Could a Trump Presidency Resuscitate Keystone XL?

Back in September, Bloomberg ran an article identifying a certain environmental activist as the "Woman Who Killed Keystone XL." Shortly thereafter, the same wire service published a separate article quoting an analyst using the term "Keystone-ed" to describe a possible similar fate for Energy Transfer's Dakota Access oil pipeline project, which has received much media scrutiny in recent months.

To paraphrase Mark Twain, might the reports of Keystone XL's death have been exaggerated?

While on the campaign trail this past spring, candidate Donald Trump said that he would approve the TransCanada project but under renegotiated terms that would give the U.S. government a cut of the profits. For its part, TransCanada indicated that it was cool on the idea of going into business with the Feds.

According to Christopher Guith, senior vice president for policy at the U.S. Chamber of Commerce's Institute for 21st Century Energy, Trump's idea of a public-private Keystone XL raises questions of legality and seriousness.

"He made it pretty clear he would approve it with some … extemporaneous riffing that he would demand an ownership stake for the U.S. government," Guith said. "I don't know if that's legal to begin with and, more importantly, he might not stick with that because it might have been extemporaneous."

Provided that TransCanada continues to see value in Keystone XL, a second review of the project likely would be more painless for the company than the first, he added.

"I would fully expect that if it was still in TransCanada's interest – and I don't know if it is or not from a financial standpoint – I would expect them to re-apply, and have that process expedited through the State Department," remarked Guith.

Sam Rines, senior economist and portfolio strategist at Avalon Advisors LLC in Houston, said it's possible the Keystone XL debate could be reopened under the Trump administration.

"The question is just whether or not it's economical at current oil prices," he said. "You change it from being a regulatory question to an economic question, and a lot of the oil sands aren't profitable at $40 to $50 [per barrel]. The technology isn't going to catch up anytime soon."

"You could see things like the Dakota Access be rerouted," concluded Rines. "But those types of economical lines will have a much easier time getting through a Trump presidency than they did with Obama."

(Rigzone Senior Editor Deon Daugherty contributed to this article.)

Matthew V. Veazey has written about the oil and gas industry since 2000. Email Matthew at mveazey@downstreamtoday.com

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