Keystone XL clears final hurdle only to see more hurdles

Regulators say the Keystone XL pipeline can be built through Nebraska, but they've ordered an alternate route, raising the possibility of further delays.

Pipeline still needs work to get across finish line, despite approval of route through Nebraska

A regulatory nod from Nebraska inches the long-delayed Keystone XL project closer to construction, but it's still not at the finish line. (Daniel Acker/Bloomberg)

Nebraska's decision on Keystone XL's final route was billed as the key regulatory ruling that would pull the long-delayed pipeline proposal out of a nearly decade-long limbo.

Supposedly, the sound of bulldozers breaking ground would soon bring a giant sigh of relief from Canada's energy industry, and from both Alberta Premier Rachel Notley and Prime Minister Justin Trudeau, who could both sell the pipe as evidence they really do care as much about industry as they do the environment.

Of course, in the current super-charged world of pipeline politics, no decision was ever going to be that straightforward.

The 3-2 vote from Nebraska's Public Service Commission — in favour of a route some 30 kilometres east of TransCanada's preferred line through the state — officially moves the project ahead.

Yet, the introduction of an alternate route also opens the proposal to another round of legal and regulatory challenges that could continue to mire the pipeline in pre-construction purgatory.

Getting approval in Nebraska was not "a hurdle of any significance," said Rafi Tahmazian, who manages about $1 billion in energy investments at Canoe Financial in Calgary.

"It literally did not move the dial." 

Fool me once

The shrugging off of even seemingly good news on the pipeline file is, by now, a standard reaction from Canada's energy industry, which has seen its hopes for a major export pipeline stymied by several cancelled projects, years of delays and what many see as unnecessary regulatory and government foot dragging.

Still, some in the industry remain more optimistic. Of the three major projects on the books — Keystone XL, Kinder Morgan's Trans Mountain expansion and Enbridge's Line 3 replacement —Alex Pourbaix, the former second-in-command at TransCanada and new chief of the oilsands giant Cenovus, told reporters last week that he thinks at least two will get built. As for the third? He believes it will go as well, but feels that the experience of the last decade means a little hedging is only prudent.

If Keystone XL gets built, Alberta Premier Rachel Notley will be among the politcal winners. (Jason Franson/The Canadian Press)

If a pipeline does go ahead — a possibility that now seems at least marginally more likely following Nebraska's decision — the benefits to Canada's oil industry are clear. A new export line would eliminate current transportation bottlenecks, shrink the discount that Western Canadian barrels fetch compared to world prices, and remove a constraint on potential production growth from the oilsands.

None of those arguments, of course, move pipeline opponents, who worry about the on-the-ground consequences of spills, the sanctity of First Nations land rights, and the broader environmental concerns of encouraging further emissions from oilsands production. 

The tension surrounding pipelines continues to be so drum tight that even the ruling of relatively obscure five-person regulatory panel in Lincoln, Neb., is enough to draw international scrutiny.

"Right now, in Canada we have this weird thing where every single project has taken on this national inferiority complex of why can't we get anything built," said Andrew Leach, an associate professor of economics at the University of Alberta.

The project long seen to face the fewest speed bumps, Enbridge's Line 3 expansion, is running into problems in Minnesota. Still, assuming it goes ahead, then a green light for either Keystone XL or Trans Mountain would buy the industry another six or seven years before pipeline capacity once again became a critical priority.

Political winners

That breathing room would be welcomed by Notley's NDP government, which could use the construction of a major pipeline project as a chit in her coming re-election bid.

In contrast, Trudeau's Liberal government, which has planted its flag in Kinder Morgan's line to the west coast, may only be able to follow suit if Trans Mountain is the project that gets the immediate nod. 

Nebraska has given its OK to an alternative Keystone XL route. (Nebraska Public Service Commission)

"I don't think that the Trudeau government has the luxury of saying, 'the pressure's off, let's sit back and relax,'" said Kathryn Harrison, a political science professor at the University of British Columbia. "He's talked about the importance of getting oil to market, not leaving oil in the ground. There will be pressure on the federal government to defend its approval of the project."

The specifics of TransCanada's potential path through Nebraska could mean that Trans Mountain may still be in pole position, regardless of the regulatory win just gained by Keystone XL.

Of the three routes TransCanada proposed through the state, regulators approved the third option. The choice of the alternative route is already leading environmental groups to call for more study, as well as offering a fresh opening for potential challenges from new landowners.


Paul Haavardsrud writes for CBC's western business desk in Calgary. He is also a producer on CBC Radio’s national business desk where he talks about business on Radio One in the afternoons. Prior to that he worked for newspapers. On Twitter, he’s @paulhaavardsrud.