Pipes meant for the defunct Keystone XL project are stacked at a yard in Gascoyne, N.D., in 2015.Alex Panetta/The Canadian Press
Canada and the United States must do more to remove political risks around pipeline permitting, the head of South Bow Ltd. SOBO-T says, as the company finalizes a call for volume commitments on its planned Prairie Connector line.
If built, South Bow’s Prairie Connector pipeline would largely follow the route of the proposed Keystone XL line and carry roughly 450,000 barrels of oil each day from Hardisty, Alta., to the U.S. border. There, it would connect with a multidestination line proposed by Bridger Pipeline LLC, a private oil transportation company based in Casper, Wyo.
Bevin Wirzba, chief executive of Calgary-based South Bow, declined to go into significant detail about Prairie Connector on Thursday, 24 hours before the company’s deadline to determine whether it has enough commercial support to advance the project.
But, speaking at the Energy Roundtable conference in Calgary, he explained how the plan originated.
South Bow saw an opportunity for the project late last summer. At the time, production in Alberta’s oil sands had grown significantly, to roughly four million barrels a day. Mr. Wirzba said he believes that’s only the start of a substantial increase in output from the oil sands.
For Ottawa and Alberta, the hardest part of agreeing on a pipeline plan is just beginning
In an interview on the sidelines of the conference, he said he envisions production not merely doubling from its current level – which Alberta Premier Danielle Smith has said is her goal – but tripling over the next 50 years.
That can only happen if the federal and Alberta governments develop policies and regulations that encourage the investment needed to fund growth, he said. And those conditions are necessary before South Bow can make final investment decisions on allocating capital to its own projects.
“The journey is still going to take quite a while, but I’m encouraged by the pace that it’s gone in this past year.”
Transporting more crude to market will present a huge opportunity for pipeline companies, and Prairie Connector would help the first stage of the ramp-up of the Western Canadian basin, Mr. Wirzba said.
Canada’s oil sector is in a “materially different situation” today than it was a year ago, resulting from various federal policy changes and the energy agreement signed by Ottawa and Alberta, Mr. Wirzba said.
North or south? How potential pipeline routes to the West Coast would differ
In the case of pipelines, however, he said, the risk remains that a new government on either side of the border could nix a project.
That’s what happened with Keystone XL; in 2021, when Joe Biden took office as U.S. president, he ripped up a key permit that had been issued by Donald Trump, his predecessor.
South Bow is working with a partner in the U.S. “to avoid some of the previous pitfalls that we had with permitting,” Mr. Wirzba told the conference. But Prairie Connector customers would be looking at 20-year commitments, so it’s important to address what he called “sovereign risk,” or the likelihood of government action killing a project.
Mr. Trump signed an order last month authorizing the construction of the Bridger line, which Mr. Wirzba said Thursday was “critical” to the future of Prairie Connector.
Under new rules in the U.S. passed in September, a new president cannot revoke any such permit without the approval of Congress. The Promoting Cross-Border Energy Infrastructure Act also streamlines permitting for oil, gas and electricity infrastructure at international borders.
“That’s a big step forward,” Mr. Wirzba said, but it doesn’t completely guarantee durability of the key cross-border permits, making it difficult to allocate capital to pipeline projects that straddle the two countries.
“We may be able to get to commercialization, but it’s solving the sovereign risks that we need to navigate,” he said.
South Bow has already approached farmers and ranchers in southwestern Saskatchewan to re-survey land that lies along the original Keystone XL route.
Mr. Wirzba said that although Canada needs to diversify its energy markets, the sector is so closely intertwined with its southern neighbour that there is an appetite for increased pipeline capacity into the U.S.
“Our customers in Canada are accessing more demand in the United States, and those demand centres in the United States getting high-quality, dependable, reliable product for them to monetize,” he said.
“So there is a mutually beneficial role in this value chain that we’ve been working.”