our current and primary method of shipment, we evaluate and monitor on an ongoing basis where crude by rail has been, and will continue to be, an option,” said Julie Woo, a spokeswoman for oil sands driller Suncor.
Trump approved the pipeline
The controversial pipeline’s fate stands in stark contrast to the rhetoric of President Donald Trump, who approved the project in March.
“It’s going to be an incredible pipeline, greatest technology known to man,” said Trump at the time.
Trump criticised President Barack Obama’s opposition to Keystone in the 2016 presidential campaign as a sign of America surrendering economic prosperity on the altar of climate change and environmentalism.
Public opposition continues
The Keystone is one of a handful of new pipelines that are facing problems lately.
Canadian officials last year approved Kinder Morgan’s Trans Mountain pipeline that would link Alberta’s tar sands with export terminals on the Pacific Coast and Enbridge’s Line 3, which would run from Alberta to the U.S. border in Manitoba.
But the low price of oil has slowed those projects.
Meanwhile, the Keystone and other pipelines still face public opposition.
The newly elected New Democratic Party in British Colombia opposes the Trans Mountain pipeline. Regulators have delayed Enbridge’s Line 3. And Nebraska officials must still approve the final leg of the Keystone pipeline in the state.
Pipeline critic and South Dakota resident Byron Steskal, said spills have occurred where the pipeline runs through his state.
“TransCanada’s fancy detection system failed,” he said. “Keystone 1 was shut down until July 2, 2016.”