Winnipeg Free Press - PRINT EDITION

While we wait for Keystone

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The Stephen Harper government and the Alberta government of Premier Alison Redford have been making a big diplomatic push in Washington for construction of TransCanada Corporation's proposed Keystone XL pipeline. That line would bring Alberta oil through the U.S. central plains to Steele City, Neb., and thence to Gulf Coast refineries.

The immediate economic need for the Keystone XL line is, however, less than it seemed a year ago. The political price for it may be high because many of U.S. President Barack Obama's core supporters are against it. Mr. Harper should take the long view: The logic of the Keystone XL line will eventually prevail because U.S. consumers will need the oil.

The Keystone XL pipeline awaits approval from the U.S. State Department, which turned it down once already in the face of vociferous objection from U.S. environmental groups. Now a new route through Nebraska has been found, with the approval of Nebraska authorities. TransCanada has renewed its application on that basis, but the objections of environmental groups appear as strong as ever.

In the meantime, TransCanada has been testing the opinion of oil shippers to see if they would use a line from Alberta to Montreal. The response was encouraging. The company announced Tuesday it is inviting firm commitments to use such a line. Customers can submit bids until June 17. Then TransCanada will know what volumes are offered at what rates.

TransCanada has been operating a natural gas pipeline from Alberta to Montreal for the last half-century. It is little used now because Ontario, Quebec and eastern U.S. customers have sources of natural gas closer to home. That line can be adapted to carry oil. There may be objections from some communities near the line, but since it has been operating satisfactorily as a natural gas pipeline for half a century, the grounds for objection will be slender.

Refineries in Quebec and New Brunswick rely on imported crude oil. Alberta oil is not available to them for want of a pipeline. If the price is right, TransCanada can solve that problem for them. Oil producers in Alberta, who thought they needed a pipeline to Nebraska, can just as readily sell to eastern Canadian refiners.

Moreover, railways have been hauling sharply increased volumes of Alberta oil to U.S. refiners. Oil became a greater part of their traffic during 2012 and they expect the increase to continue this year. The Keystone XL line would probably be a safer and more efficient means of shipment, but if the U.S. authorities insist on receiving Canadian oil by rail, that is their choice to make. Railways may have a continuing role in shipping bitumen from northern Alberta oilsands operations. Suncor, one of the largest oilsands miners, had planned to build a huge plant called the Voyageur upgrader to turn bitumen into synthetic crude oil that most refineries could handle. After long and careful study of the costs and revenues, the company announced in late March it would not proceed. The Enbridge pipeline company is seeking regulatory approval to build the Northern Gateway pipeline from Alberta to Kitimat B.C., to carry dilute bitumen for shipment to Asian customers, but that project has run into stiff opposition from people who live near the route.

The route from TransCanada's Hardisty terminal to Montreal appears at the moment to be the path of least resistance. Mr. Harper need not make the Keystone XL pipeline a big issue in Canada-U.S. relations because Canada doesn't immediately need it. Mr. Harper might have to make concessions in some unrelated field to win Obama administration support for the pipeline because that is the way international relations usually work. It would be a shame to lose advantages elsewhere -- in efficient border-crossing, in trade or in defence production, for example -- in order to win construction of a pipeline Canada can cheerfully wait for. The political price for prompt approval of Keystone XL -- if it is available at all -- is likely to depend on how badly Mr. Harper seems to want it.

Editorials are the consensus view of the Winnipeg Free Press’ editorial board, comprising Catherine Mitchell, David O’Brien and Paul Samyn.

Republished from the Winnipeg Free Press print edition April 5, 2013 A8

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