3 Important Lessons Learned from the Keystone XL Pipeline

lessons learned from Keystone XL pipeline

Keystone XL Under Construction

Keystone XL (KXL) is now officially dead, and that's just too bad. After more than 15 years since first being proposed – a time over which global oil demand has risen by more than 10 million barrels per day (bpd) – TC Energy, the pipeline’s owner, has now confirmed the termination of the project.

It was a long and arduous road for the pipeline, one which saw many successful court challenges from opponents and multiple presidential permits either pulled or issued for the project in a staggered fashion.

Nothing came to fruition for Keystone XL, or North American energy security for that matter, as the pipeline would have allowed refineries in the U.S. Midwest and Gulf Coast to source more feedstock from sustainable producers in Canada. According to Forbes, some estimates suggested that the Keystone XL project would have “…reduced American dependence on Venezuelan and Middle Eastern heavy crude imports by 40 per cent.”

And while KXL sat in regulatory limbo for well over a decade, other major global oil and gas producers benefited immensely and today the global environment is worse off.

Here are some major lessons we should all have learned from the Keystone XL pipeline.

#1 - The U.S. Will Still Import More Canadian Oil

Without the Keystone XL, the U.S. will continue to import record levels of Canadian oil – set at more than 3.8 million bpd in 2019, with analysts expecting that to rise up to 4.4 million bpd over the next few years.

Furthermore, pipeline expansions currently underway are expected to add more than 950,000 bpd of additional export capacity for producers in Canada before 2025. The Line 3 replacement is one of them, a project which, like KXL, has also met stiff opposition from anti-pipeline protestors in the U.S.

Without new pipelines to import those increasing volumes of crude, some of that oil will be shipped into the U.S. via rail or truck – forms of transport that are proven to be more carbon-intensive and less safe from an environmental perspective.

According to a 2014 study, the transport of oil by rail emits up to 50 per cent more GHG emissions versus by pipeline. Another study in 2016 found that GHG emissions increase anywhere from 61 to 77 per cent when using trains to ship oil long distances instead of pipelines. To add, high-tech control systems and satellite-based monitoring on today’s pipelines mean that they are about 4.5 times safer than rail for the transport of oil and gas products.

Combine these facts with the reality that U.S. imports of Canadian oil are poised to continue growing over the next several years and it’s clear that Keystone XL would have been the best choice for the environment.

#2 - Market Share is Ceded to Other Producers

KXL’s termination cedes global oil market share to other less environmentally responsible producers and moves the transport of oil from pipeline to tanker, truck and rail, having the opposite effect on global GHG emissions and the environment than intended with its shutdown.

The pipeline would have allowed refineries in the U.S. Midwest and Gulf Coast to source more heavy oil from sustainable producers in Canada rather than from elsewhere around the world. This matters, because not many other major oil and gas producing nations have the same exceptional performance on Environmental, Social and Governance (ESG) metrics that Canada already enjoys.

Of the world’s top 10 oil exporters, Canada consistently ranks number one on several ESG-related indexes. Those include:

Future Oil and Gas Pipelines 2021 Beyond - Energy Minute v2-01

It’s clear that Canada is one of the most transparent, regulated and environmentally conscious oil producers on the planet. And just a few days ago, the industry announced a new net-zero to 2050 initiative that will continue to cement Canada’s position as a global energy supplier of choice for environmental and climate-conscious consumers.

Ceding market share to oil producers with abysmal records on the ESG-related indexes above does nothing to advance social progress, responsible governance or environmental protection around the world. Unfortunately, the termination of Keystone XL may do just that by displacing sources of oil supply away from Canada to regions in South America, the Middle East and elsewhere.

#3 - Growing Global Demand for Oil Has Not Stopped

Keystone XL’s termination will do nothing to keep one barrel of oil in the ground. According to the International Energy Agency’s most recent projections, global demand may “…rebound to levels seen before the pandemic in a year, signalling a speedier recovery than its previous estimates.”

Another March 2021 oil demand projection by BMO Capital Markets sees demand increasing to 104.9 million bpd by 2025, then up to 108.2 million bpd by 2030, far above levels seen before the global COVID-19 pandemic.

The pipeline's termination will hinder more sustainably produced Canadian oil from accounting for more global market share in the U.S. and open the door for other major producing nations to fill the void.

As long as the world needs oil, it should come from environmentally responsible producers like Canada. More Canadian oil on the global market is good for Canada and the global environment!

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