How a Biden victory could shake up Alberta’s oil and gas sector

The U.S. is the biggest customer for Canadian crude and any rumble from the White House that affects American energy production, or consumption, is sure to ripple into Alberta.

The same goes for U.S. foreign policy decisions that can tilt world markets — and then there’s Alberta’s stake in the controversial Keystone XL pipeline.

If Donald Trump wins re-election, experts expect more of the same from the White House. His campaign has touted his support for the sector in the final days of the race.

But it’s a different story should his Democratic rival be victorious.

Joe Biden has made energy and the environment a key plank in his platform and the potential implications for Alberta’s oilpatch could be significant.

With election night Tuesday, let’s take a little closer look.

Energy transition, not energy dominance

Trump wants to be seen as a big backer of the U.S. oil and gas industry. 

During his term, he tried to give the sector a boost by cutting taxes, red tape and regulations. He’s spoken of establishing U.S. energy dominance. 

It’s been argued Trump’s moves put the Canadian sector at a disadvantage, but the industry has tended to call on Ottawa to keep up, not point blame at Washington, D.C. 

But Trump’s policies and rhetoric haven’t sheltered the American sector from the growing scrutiny of investors or environmentalists concerned about climate change. It’s been rocked by the economic impact of the pandemic too. 

Instead of energy dominance, Biden has been talking about energy transition. 

Among Biden’s plans is putting the U.S. on a path to achieve net-zero emissions, economy-wide, by no later than 2050. He’s willing to spend big to get there.

Biden’s climate package is pegged at $2 trillion US.

If his green strategy should somehow affect U.S. oil and gas production — particularly a ban on new fracking on federal lands — this could create a crack for more Canadian crude.

“But it’s still undetermined because public lands are a fairly small amount of overall U.S. production,” said Jackie Forrest, executive director of the ARC Energy Research Institute.

“If there isn’t any growth on U.S. federal lands, then that may mean, would mean, more opportunity for Canada if the U.S. is going to produce less.”

Clouds over Keystone 

Before COVID-19 sapped fuel demand, a lack of pipeline capacity weighed on Alberta’s oil industry and Canadian crude prices. 

Supporters of TC Energy’s Keystone XL pipeline, which would transport up to 830,000 barrels a day of oil from Alberta to Nebraska, see it as a key part of the answer.

Alberta’s United Conservative government deemed it important enough that it agreed to make a $1.5-billion equity investment in the project, plus loan guarantees.

Trump has backed the pipeline, using the power of the White House to try to keep the $10-billion pipeline moving forward.

“Clearly, a Trump re-election will make it a virtual certainty that KXL will be completed,” said Dennis McConaghy, a former executive at TC Energy. 

But Trump’s support hasn’t gotten the project over the goal line yet and it continues to face legal battles with pipeline opponents that cloud the project’s future. 

Biden has said he’d kill the pipeline, and cancel a permit Trump had issued for the project.

James Coleman, an expert on energy law at Southern Methodist University in Dallas, said Biden has the legal tools to halt progress on the project.

“Things can change,” Coleman said. “But certainly he has indicated that he’s hostile to it and that his allies and his voters will expect him to deliver on that promise.”

Others still see hope for the project under Biden, including Premier Jason Kenney. Last week, TC Energy awarded more than $1.6 billion US in American contracts to build the line.

“There’s so much sunk cost into it, and I don’t see an argument for stopping it,” said Christopher Sands, director of the Center for Canadian Studies at Johns Hopkins University.

U.S. sanctions on Iran

A change in the White House is also expected to usher in some big changes in U.S. foreign policy, including with Iran.

Biden supports returning to diplomacy with Iran if it comes into compliance with the 2015 nuclear deal the U.S. struck with Tehran and five other world powers. 

That could loosen economic sanctions Trump placed on the country and allow more Iranian crude back onto fragile oil markets. 

Bloomberg News reported last week if Biden wins, several leading banks expect a million barrels a day or more flooding into the market next year.

“That’s the biggest thing that we need to be watching for because that will impact the price of oil and impact the producers here in western Canada,” Forrest said.

Climate leadership

Many will be watching to see whether a Biden administration will live up to the climate goals laid out on the campaign trail. 

Within 100 days, Biden promises a global climate summit to push countries to join the U.S. in toughening their climate objectives. 

He’s also talked about using “carbon-adjustment fees,” or perhaps quotas, on carbon-intensive products from countries that fail to meet climate and environmental obligations.

At home, his to-do list includes methane pollution limits on oil and gas operations, and de-carbonizing the transportation system.

Some in the oilpatch may worry all this could push Ottawa to go further with regulation they fear could hamper the competitiveness of Canadian producers. 

But Kenney himself said recently access to capital for projects in the oil and gas industry requires action on environmental issues from industry and government. 

Other observers see opportunity in U.S. leadership on the climate file and Biden’s plans to invest in a green economy, boosting the appetite for low or zero-carbon energy sources and technology Canada could help provide.

“There is a huge opportunity here for our energy sector, writ large,” said Josha MacNab, national policy director with the Pembina Institute, a green energy think tank.

“How can we be supporting the production of bio-fuels and zero-carbon hydrogen and those pieces that could help to meet that demand.”