Trump administration approves Keystone XL pipeline

BBC reports that the Trump administration has issued a permit to energy company TransCanada to build the Keystone XL pipeline.

The State Department said it had found the project, which was blocked by former US President Barack Obama, to be in the US national interest.

The 1,180mile (1,900km) pipeline will carry tar sands oil from Canada to refineries on the Texas coast.

President Trump, who in January signed an executive order backing the project, is due to make an announcement.

Secretary of State Rex Tillerson recused himself from the matter because of his previous role as chief executive of ExxonMobil.

The permit was signed by an undersecretary of state for political affairs, career diplomat Tom Shannon.

Activists rallied outside the White House in 2015 to thank Obama for blocking the pipeline
Image copyright GETTY IMAGES
Activists rallied outside the White House in 2015 to thank Obama for blocking the pipeline
Map of pipeline

TransCanada still needs approval of the $8bn (£6.4bn) pipeline’s route through the US state of Nebraska.

An evaluation by the US state department was required, because the pipeline crosses an international border.

In denying the project in 2015, former Secretary of State John Kerry wrote that it would neither spur economic growth, nor help the US achieve energy independence.

He said it would threaten environmental damage by allowing “a particularly dirty source of fuel” to enter the US.

Miles of unused pipe sits in a lot outside Gascoyne, North Dakota
Image copyright GETTY IMAGES
Image captionMiles of unused pipe sits in a lot outside Gascoyne, North Dakota

TransCanada, a Calgary-based company, called Friday’s decision “a significant milestone”.

Chief executive Russ Girling said: “We greatly appreciate President Trump’s Administration for reviewing and approving this important initiative and we look forward to working with them as we continue to invest in and strengthen North America’s energy infrastructure.”

They say the pipeline will create 13,000 jobs over two years, but opponents argue the vast majority of these jobs will be short-term work in the construction phase.

During the presidential election, Mr Trump embraced the idea that the pipeline would create American jobs.

He also signed a memorandum requiring Keystone to be built using American steel.

However, the White House later said this requirement would only apply to future applications, not projects already being built, such as Keystone.

A mandate to use US steel would not only be more expensive for TransCanada, but could lead to US authorities being sued by the World Trade Organization.

White House spokeswoman Sarah Sanders said earlier this month: “Since this one is already currently under construction, the steel is already literally sitting there, it would be hard to go back.” Go to BBC to read more

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My Comments:

I cannot question the validity of this project from commercial (stand alone) & political points of views but the validity of the project in terms of timing is a bit off. It is not clear when we will be able to see the end of low oil prices due to endless oversupply. 

It is not clear when we will be able to see the end of low oil prices due to endless oversupply. The potential for the increase of political tensions globally, trade wars and shrinking market share that would significantly limit business opportunities for international corporations, leave little doubt that it will affect the demand.

With immaterial or stagnant demand, sustained low oil price environment, less generated cash and unsustainable corporate debt (due to rates hikes), a number of oil companies may be out of business. Growing unemployment would suppress demand even further which may trigger a domino effect. It may eventually cause a banking crisis as banks will have to write off the huge amount as bad debt.

We shall not forget that renewables become a serious competitor.It is forecasted that by 2016, renewables would represent approximately more that 50%.

If the above take place, I wonder, what the return on investment is going to be? Or should I say, how negative it is going to be? Because empty pipe does not generate money. Unless, of course, someone would declare bankruptcy to ensure that at least something is returned.

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