Pipelines and Politics

Today’s decision by the US State Department to turn down TransCanada Inc’s proposed Keystone XL pipeline is not wholly unexpected.  First, let’s be clear, this isn’t a flat out “go away and never call me again” from the US government.  All that has really transpired today is that the State Department, as it was mandated to do by legislation piggy-backed to the payroll tax cut in December, made a decision on the project before February 21.  As is, the pipeline runs through a sensitive aquifer in Nebraska and without sufficient time for planning and approvals of a new route denial was inevitable. TransCanada will reroute, reapply and given the state of the US economy and the jobs that are tied to the project it will likely gain approval by whatever government is elected in November.

Also today, Enbridge’s only deal with native groups along the route of their proposed Northern Gateway project failed to be ratified.  The group, however, will continue talks as they were simply dissatisfied with the deal as it was.  Sound familiar?

While both of these events are being championed as victories by environmentalists, neither is a total defeat for the oil business.  Both of these projects, in some way or another are going to go forward.  The world is not going to stop running on oil anytime soon.  There is no proven viable alternative to fossil fuels and even if there were, the changes in infrastructure that would likely accompany such an alternative are daunting.  For the meantime, Alberta’s increasingly economically viable oil will have to find a way to market.

Of course, this is no secret.  Just look at the stock prices of each company today.  TransCanada was down 4% but finished off only 1.11% and Enbridge actually gained by .44%.  Not exactly bearish reactions.

The showdown between environmentalists and the oil industry will be not only intriguing but extremely important.  The environmental lobby has an important role to play by ensuring the company is being honest and accurate in its reviews and assessments.  Especially since the Federal Government and Stephen Harper have made it clear that they support the project and are going to help it along in any way possible.

We need to be realistic with our expectations.  With the near certainty of the pipelines being built in one way or another we shouldn’t waste our time opposing them  on an existential level.  What is important is that both Keystone and Northern Gateway – or whatever they end up being called – are built on a route and in a manner that is least damaging to our environment.  We need to understand fully what the risks and what the benefits to all of the stakeholders are.  Finally, we need to ensure that in the case of a disaster that pipeline companies are prepared clean up the full extent of the mess they make.