President Joe Biden signed an executive order on Jan. 20 that revoked the March 29, 2019, Presidential Permit granted to TC Energy Corp. to build the Keystone XL pipeline across the U.S.-Canada border.
Citing a 2015 review of the project that resulted in the U.S. Department of State and former President Barack Obama determining that the pipeline would not serve the U.S. national interest and growing concerns regarding change, Biden’s executive order states that leaving the pipeline permit in place “would not be consistent with my Administration’s economic and climate imperatives.”
A number oil and gas pipeline industry stakeholders responded with disappointment in the decision, highlighting the number of jobs that the Keystone XL project would create and its impact on the U.S. economy, energy security and communities along the proposed pipeline route.
TC Energy announced it was disappointed with the Biden’s action, stating that the decision overturns an unprecedented, comprehensive regulatory process that lasted more than a decade and repeatedly concluded the pipeline would transport much needed energy in an environmentally responsible way while enhancing North American energy security.
The company said the action will directly lead to the layoff of thousands of union workers and negatively impact ground-breaking industry commitments to use new renewable energy as well as historic equity partnerships with Indigenous communities.
TC Energy will review the decision, assess its implications and consider its options. However, as a result of the revocation of the Presidential Permit, advancement of the project will be suspended. The company will cease capitalizing costs, including interest during construction, effective Jan. 20, and will evaluate the carrying value of its investment in the pipeline, net of project recoveries.
The company statement also noted the impact on its earnings for 2021. TC Energy will modify its previously announced financing plans.
“Our base business continues to perform very well and, aside from Keystone XL, we are advancing $25 billion of secured capital projects along with a robust portfolio of other similarly high quality opportunities under development,” said François Poirier, TC Energy’s president and CEO. “These initiatives are expected to generate growth in earnings and cash flow per share and support annual dividend increases of eight to ten per cent in 2021 and five to seven per cent thereafter.”
The Association of Oil Pipe Lines (AOPL) lamented the Biden administration’s first day action to block thousands of new jobs and deprive those workers of billions of dollars in payroll salary.
“Killing 10,000 jobs and taking $2.2 billion in payroll out of workers pockets is not what Americans need or want right now,” said Andy Black, AOPL president and CEO.
Building the Keystone XL pipeline would create 10,000 good-paying American union jobs during construction. U.S. employment wages would exceeded $2.2 billion under a Project Labor Agreement with four American labor unions. The pipeline’s builder was ready to award over $3 billion in contracts awarded to U.S. contractors and suppliers in 2020 with all new steel pipe for Keystone XL is Made in America.
The project also offered significant environmental protections. Keystone XL would operate at net-zero GHG emissions. Its $1.7 billion investment in new, privately-funded renewable power infrastructure would provide 100 percent of the power to operate the pipeline, according to a TC Energy announcement on Jan. 17. The project sponsor also executed a renewable power MOU with North America’s Building Trades Unions to construct this renewable power infrastructure with a $10 million Green Job Training Fund for union workers.
The Biden Keystone XL cancellation will also hurt Native American communities, Black said. Native American partnerships in the project would generate more than $1 billion in equity ownership opportunities with input into construction and operations. The project sponsor committed over $500 million for Native American suppliers and employment opportunities for tribal communities. Rural America would lose out on over $100 million of annual property taxes that would have gone to rural communities.
Blocking Keystone XL may ironically lead to an increase in greenhouse gas (GHG) emissions, Black added. Government analysis shows pipelines emit fewer GHGs when they make their deliveries compared to other modes of transportation. Denying construction of Keystone XL means much of that crude oil will travel by train or truck instead, producing greater GHG emissions, more air pollution and more traffic congestion.
American Petroleum Institute (API) president and CEO Mike Sommers called the Biden executive order represented a step backward for the United States and its energy industry.
“President Biden takes office at a time when the U.S. leads the world both in energy production and environmental performance,” Sommers said. “This president inherits a strong American energy picture, marked by low household energy costs, record emissions reductions and less reliance on foreign energy. Accelerating America’s energy and environmental progress and enabling the nation’s economic recovery will require sound and effective regulatory and other policies that protect access to affordable, reliable, and cleaner energy produced in the United States.”
Sommers added that API shares Biden’s goal of leading efforts to address climate change and that those actions must be global in nature.
“That’s why we support the ambitions of the Paris Agreement, including global action to reduce greenhouse emissions and alleviate poverty around the globe,” he said. “Models show this agreement between nations cannot be achieved without access to natural gas, and that’s why we will continue to advocate for expanded U.S. LNG exports as a path to transition countries toward cleaner fuels while ensuring millions of people in developing nations have access to electricity.”
Sommers highlighted impacts of the Keystone XL project on the environment and the safety of pipelines.
“Revoking the Keystone XL pipeline is a significant step backwards both for environmental progress and our economic recovery,” he said. “Pipelines are the safest, most environmentally friendly way to transport energy, and the economy cannot recover at full speed unless we deliver reliable energy from where it is to where it is needed. The Keystone XL Pipeline has been through more than 10 years of extensive environmental reviews, and today’s announcement is a slap in the face to the thousands of union workers who are already a part of this safe and sustainable project. This misguided move will hamper America’s economic recovery, undermine North American energy security and strain relations with one of America’s greatest allies.”
Sommers added that “smart regulations” would help the industry and the U.S. government to continue to meet shared goals of reducing emissions, protecting public health and developing affordable, reliable and cleaner energy.
“We will work closely with the Biden administration as it conducts regulatory reviews that may impact our industry,” Sommers concluded.
Chris Bloomer, president and CEO of the Canadian Energy Pipeline Association (CEPA), said he was disappointed and concerned with the Biden administration revoking the Keystone XL permit.
“This revocation is a backward-looking decision that ignores the tremendous progress made by the transmission pipeline industry over the last decade,” Bloomer said. “Keystone XL would achieve net zero emissions when placed into service and committed its operations to be fully powered by renewable energy sources by 2030. The project included historic equity partnerships with Indigenous communities, and would create thousands of jobs that are now lost at a time when they are needed most. The decision represents a significant loss to the energy industry, organized labour, Indigenous groups, cross-border interests and North American energy security.”Tags: AOPL, API, CEPA, Keystone XL, President Joseph R. Biden, Presidential Permit, TC Energy