Alberta Premier Jim Prentice Champions Controversial Oil Pipeline

In a recent New York address, Jim Prentice stumped for the Keystone XL project and urged U.S.-Canada cooperation on environmental policy.

Alberta Premier Jim Prentice Interview

Jim Prentice, premier of Alberta, speaks during an interview in New York, U.S., on Friday, Feb. 6, 2015. Prentice met with New Jersey Governor Chris Christie yesterday in Trenton for an hour-long talk about jobs, energy and TransCanada Corp.'s stalled Keystone XL pipeline. Photographer: Michael Nagle/Bloomberg *** Local Caption *** Jim Prentice

Michael Nagle/Bloomberg

Eric (Doc) Prentice was a Canadian professional hockey player in the 1940s who spent most of his career with American teams. After paying into the U.S. Social Security system for almost a decade, the Alberta, Canada, resident collected a $59 monthly check later in life. He would save those checks until he had enough for a trip across the border to Montana, telling his son, Jim Prentice — now Alberta’s 16th premier — that the money belonged to the U.S. and they were going to spend it there.

On February 6, Jim Prentice’s recounting of this story drew applause from an audience of bankers, lawyers and government workers during a Foreign Policy Association luncheon at the Harvard Club of New York. Prentice was delivering his final speech of a weeklong U.S. tour to drum up support for the controversial Keystone XL oil pipeline, which was first proposed by TransCanada Corp. in 2008.

“The energy relationship shared between our two countries is much bigger than any single pipeline,” Prentice said in his address, which highlighted North American economic ties and called for teamwork and “a return to the principles of free trade enshrined in NAFTA.” He urged coordination between the U.S. and Canada in setting environmental standards and continuing investment in North America’s pipeline infrastructure.

Before becoming premier by winning the race for the leadership of Alberta’s long-ruling Progressive Conservative Party, Prentice, 58, was a cabinet minister in the Conservative government of Canadian Prime Minister Stephen Harper. He left federal politics in late 2010 for a three-year stint as vice chair and executive vice president of Canadian Imperial Bank of Commerce, where he led the firm’s energy and infrastructure business. At the Harvard Club he remarked that his time as a banker taught him that even the best analysts have trouble keeping pace with the speed of oil price fluctuations.

Prentice took office last September in the middle of the oil nosedive, which has put Alberta on the brink of recession. The heavy crude–producing oil sands in the north of the province contain about 168 billion barrels, the world’s third-largest proven reserves, after those of Saudi Arabia and Venezuela. With West Canadian Select, a benchmark price for North American heavy oil, trading at about $35 a barrel in early February, the Alberta government says its revenue could drop C$7 billion ($5.6 billion) during the next year. Solutions being considered include cutting spending, raising taxes and issuing debt.

TransCanada’s Keystone XL is a proposed 1,200-mile addition to the Calgary-based energy infrastructure company’s existing 2,600-mile pipeline network, known as the Keystone Pipeline System, which currently ships Alberta oil sands crude to Illinois. Canadian officials contend that the $8 billion project will boost the province’s ailing economy by allowing its oil to gain better access to refineries on the Gulf Coast and consequently fetch a higher price.

Snaking through Montana and South Dakota, Keystone XL would transport Alberta oil to Steele City, Nebraska, for delivery south. U.S. producers in Montana and North Dakota would also have access to the pipeline, whose 36-inch diameter would accommodate 830,000 barrels of oil a day.

Gulf Coast refineries, which are optimized for processing heavy crude, see supply from their traditional sources, Mexico and Venezuela, declining and are looking to the Western Canadian Sedimentary Basin to fill the gap. The U.S. State Department was tasked with evaluating Keystone XL. “Gulf Coast refineries have the potential to absorb volumes of WCSB crude that go well beyond those that would be delivered via the proposed project,” it said in its environmental impact statement released last January. “On this basis, the likelihood that WCSB crudes will be exported in volume from the Gulf Coast is considered low.” In 2013 the U.S. was the destination for close to 97 percent of Canadian oil exports.

Critics of the pipeline point to the possibility of oil spills, water contamination, conflicts arising from construction on tribal lands and greenhouse gas emissions caused by carbon-intensive oil sands extraction. In its environmental assessment the State Department said it didn’t expect Keystone XL to raise emissions because the pipeline wouldn’t increase production of crude, which will be carried by train anyway if the project doesn’t come to fruition.

But in a February 3 letter to the department, the U.S. Environmental Protection Agency stated that the carbon-heavy oil shipped via Keystone could cause the release of 27 million metric tons of carbon annually, the equivalent of 7.8 coal plants. President Barack Obama has vowed to veto the Keystone XL bill, which passed the House of Representatives on Wednesday with a vote of 270–152 after winning 62–36 in the Senate.

At the Harvard Club, Prentice echoed common arguments about economic benefits and national security from Keystone backers such as Republican U.S. congressmen, the billionaire Koch brothers and the Canadian government. “This is a project which creates jobs, which is environmentally supportable and is in the best interests of both Canada and the United States,” he said. Prentice pointed out that Alberta is the largest supplier of crude oil to the U.S. and reminded the crowd that the North American energy boom, which has been fueled by new techniques for extracting oil and gas from unconventional sources, is reducing U.S. dependence on foreign oil.

“Escalating oil production in both Canada and the U.S., along with improved abilities to extract unconventional hydrocarbons, like shale oil here and oil from oil sands in Alberta, are transforming the pipe dream of energy independence to probability,” he said. “That dream is only a few years away from realization.”

Prentice contended that more integration of North America’s energy economy and infrastructure would yield environmental benefits by setting the stage for a more effective bilateral approach to environmental standards and permitting. Being in the energy business is the same as being in the environment business, he said, calling for North America to lead the world in environmental performance.

Addressing the backlash from U.S. politicians and environmentalists over Keystone XL, he pointed to some U.S. jurisdictions’ proposed legislation to exclude Alberta oil and asked why his province was being scrutinized more closely than comparable oil producers like Venezuela.

“We actually are headed for the worst of all possible worlds: a proliferation of subnational standards, standards that apply to some kinds of oil but not others, that apply to some kinds of energy but not others, that apply to some methods of transportation but not others and that apply to some pipelines but not others,” Prentice said. “This is not the genius of free trade at work.”