Keystone XL no longer crucial for Canada's oil exports, says natural resources minister

The federal Minister of Natural Resources says Canada has moved on to a whole different plan for its oil exports, leaving the once-crucial Keystone XL pipeline as a bit of an afterthought.

Jim Carr says Canada's plan for oil exports is 'not to solely rely on one major market'

Canada's Natural Resources Minister Jim Carr says the Keystone XL pipeline is approved in Canada, but the rest is up to the company and to the incoming U.S. administration. (Chris Wattie/Reuters)

The prospect of the Keystone XL pipeline being approved by the incoming Trump administration will have little effect on Prime Minister Justin Trudeau's plans to get Canada's oil to market. 

Federal Natural Resources Minister Jim Carr says Canada has moved on to a whole different plan for its oil exports, and the once crucial Keystone XL pipeline has become less of a priority.

"It doesn't get oil to export markets in Asia," said Carr as he left his government's cabinet meeting Tuesday.

"It's a goal of the government of Canada to expand its export markets."

President-elect Donald Trump has promised to grant a permit to TransCanada's Keystone XL project that would carry more than 800,000 thousand barrels of oil a day from Alberta to refineries in Texas. President Barack Obama rejected the pipeline last year. 

Almost all of Canada's oil is currently being exported to the U.S. Pipelines that carry oil from Canada are at capacity, so a lot of it is going by rail. Canadian oil also faces a significant discount in U.S. Midwest refineries because it's heavier and more expensive to refine than light crude.

Carr said his government wants to take a new approach.

"I think that if you listen to what the prime minister has said about moving our resources sustainably, the importance of responding to the demands in other export markets, and not to solely rely on one major market," he said. "That is the sensible approach to take and nothing has changed."

'Getting energy to the world'

Carr's comments show that the Keystone XL project is no longer the only option or even the best option, according to Jennifer Winter, scientific director of energy and environmental policy at the University of Calgary.

She thinks the priority for the Canadian government now is focusing on pipeline projects on its own soil and the markets it wants.

"Oil producers would prefer to have Keystone rather than no Keystone, the issue is where do Canadian producers want to send oil?" she said in an interview with CBC.

"The change is the idea Asia is a much more important market, and a few years ago when [prime minister] Stephen Harper was talking about Keystone, the U.S. looked like the best market for Canadian oil," Winter said. "China is going to be a much bigger growth market and therefore substantially more attractive." 

A yard in Gascoyne, N.D., which has hundreds of kilometres of pipe stacked inside that are supposed make up the Keystone XL pipeline. (Alex Panetta/Canadian Press)

Canadian oil producers seem to be taking a similar approach.

"The United States is our industry's largest customer, but also our largest competitor, and we will continue to advance the priorities that are important to Canadian producers," said Canadian Association of Petroleum Producers spokeswoman Chelsie Klassen in an email to CBC.

"Our challenge is getting that energy to the world, and the only way we can do that is through more energy infrastructure, such as pipelines, which will enable us to deliver oil and natural gas to more customers at home and globally."

During question period in the House of Commons Tuesday, Carr said that as far as Canada is concerned, Keystone XL has been approved and is ready to go on the Canadian side of the border. If the pipeline is to be built, Carr said, the company has to reapply for permission from the U.S. government.

Keystone no slam dunk

The federal government is considering two pipeline proposals now. It has to decide by Dec. 19 the fate of the proposed Trans Mountain pipeline expansion that would carry oil from Edmonton to Burnaby, B.C. 

It also has to figure out what to do about the troubled Northern Gateway pipeline project that would carry oil from Alberta to Kitimat, B.C. for export to Asia. 

That pipeline is in limbo after a court overturned federal approval of the project. The federal cabinet has to decide by the end of November whether to undertake more consultations with Indigenous communities or scrap the whole thing. 

Meanwhile, the prospect of the revival of the Keystone XL pipeline isn't a slam dunk either, according to Jeff Phillips, who specializes in international trade and U.S.-Canada relations with Dawson Strategic in Ottawa.

"Canadians maybe can't believe this zombie pipeline, that cannot be killed, has re-emerged again," said Phillips in an interview with CBC.

Phillips predicts Trump's campaign promises to approve Keystone XL may come up against the reality of the controversial project.

"He also had a big caveat to that, which is he would want America to have a bigger share of the pie, and we don't know what that means," he said.

"Even if the new U.S. administration is supportive and gives its approval, there are still a lot of key steps that have to happen before that pipeline gets built." 


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