Forget the politics. Forget the environmental risk. Forget even the climate consequences. TransCanada Corporation’s revived Keystone XL pipeline is a lousy business proposition, writes Tom Sanzillo, director of finance at the Institute for Energy Economics and Financial Analysis (IEEFA), in a Fortune magazine op ed.
“From a strictly financial point of view—one devoid of political context—the Keystone XL is a singularly poor investment,” Sanzillo asserts.
Calgary-based TransCanada was forced to abandon its proposed 830,000-barrel-per-day, 3,200-kilometre pipeline to carry Canadian diluted bitumen to refineries and ports on the U.S. Gulf Coast in late 2015, when former U.S. President Barack Obama determined the project was not in the United States’ national interest. Last week, President Donald Trump reversed that finding and invited the company to re-apply for permission to build the line, which it did within days.
But “there are almost too many reasons to count as to why Keystone is a feeble proposition,” Sanzillo writes.
“The pipeline would be supplied mostly by oil sands reserves in Canada, which are too expensive to unlock unless—contrary to all expectations—global oil prices magically regain record heights. Public opposition to the project is so vast as to guarantee interminable litigation and the sort of costly civil disobedience that has worked so effectively against completion of the similarly financially rickety Dakota Access Pipeline. Climate policies enacted by international governing bodies pose risks to development of fossil fuel resources everywhere. Divestment campaigns are gaining momentum. Competition from cheap shale gas and renewables is formidable.”
In short, whatever else can be said about Keystone XL, it will almost certainly lose money for its builders and their backers, Sanzillo concludes. “And while bankruptcy will always be available to its owners and financiers, the losses such a project’s failure would create for communities, employees, small businesses, and local governments would be long-lasting.”