Friday July 14, 2017

Keystone XL got its approval, now investors are kinda 'meh'

TransCanada's Keystone XL pipeline originates in Hardisty, Alberta.

TransCanada's Keystone XL pipeline originates in Hardisty, Alberta. (The Canadian Press)

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There was a time when the Keystone XL pipeline was a trending term.

The TransCanada pipeline project was first proposed in 2008, and it became a lightning rod in the fight between oil supporters and environmentalists.

But in March, TransCanada scored a victory when U.S. President Donald Trump approved the controversial pipeline project intended to ship oil from Hardisty, Alberta to refineries and other markets via the U.S.

"There's been …. a change in the markets. There's been a change in the price of oil." - Michal Moore

TransCanada must still gain approval for its route through the state of Nebraska, which has resulted in numerous court battles.

The other catch? They need investors and oil companies to sign on to the project long-term. And according to a recent story in The Wall Street Journal, interest from investors is lukewarm.

 

Trump Keystone

In this Feb. 1, 2012 file photo, miles of pipe ready to become part of the Keystone Pipeline are stacked in a field near Ripley, Okla. (Sue Ogrocki/Associated Press)

The 'meh' factor

Michal Moore is a senior research fellow with the University of Calgary's School of Public Policy, and he's also a fellow with the Energy Institute at Cornell University.

Moore says there are a few reasons why investors aren't jumping at the chance to back the pipeline.

"Well, for one thing, it's taken a long time to get to the point where the project could actually proceed," says Moore.

After years of protests by environmentalists, and years of lobbying by the oil industry, former President Barack Obama rejected the project in 2015, saying the pipeline was not in the "national interest of the United States."

After having circled the White House during their protests, anti-pipeline protesters gathered there again in November of 2015 to celebrate Obama's decision.

Keystone XL Pipeline Reaction

Gene Karpinski, left, with microphone, president of the League of Conversation Voters, speaks during a gathering in front of the White House to celebrate President Barack Obama's rejection of the proposed Keystone XL pipeline Friday, Nov. 6, 2015, in Washington. (AP Photo/Alex Brandon)

Two months after taking office, Donald Trump reversed that decision and approved the project.

But much had changed since the pipeline was first proposed, says Moore.

"There's been …. a change in the markets. There's been a change in the price of oil. And there's certainly been a change in the attitude of the local governments along the way," says Moore.

He also notes that during the period during which the project was being reviewed or rejected, investors and shippers have found other ways to move their product.

   

Current political climate

Moore notes that although Trump has championed the pipeline, and "gleefully" reversed Obama's decision on the Keystone XL, his support has done little to actually move the project along.

"They've done it in a way that does not instill certainty or confidence in the market that things won't be overturned, or that the court decisions along the way won't impose further difficulties and delays," he says.

TransCanada Keystone NAFTA 20170228

President Donald Trump shows his signature on an executive order on the Keystone XL pipeline, Tuesday, Jan. 24, 2017, in the Oval Office of the White House in Washington. (Evan Vucci/Associated Press)

So while Trump has shown enthusiasm for the project, it hasn't increased confidence among investors.

"At the same time, the mood of those who are opposed to oil pipelines or hydrocarbon projects has gotten more militant," says Moore.

That has some investors shying away from controversial projects.

This week, Desjardins announced a temporary freeze on lending for pipeline projects.

    

Can the Keystone XL still succeed?

Moore says that if anyone can make a success of the Keystone XL pipeline, it is TransCanada. He says that the company will be pushing its long-term plan.

Keystone XL map March 2017

The Keystone XL pipeline would bring oil from Hardisty, Alta., to Steele City, Neb. (Natalie Holdway/CBC)

"My sense is that they may have had to retrench, and not had the project that they had designed in the first place come in a timely fashion," says Moore. "But at the end of the day, what they do end up with is likely to be more fine-tuned to the marketplace."

Moore says TransCanada is also adding to the infrastructure, which will be an asset well into the future.

"Pipelines are something that we need and will continue to utilize long into the future, whether they carry oil or not. It may carry water someday, it may carry waste products. We're going to need that infrastructure, and frankly that's what TransCanada is proposing."

To hear Marcia Young's conversation with Michal Moore, download our podcast or click the 'Listen' button at the top of this page.