Fact checking Premier Kenney on Keystone XL

Albertans deserve and urgently need an honest conversation about the future of the oil sands industry and how to further economic diversification in our province.

Ever since U.S. President Joe Biden cancelled the border-crossing permit for the Keystone XL (KXL) pipeline, Premier Jason Kenney and others continue to spread misinformation about KXL, the oil sands industry and the energy transition.

Unfortunately, some media commentators are repeating Kenney’s talking points without fact checking. This blog provides key facts on oil sands operations and pipelines, the energy transition, and possibilities for economic diversification in our province that debunks the misinformation being presented about the Keystone decision.

Oil sands producers don’t need KXL, or the Trans Mountain pipeline expansion

Premier Kenney claims cancelling KXL will have “devastating consequences.”

According to a recent report by David Hughes, one of Canada’s foremost energy experts, KXL and the Trans Mountain pipeline expansion are not needed by Alberta’s oil industry, which has enough takeaway capacity from existing infrastructure along with announced expansions and optimizations of existing pipelines.

Commenting on the death of KXL, Art Price, the former CEO of Husky Energy, stated: “Pipelines today make no sense. There’s a surplus in the market. Stop trying to focus Alberta’s economy on growing oil production. Drop it. The industry has.”

KXL wouldn’t have reduced oil sands producers’ transportation costs

Contrary to the premier’s claim, KXL’s cancellation is not “a gut punch for the Canadian and Alberta economies.”

The cancelled pipeline wouldn’t have reduced bitumen shipping costs. Oil sands producers would have paid about US$10 per barrel to ship bitumen in KXL. When TMX becomes operational in late 2022, most of the bitumen shipped in the pipeline will likely be heading to U.S. refineries. According to Oil Sands Magazine, the cost to transport bitumen using TMX and then boats to the U.S. Gulf Coast refineries “will likely be on par with KXL or even crude-by-rail.” Shipping bitumen to California refineries via TMX and then boats “should be in the US$5 a barrel range, about half the cost of shipping to the [U.S. Gulf Coast].”

The KXL cancellation doesn’t affect Line 3 and Line 5

Premier Kenney claims “retroactive” cancellations for existing pipelines may occur if Prime Minister Trudeau doesn’t impose trade sanctions on the U.S.

Canada won’t win or gain from a trade war with the U.S., and Line 3 and Line 5 can’t be cancelled by retroactively pulling permits.

Line 3 provides bitumen to refineries in the U.S. Midwest. Line 5 is an important source of feedstock for refineries in central Canada. Line 5 ships bitumen via Wisconsin and Michigan to refineries in Sarnia, Ont. Some of the bitumen is refined in Sarnia, and some of it is shipped via Line 9 to refineries in Montreal.

Line 3 and Line 5 have been facing legal and regulatory issues for years. Right now the main sticking point for both pipelines pertains to water issues – permits, easements and concerns about drinking water. This is why Michigan Governor Gretchen Whitmer is concerned about line 5 impacting on the drinking water of Michiganders,

It certainly isn’t helpful to Alberta or Canada that Premier Kenney suggested in November that Governor Whitmer is “brain dead” for trying to shut down Line 5. After all, Governor Whitmer was the national co-chair of Joe Biden’s presidential campaign.

The U.S. isn’t replacing oil sands imports with Middle Eastern or Venezuelan oil

Premier Kenney and other commentators claim if Alberta isn’t allowed more pipelines to the U.S., then the U.S. will need to import more oil from the Middle East and Venezuela. This tall tale is not based on evidence.

The fact is, in the last decade, the U.S. has greatly increased their oil production. The U.S. now produces more than 11 million barrels a day.

The U.S. also continues to import more oil from Canada than any other supplier. U.S. imports of Canadian oil increased by about 200 per cent in the last 15 years; a period where total U.S. imports decreased by a third.  U.S. imports of Canadian oil are currently at near-record levels of almost four million barrels a day. By contrast, the U.S. imported less than 570,000 barrels a day from OPEC countries in recent months. The U.S. didn’t import any oil from Venezuela between May and October 2020 and there is no reason or indication they are about to do so. 

Premier Kenney is being misleading about the employment benefits of constructing KXL

Premier Kenney claims construction of KXL would create 59,000 jobs. The premier’s press release does not cite the source of this number, nor does it explain that most of the claimed jobs are not direct construction jobs, nor are they mostly jobs for Albertans. This lack of details makes the premier’s claim misleading.

The job number in Premier Kenney’s press release appears to originate with TC Energy, who say KXL’s “construction will support nearly 60,000 (U.S. 42,000 and Canada, 17,000) direct, indirect and induced employment opportunities.”

What do these employment numbers mean?

Let’s start with the direct jobs. Direct jobs in this case are the temporary construction jobs to build KXL. TC Energy would have employed 13,200 workers to build KXL. About one-fifth of those jobs would have been in Canada (2,800 jobs). Last March, Premier Kenney stated KXL “will create over 1,400 direct and 5,400 indirect jobs in Alberta during construction.” As important as the 1,400 construction jobs are for those Alberta workers, this is a long way from the premier talking about 59,000 jobs.

Indirect jobs in this case are jobs in businesses supplying good and services to TC Energy for the construction of KXL. Induced jobs are jobs supported by the household spending of workers (i.e. the direct and indirect jobs discussed above). It’s unclear how many total indirect and induced jobs would be supported by the construction of KXL because TC Energy lumps direct, indirect and induced jobs together in their claim of total employment benefits of “nearly 60,000” jobs.

Alberta has many economic diversification options

Given the capital-intensive nature of the oil sands industry, Premier Kenney could have created more jobs in Alberta by investing $1.5 billion in virtually any other industry, for example construction and operational jobs in long-term care, or improving ventilation in schools, or building the super lab the United Conservative government previously cancelled.

The CEO of Calgary Economic Development Mary Moran asserts technology, agriculture and aerospace are growth areas for her city.

Part of the honest conversation that Albertans urgently need is the fact that oil and gas employment in our province has declined by 37,404, or 22.5 per cent since 2014. Total Canadian oil and gas employment in that period declined by 58,748 or 26 per cent.

Meanwhile, global energy transition investment grew nine per cent in 2020 and hit a record high of $501 billion despite COVID-19. Alberta needs a plan to further our economic diversification and grab a piece of this growing economic pie. Solar is now the cheapest electricity in history. Alberta has significant solar and wind energy potential, and that can bring over 30,000 jobs to our province in the 2020s. Lithium from oil sands waste might start to be used for EV batteries. There is also the potential for thousands of additional jobs in environmental remediation to clean up old oil and gas wells.

Growth in the electric vehicle (EV) market will take off in the 2020s. General Motors will be mostly producing EVs by 2035, and Tesla is working on a new battery design so it can sell EVs for US$25,000.

According to energy expert David Hughes, “Emissions from the oil and gas sector alone are on track to exceed Canada’s emissions reduction target in 2050 by 81 per cent—even with a 100 megatonne (Mt) per year cap on oil sands emissions.” Unfortunately, Premier Kenney doesn’t seem to see the writing on the wall. In response to the KXL cancellation, Premier Kenney made the questionable claim that “the Keystone XL pipeline [is] part of the solution in the energy transition.”

The pandemic has also made it clear that cutting jobs and funding for public services like health care, seniors care and K-12 and post-secondary education aren’t helping Albertans and our province thrive. Educating the leaders of tomorrow, keeping residents healthy, enabling seniors to live in dignity and investing in a real economic diversification plan would be a far better investment of $1.5 billion of Albertans’ money.

Alberta has so much to offer Canada and the world. We need our elected officials to begin to take seriously the need to support these economic diversification possibilities and others that may arise through the ingenuity of Albertans.