The broadening support that critics of TransCanada Corp.'s Keystone XL have garnered is doing more than threatening a proposed pipeline. It has become protesters' best chance at curtailing the expansion of Canada's oil sands industry.
Opponents of the planned pipeline have persuaded Nebraska lawmakers, including the state's Governor, to consider whether it has the power to force the crude conduit to take a new route, and the U.S. State Department may also seek a redesigned plan. Detractors also charge that conflicts of interest tainted the pipeline's approval process, and the U.S. government is now reviewing these allegations. It all adds up to a possible delay for the project perhaps stretching beyond 2012.
Protesters have long complained about growing development in the oil sands, but have never been able to slow activity in Alberta's bitumen-rich north. But by focusing on pipelines, rather than attacking dozens of oil projects themselves, critics have found an effective approach in their effort to thwart expansion in the broader oil sands industry.
"If you're a protester, you've figured out that you can't stop Imperial Oil or Exxon or Total or Statoil from investing in oil sands," Geoffrey Cann, national leader of Deloitte's energy and resources division, said."[But]if you're a protester … if you want to throttle the industry, go for the throat. And that appears to be the pipelines."
Keystone XL's critics have also built a coalition made up of a number of diverse groups, an element that has been missing in other energy protests.
"Nebraska landowners allied with environmental groups [and]allied with some trade unions," said Andrew Leach, a professor of natural resources, energy, and environment at the Alberta School of Business at the University of Alberta. "[There are]some very different interests that are pulling in the same direction on this project. There's a lot of lessons there in terms of building the movement."
There are three proposed pipeline projects slated to move oil sands crude out of northern Alberta to other markets: the $7-billion Keystone XL, which would shuttle 700,000 barrels of oil a day to refineries on the Gulf of Mexico; Enbridge Inc.'s $6.6-billion proposed Northern Gateway, designed to carry 525,000 barrels a day to a port in Kitimat, B.C., so tankers can take oil to Asia; and Kinder Morgan's planned expansion of its existing Trans Mountain system, which would cost around $4.3-billion to take an added 400,000 barrels a day to Burnaby, B.C.
Enbridge is also trying build a $2-billion line, dubbed Wrangler, to move oil from Cushing, Okla., to refineries on the Gulf Coast. Enbridge chief executive officer Pat Daniel said on a conference call Wednesday that he does not expect Wrangler to face the same resistance as Keystone XL because his pipeline would be constructed on an exiting rights-of-way.
Observers argue all of these pipelines are needed to keep up with Canada's forecast production growth in the oil sands. Blocking one or more means bitumen production will have to slow because existing pipelines will be full by 2015.
Northern Gateway's opponents, lead by first nations and green groups, have been vocal and are among the roughly 4,000 people who have signed up to participate in Northern Gateway's hearing process, noted Mr. Leach.
"There's a very strong push to create the similar type of wedges [as protesters found with Keystone]" he said.
Scott Bolton, leader of PricewaterhouseCoopers LLP's Canadian energy team, says that while Keystone's dissidents have attracted reams of media and political attention, in part owing to the 2012 election in the United States, TransCanada will still win the battle. The project will create jobs and provide a secure supply of energy, arguments that he believes will ultimately sway politicians in TransCanada's favour.
"The arguments for the project seem quite compelling. There has been an exhaustive environmental assessment that's been conducted, but unfortunately those factors don't seem to be getting airplay," he said. "But there's no question that these arguments [against the project]have been getting a lot of attention."
THE POLITICS OF A PIPELINE
The approval process
Keystone XL received Canadian approval in March, 2010, but the U.S. State Department has yet to rule following a lengthened environmental process that has included draft and final impact statements, and public meetings. The department has said publicly it aims to make its decision before year end, but comments in recent weeks suggest that is unlikely.
U.S. President Barack Obama raised the possibility of further delay on Nov. 1. He said he expected the department's report in the next several months, and then would make his decision based on health, environmental and economic factors.
On Wednesday, a government official said the United States may decide within weeks whether to pursue a new route for the pipeline, a move that could delay a final decision beyond the 2012 U.S. election.
The project poses political risks for Mr. Obama as he seeks to hold on to the White House in 2012.
Approving the pipeline would upset environmentalists, part of his liberal political base, who are disappointed that he has not passed broad climate change legislation.
But blocking the project would allow Mr. Obama's opponents to suggest he has not done all he can to tap new sources of fuel or create jobs. The Democratic President has advocated "green energy" while Republicans have pressed for more oil drilling.
At the state level, Nebraska's Governor and other lawmakers threaten to delay the proceedings. The legislature is debating a measure requiring TransCanada to move the proposed right-of-way away from the aquifer that provides most of the state's water, but some question whether such a state law would violate the U.S. Constitution.