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Trump victory could revive Keystone XL pipeline

Donald Trump’s position on Keystone XL is being viewed as a positive for Canada’s oil and gas industry

Reuters

Donald Trump's victory has breathed new life into TransCanada Corp.'s previously moribund Keystone XL project – the oil sands pipeline the president-elect has said he will support in exchange for a piece of the profit.

Mr. Trump has long supported the controversial Keystone XL pipeline – the proposed Canadian project targeted by U.S. environmentalists, and rejected by President Barack Obama one year ago on the grounds that it didn't match with his push to reduce greenhouse gases on a global scale.

TransCanada chief executive officer Russ Girling has stayed away from commenting on this week's U.S. election. However, the day after the vote, the Calgary-based pipeline company issued a statement saying that it remains committed to building the $8-billion (U.S.) Keystone XL project.

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The project would bring up to 830,000 barrels a day of diluted Alberta bitumen and U.S. oil to Nebraska, where it could then flow to markets in the Midwest and Gulf Coast.

"We are evaluating ways to engage the new administration on the benefits, the jobs and the tax revenues this project brings to the table," TransCanada spokesman Mark Cooper said Wednesday.

The company reiterated its economic argument for the pipeline, in terms that would appeal to the Trump administration. "Building the pipeline means 9,000 construction jobs – 42,000 direct and spin-off jobs over all. KXL would also mean tens of millions of dollars in annual property taxes to counties along the route, and a more than $3-billion boost to the U.S. gross domestic product."

During his campaign, Mr. Trump was right on message with TransCanada, saying the project would boost job creation and be the "safest pipeline ever built." He said he would ask TransCanada to resubmit its proposal for the project. "I want it built, but I want a piece of the profits," Mr. Trump said. "That's how we're going to make our country rich again."

Many uncertainties about his conditions for approval remain. But Mr. Trump's position on Keystone XL is being viewed as a positive for Canada's oil and gas industry, which has seen new investment stifled both by low crude prices and uncertainty about whether new pipelines can be built.

On Wednesday, TransCanada shares were up about 3 per cent on the Toronto Stock Exchange. Former prime minister Stephen Harper, a long-time booster of the project, tweeted Wednesday: "Congratulations to Donald Trump on his impressive victory. Canada/US partnership is strong. There is much to do, [including] moving ahead with KXL."

Dennis McConaghy, a former TransCanada executive who helped to conceive the Keystone XL pipeline – and has a forthcoming book on his experience – said the potential revival of the project is now a real possibility.

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"The Keystone XL pipeline is back in play," Mr. McConaghy said in an interview Wednesday.

"The political leadership of both Alberta and Ottawa should be embracing that option."

On a political front, Mr. Trump's win also allows the Trudeau government to consider one more option – thought to be off the table with a Hillary Clinton presidency – in its push to get a new major oil pipeline built. The revival of Keystone XL could relieve political pressure in Quebec and the Lower Mainland of British Columbia, where opposition to other pipeline projects such as Energy East and the Trans Mountain expansion runs strongest.

"That puts the Prime Minister in a tricky position given his pipeline policy was based on the fact that Hillary would win and that therefore they would have to take domestic action on a Canadian pipeline," said Robert Johnston, chief executive officer of the New York-based Eurasia Group, a political risk firm – who adds that Prime Minister Justin Trudeau "only needs to approve one pipeline both for the market and for his first term in office."

However, Alberta Premier Rachel Notley said Wednesday that while she would like to see more energy trade with the United States – including the potential of a reborn Keystone XL – her government remains committed to getting a Canadian pipeline built that would allow oil producers to diversify their customer base.

Michael Tran, director of global energy strategy for Royal Bank of Canada in New York, said even if the contentious project is approved, Canada's oil sector would remain overly dependent on the U.S. market through what Mr. Tran terms concentration risk – today more than half of the country's oil exports go to eight U.S. refineries. The sector would still require a route to the Pacific coast to reach growing Asian markets, he said.

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Republicans also won control of both the House and the Senate and reviving the Keystone XL pipeline project was official policy of the party in the election. A revived version of the Keystone XL Pipeline Approval Act is likely to be one the first bills that Republicans introduce in the next Congress, probably again by North Dakota Senator John Hoeven – who has tried to get the bill passed twice before – according to GovTrack.us, an independent website that tracks the U.S. Congress.

However, with Keystone XL not immediately going ahead, TransCanada shifted its corporate focus in the past year to other endeavours, including its $10.2-billion purchase of the Columbia Pipeline Group, Inc. this summer, which gave the company established pipeline assets in the burgeoning U.S. Appalachian shale gas region. And following the Keystone XL rejection last year, TransCanada also filed for arbitration under the North American free-trade agreement, and was seeking $15-billion in damages for the U.S. government decision it argued was "arbitrary and contrived." The company would not comment on the legal proceedings Wednesday.

Environmental groups disheartened by the Trump victory also pledged Wednesday to carry on the fight against new pipelines. In addition, there are questions about whether the capacity Keystone XL pipeline would bring on line is actually needed with a number of other proposed projects – including TransCanada's Energy East project, Kinder Morgan's expansion of Trans Mountain, Enbridge Inc.'s Line 3 expansion and others – on the books.

With reports from Shawn McCarthy and Jeffrey Jones

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