Join +750K new investors every month who copy stock picks from billionaire's portfoliosSign Up Free

Biden revokes KXL permit in blow to Canada's oil sector, Ottawa disappointed

Published 2021-01-20, 05:55 p/m
© Reuters. FILE PHOTO: A depot used to store pipes for the planned Keystone XL oil pipeline is seen in Gascoyne
WMB
-

By Rod Nickel and Nia Williams (NYSE:WMB)

CALGARY, Alberta (Reuters) - U.S. President Joe Biden on Wednesday formally revoked the permit needed to build the Keystone XL oil pipeline (KXL), dashing Ottawa's hopes of salvaging the $8 billion project that the struggling Canadian crude sector has long supported.

The move represents another set-back for the beleaguered Canadian energy industry, kills thousands of jobs and marks an early bump in Biden's relationship with Canada, a key trading partner. Biden had long promised to scrap the permit.

Kirsten Hillman, Canada's ambassador to Washington, told CTV that Ottawa was "very disappointed." Foreign Minister Marc Garneau, speaking minutes earlier, took a more muted tone, telling CTV that Canada respected and understood the decision.

Keystone XL, owned by TC Energy Corp, is already under construction in Canada, and would carry 830,000 barrels per day of Alberta oil sands crude to Nebraska. Opposition from U.S. landowners, Native American tribes and environmentalists has delayed the project for the past 12 years.

Former Republican President Donald Trump revived the project, but it still faced ongoing legal challenges.

TC Energy, in a statement issued before the revocation, expressed disappointment with a move it said would overturn a regulatory process that had lasted more than a decade.

The Calgary-based company said it will suspend construction and warned there could be a "substantive" predominantly non-cash, after-tax charge to earnings in the first quarter of 2021. TC Energy said the decision would lead to layoffs for thousands of unionized construction workers.

TC Energy stock closed down 1.2% at C$55.92 in Toronto while the benchmark Canadian share index edged up 0.3%

"Killing 10,000 jobs and taking $2.2 billion in payroll out of workers' pockets is not what Americans need or want right now," Association of Oil Pipe Lines Chief Executive Andy Black said.

Canada, the world's fourth-largest crude producer, ships most of that output to U.S. refineries. In 2019, the U.S. brought in 3.8 million bpd from Canada, more than half its daily imports of 6.8 million bpd.

Canadian producers, who have struggled for years from low prices partly related to sometimes-congested pipelines, have long supported KXL.

Producer Suncor Energy said it backed expanding market access to the U.S. through pipelines like KXL, which would provide responsibly sourced oil to U.S. refineries for the benefit of U.S. consumers.

But a Canada Energy Regulator report in November report said western Canadian crude exports are expected to remain below total pipeline capacity over the next 30 years if KXL and two other projects proceed, prompting environmental groups to question the need for all three.

Canadian Prime Minister Justin Trudeau said on Tuesday that Canada was pressing people at the highest levels of Biden's incoming administration to reconsider canceling the project.

Canadian Environment Minister Jonathan Wilkinson on Tuesday expressed optimism the two countries could work cooperatively in areas such as clean electricity, decarbonization of industry, transportation and methane emissions.

© Reuters. FILE PHOTO: A depot used to store pipes for the planned Keystone XL oil pipeline is seen in Gascoyne

Alberta Premier Jason Kenney threatened legal action on Monday if Keystone XL was scrapped.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.