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Biden Presidency Imperils Key Oil Pipelines

Source: Wall Street Journal, November 11, 2020

Keystone XL, Dakota Access are at risk of cancellation or shutdown under a Biden administration

President-elect Joe Biden’s campaign promise to phase out oil probably signals the end of the long-delayed Keystone XL oil pipeline and threatens the future of Dakota Access, another major crude conduit.

Obstructing pipeline projects is one way Mr. Biden could accelerate America’s shift toward renewable energy, by making oil more difficult and expensive to move around. Other policies that require legislative signoff would be more challenging to implement unless Democrats won control of the Senate.

“In the absence of legislation, you’re going to try to do what you can through administrative action,” said Christine Tezak, managing director at energy research firm ClearView Energy Partners LLC.

Mr. Biden’s campaign has said he would revoke a presidential permit that Keystone XL needs to cross the U.S.-Canadian border. The move is likely to doom the $8 billion initiative to bring crude from the Canadian oil sands to the American Midwest.

Mr. Biden hasn’t publicly weighed in on Dakota Access, though Vice President-elect Kamala Harris, as a U.S. senator, joined dozens of members of Congress in filing a legal brief earlier this year supporting efforts to shut down the pipeline, which runs some 1,200 miles from North Dakota to Illinois and has been operating since 2017.

Native American tribes, environmentalists and landowners have been trying for years to block the projects, which have become symbols in the fight to keep fossil fuels in the ground.

Keystone XL is particularly vulnerable because it isn’t running more than a decade after being proposed, the result of legal and permitting delays. The expansion of the existing Keystone pipeline, which would run from Canada to Nebraska, requires U.S. authorization to cross the international border.

The project is being built by Calgary-based pipeline firm TC Energy Corp. and partially financed by Alberta’s provincial government.Mr. Biden can unilaterally rescind the permit President Trump granted last year.

Canadian Prime Minister Justin Trudeau discussed the Keystone expansion on Monday with Mr. Biden. According to a readout of the call, Mr. Trudeau said he hoped to engage with the incoming administration on “key issues” such as energy cooperation and Keystone XL. Mr. Trudeau has long advocated for the pipeline, seeing it as an important conduit to market for Canadian oil.

Officials from the province of Alberta and TC Energy have also been reaching out to labor unions that would benefit from jobs and governors from states along Keystone XL’s path, people familiar with the matter said.

“A decision made to cancel Keystone XL wouldn’t just eliminate jobs on paper, it would literally take jobs away from thousands of Americans working in the field,” a TC Energy spokesman said in a statement.

A person familiar with the Alberta government’s plans said the pipeline backers also would try to position Keystone as a better option to get oil to Gulf Coast refineries, which generally are built to process a mix of the lighter oil produced in the U.S. and heavier varieties such as the kind pumped in Canada. Backers could argue that getting oil to U.S. refiners from Canada is a better option for those worried about environmental, social and governance issues than oil imported from most other countries, the person said.

Roughly half of U.S. oil imports come from Canada, according to the U.S. Energy Information Administration. Canada has seen Keystone XL as an important way to move oil out of the country, which before the coronavirus pandemic was grappling with pipeline bottlenecks that squeezed regional oil prices and forced producers to send more of their oil by train.

Nevertheless, analysts said they expected Mr. Biden to follow through on his promise to revoke Keystone XL’s permit, handing a win to progressive supporters.

Analysts said the political calculus is more complicated for Dakota Access, which has been running for years. As of earlier this year, the conduit operated by Energy Transfer LP transported almost 40% of the oil produced in North Dakota, America’s second-largest oil-producing state, according to East Daley Capital Advisors Inc. “Canada’s need to export oil—how does that rank in a Biden foreign policy world? So low as to not even be perceptible,” said Bob McNally, who served as an energy adviser to former President George W. Bush. “To Canada, I think it’s going to be, ‘Too bad.’ ”

A federal judge ruled earlier this year that a U.S. Army Corps of Engineers environmental review of the project’s impacts was insufficient. He ordered the Corps to conduct a more rigorous evaluation, invalidated the pipeline’s permit to cross Lake Oahe—a reservoir on the Missouri River—and ordered the pipeline to be emptied of oil.

An appeals court in August allowed Dakota Access to continue operating for now, pending further review by the district court. The Army Corps is challenging the lower court’s ruling that it must complete an environmental-impact statement, a process the agency said could take 13 months or longer.

Any decisions are unlikely before late this year. Energy Transfer declined to comment.

Mr. Biden’s campaign didn’t respond to requests for comment about whether it would seek to shut down Dakota Access. Its options for doing so would depend on the state of the litigation.

The politics of emptying Dakota Access would be far more difficult if the court allows the pipeline to continue operating, analysts said.

Lonnie Stephenson, a climate adviser to Mr. Biden and international president of the International Brotherhood of Electrical Workers, said the president-elect left him with the impression that he wouldn’t reflexively oppose all pipeline projects. Union leaders are ready to push back if he works against Dakota Access, Mr. Stephenson said.“For him to be the one to decide the pipeline closes is just a very fraught decision for him to have to own,” said Katie Bays, managing director at investment adviser FiscalNote Markets.

“It is an issue for us,” Mr. Stephenson said. “And we’ll make sure we have some frank and hard discussions where we need to.”