U.S. President Barack Obama is under increasing pressure from Americans for the White House to rejects any deals with Canada that would pave the way for the operation of the Keystone XL pipeline project by TransCanada, even if Ottawa is promising to be tougher on carbon emissions.
Pipelines for Keystone XL Pipeline
If Mr Obama would heed the call by the green groups to block the pipeline project that would transport oil from Canada's oil sands in Alberta to the U.S., the cost to future capital expenditures would be $1.8 billion.
Mark Frieson, analyst at RBC Capital Markets, explained that the estimate is based on deferment of 300,000 barrels of oil sands growth daily during the years 2015 to 2017. But beyond 2018, the amount to be shaved in spending on oilfield services is expected to reach $7.8 billion.
But the overall impact would likely be mitigated by a combination of rail and competing pipelines from other producers such as Suncor Energy, MEG Energy and Cenovus Energy that would be spending billions into expansion of existing projects.
"If Keystone XL doesn't go through, the projects that already have the bulk of the work done on them are going to continue," Financial Post quoted Brook Papau, vice president for energy research at ITG.
It would also defer newer projects slated to become online after 2016-17, but the energy firms would not halt their expansion plans under way. He said the oil would need to reach their market some other way, which makes rail the obvious answer.
CN Rail was actually considering that, but there are questions over safety after a rail accident in Quebec showed the danger of transporting oil by train.
The American environment groups, in their letter to Mr Obama, explained, "Our rationale is simple. Building Keystone XL will expand production in the tarsands, and that reality is not compatible with serious efforts to battle climate change."
The environmentalists pointed out that any assurances from the Canadian government could not be trusted, citing the Harper government vowed before to cut pollution across industry but did not follow through with its 2008 plan.
"Carbon pollution from the tarsands is now projected to be twice as high in 2020 as envisioned under that plan. Simple arithmetic shows that the only way to reduce emissions from the tarsands is to cap expansion where it is now and reduce production over the coming years," Calgary Herald quoted the environmentalists' letter.
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