Why Keystone is still Alberta’s best bet

By Max Fawcett, Managing Editor

Don’t believe the hype. In the wake of the U.S. government’s decision to delay the approval of the Keystone XL pipeline, talking heads on both sides of the border have suggested that the industry’s focus will now shift to Enbridge’s Northern Gateway project and its ability to ship bitumen from Alberta to Asia. As the Financial Post’s Claudia Cattaneo wrote last week, “the United States’s poor handling of Keystone XL may have strengthened the case for Northern Gateway on nationalistic grounds.”

Perhaps. But nationalism was never the driving force behind the Keystone XL project to begin with, and it’s an utterly impotent one when it comes to getting the Northern Gateway project approved. Yes, Canada needs to diversify the markets into which it sells its petroleum products, and yes, China is an appealing option. And it’s true that unlike Keystone XL, the Northern Gateway project doesn’t need the approval of the U.S. president to proceed. But the political hurdles that Keystone XL failed – for now – to overcome are nothing compared to the legal ones that stand in the way of Enbridge’s proposed project.

First and foremost, there are the legal rights of the many aboriginal nations whose land the Northern Gateway line would have to traverse. The British Columbia courts have show a repeated willingness to prioritize the recognition and respect of aboriginal title over economic interests, regardless of how pressing they might be. And unless Enbridge can convince every last one of those First Nations to support the pipeline – an unlikely scenario, given the current level of opposition – it will face a battle in the courts that could take years.

By then, of course, it’s almost certain that Keystone XL will have been approved and built. The Obama administration’s decision to delay the approval of the line was less about environmental concerns than it was about appeasing voters in a state that could play a role in the 2012 election campaign. Nebraska may only have five electoral college votes (and unlike most states, Nebraska splits up its electoral college votes rather than allocating them all to the winner) but they may very well matter in a close campaign. By 2013, those sorts of considerations will no longer be relevant, which will mean that the decision will be made based on merit rather than political calculus. TransCanada’s willingness to work with the state of Nebraska and adjust the route so that it doesn’t come in contact with any critical aquifers – their principal objection – makes the project’s approval even more likely.

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