Biden's energy policies seen jeopardizing prospects for a North American energy alliance

Canadian and US policymakers expressed support for a North American energy alliance May 17, but warned that the Biden administration's energy policies, particularly concerning oil and gas, were threatening that relationship.

During a hearing by the Senate Energy and Natural Resources Committee, a number of Republican lawmakers harped on the cancellation of the Keystone XL Pipeline, which would have delivered 830,000 b/d of Canadian oil to the US. They also blasted White House efforts to encourage greater production from OPEC and reports of interest in Venezuela and Iranian oil supplies, while pursuing policies the GOP believes have stifled domestic production.

"We find it inexplicable that the government of the US has been more focused on encouraging additional OPEC production than Canadian production," Alberta Premier Jason Kenney told the committee.

The Biden's administration's approach to shoring up global oil supplies and efforts to rein in soaring gasoline prices were particularly perplexing as "Alberta supplies the US with 10 times more oil than Saudi Arabia, and five times more than all of OPEC," Kenney added, noting that 62% of US oil imports and 63% of US gas imports come from Canada.

Senator Lisa Murkowski, Republican-Alaska, lamented that the US has failed to look to its neighbors first for energy solutions and told Kenney that many in the US were "also having a hard time understanding" the Biden administration's actions.

"There's a lot of kinship between Alaska and Canada right now," she said. "We feel like we have been shunted off to the corner as well, and our opportunity to provide for America's domestic production has been effectively derailed by this administration."

Energy partnership

Murkowski viewed a North American energy alliance as "common sense," and that sentiment appeared to be shared by Republicans and Democrats alike as Canada boasts not only oil and gas resources but critical minerals that are vital to clean energy technologies.

Kenney, who leads the United Conservative Party, and Canadian Minister of Natural Resources Jonathan Wilkinson, a member of Canada's Liberal Party, both advocated for the further development of a North American energy powerhouse as well, and highlighted Canada's strides in addressing climate change.

Kenney contended that Alberta was poised to increase crude exports to the US by 1.5 million b/d over the next couple of years, through increased production, pipeline optimization projects and the expected early 2024 start of the Trans Mountain pipeline expansion, which would give the oil sands much needed takeaway capacity.

But he also expressed concerns that the US policy direction could again hamper oil and gas infrastructure development on both sides of the border, and that has "created a serious problem of investor confidence."

Yet, Kenney told lawmakers that Alberta was still committed to making an energy partnership work. "It's manifestly in the interests of both the American and Canadian people to develop [a] policy framework" that turns the concept of a North American energy alliance into a reality, he said.

Asked what Congress could do to help mend and strengthen the US-Canada energy relationship, Kenney offered three suggestions.

First, he said the US should halt actions that threaten existing oil and gas infrastructure and instead look to help de-risk development of new pipelines.

Line 5

Specifically, he called on the US federal government to join Canada in opposing state opposition to Enbridge's 645-mile Line 5 propane, crude oil and fuels system that stretches from Wisconsin through Michigan and into Ontario.

Enbridge has proposed a $750 million Great Lakes Tunnel project to keep the 69-year-old twin-pipe network safer under the Great Lakes' Straits of Mackinac. But Democratic Michigan Governor Gretchen Whitmer has ordered Line 5 shut -- an order Enbridge has openly defied.

The pipeline operator "has indicated a willingness to do whatever needs to be done to address the environmental concerns," Wilkinson told lawmakers. "We think the company has gone above and beyond what is required here, but we are obviously looking to find a resolution that's going to work for all sides."

Line 5 transports up to 540,000 b/d of NGLs, including propane for home heating, and crude from Western Canada to various US hubs and Eastern Canada.

Kenney asserted that decommissioning the pipeline without a replacement would jeopardize energy security for the upper Midwest and "worsen the energy and cost of living crisis at the worst possible time."

But he was hopeful that the imperative for energy security spurred by Russia's invasion of Ukraine would "cause a fundamental rethink about these issues in Washington."

"Let's work together to see can we bring back something like another major pipeline between Alberta and the US," he offered instead.

That effort, he said, would likely require government participation to de-risk such a project as the Keystone veto "spooked" capital markets and private sector investment.

"I don't think you're going to have a pipeline company coming to market with a $10 billion-plus project with so much political and regulatory uncertainty," he said. "I think we, as governments, need to be more forward leaning to de-risk projects like that."

Next, he urged the US to work with midstream companies to accelerate regulatory approvals of pipeline optimization projects that could create an additional 400,000 b/d of export capacity to the US.

Lastly, he recommended treating Canadian oil and gas the same way Canadian critical minerals are treated under Title 3 of the Defense Production Act.

Murkowski applauded those recommendations, noting that "Canada is one of the few countries that's considered a domestic source under" Title 3 of the DPA. "That is something that's an area of opportunity that I think we need to push this administration to look to," she said.