Biden win raises doubts on new US pipeline projects

  • : Crude oil, Natural gas, Oil products
  • 20/11/16

US pipeline projects will face greater obstacles under a Joe Biden presidency, and some could face the end of the road. But a clampdown on new lines may make existing ones more valuable, and some could be repurposed in an energy transition.

Biden's election win promises an abrupt shift in federal energy policy, including expanding renewables and rescinding preferential policies for the oil and gas sector. His victory over President Donald Trump could spell the end of a very long road for the totemic Keystone XL — an $8bn, 830,000 b/d project that has been on the books for more than a decade, seeking to move crude from western Canada to the US midcontinent (see map). Biden's campaign has pledged to withdraw the presidential permit needed for Keystone XL to operate, ringing a possible death knell for the pipeline.

Canadian firm TC Energy downplayed the Biden risk, banking on the appeal of its partnerships with five indigenous peoples groups as well as $1.6bn in labour agreements with US trade unions. But the company is facing legal headwinds after a key water permit was thrown out by US courts.

The new Democratic administration will be under pressure from environmental groups to take aggressive action on climate issues, and one of the biggest targets is US midstream firm Energy Transfer's Dakota Access pipeline. The 570,000 b/d line, in service since 2017, is facing a possible shutdown in December because of a court case surrounding its environmental permitting. Biden's running mate Kamala Harris was one of three dozen lawmakers who in May urged a federal court to shut the line while a new environmental review is pending. Energy Transfer says it is confident that Dakota Access will continue to operate as the case moves through the courts. But a Biden administration could intervene.

A Biden presidency will also bring a halt to an overhaul of infrastructure permitting rules that Trump finalised this year. Those revisions sought to fast-track the approval of natural gas pipelines and other infrastructure by removing the need for regulators to evaluate "remote" effects such as climate change. Biden has vowed to reverse the changes and apply greater scrutiny on how building new pipelines could increase or reduce emissions. His victory could also pose permitting obstacles for large projects under construction, such as the $6bn Mountain Valley gas pipeline. Environmentalists have asked regulators to revisit how construction could affect endangered species and water quality along the line's route.

Taking the high ground

While some projects face a tougher road ahead, US midstream operators are touting the value of pipelines already in the ground. A Biden government could lift the value of existing infrastructure and rekindle interest in a waning midstream corporate structure, US independent refiner Phillips 66's chief executive, Greg Garland, says. Higher corporate taxes favoured by Democrats could increase the value of master limited partnerships that proliferated under President Barack Obama but have consolidated under Trump. And a Democratic administration would support the spread of interest in climate programmes and accounting for the cost of carbon, he says.

US pipeline operator Kinder Morgan chairman Richard Kinder says the firm's vast pipeline infrastructure could be adapted to "play an important role in facilitating many of the changes being advocated to lessen global emissions". Kinder Morgan could modify lines to carry green hydrogen or renewable diesel, he says. Midstream firms' third-quarter earnings calls showed a clear pivot on climate change in the sector, with pipeline giant Enbridge going as far as to pledge net zero carbon emissions from its operations by 2050.

US and Canada pipelines

Related news posts

Argus illuminates the markets by putting a lens on the areas that matter most to you. The market news and commentary we publish reveals vital insights that enable you to make stronger, well-informed decisions. Explore a selection of news stories related to this one.

Business intelligence reports

Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.

Learn more