Alberta, Canada’s oil heartland, may seek compensation from the United States after newly inaugurated President Joe Biden moved to nix the Keystone XL Pipeline, Bloomberg said on Thursday.
Alberta spent $1.2 billion on the project so far, and may look to the North American Free Trade Agreement (NAFTA) to help it recoup some of those costs, according to an official from Premier Jason Kenney’s office said.
The pipeline was supposed to carry 800,000 barrels of oil per day from Canada to the United States.
The death of the Keystone XL project is a massive blow for the oil-rich province and Canada’s entire energy industry. Canada has struggled with insufficient takeaway capacity for years — and consequently a lower price for its benchmark, Western Canadian Select. The major price difference between WCS and WTI has eaten into Canadian oil company profits.
The heavy oil that comes from Alberta is particularly suited to US refineries.
Alberta has been counting on Keystone XL to alleviate the takeaway capacity constraints and prop up the price of its oil. Without the Keystone, Canada will continue to ship more oil by rail — a costlier endeavor and a method that is not as safe as shipping by pipeline.
The owner of the pipeline, TC Energy, went after compensation the last time the project was scrapped under US President Obama. That time, TC Energy tried get $15 billion in compensation under NAFTA. However, TC Energy dropped the case when President Trump revived the project.
The Transmountain expansion project is now the most critical pipeline in Canada. Owned by the government of Alberta, the pipeline may be the last hope for Alberta’s oil industry. It remains one of the few viable ways of increasing Canada’s pipeline takeaway capacity.
This article was originally published on Oilprice.com