As markets digest the surprise election of Donald Trump, one thing is clear: pipelines are back

By Tracy Johnson, CBC News Posted: Nov 09, 2016 4:33 PM ET, Last Updated: Nov 09, 2016 5:42 PM ET, http://www.cbc.ca/news/busines...ood-or-bad-1.3843375

The Keystone XL pipeline could be approved within days of president-elect Donald Trump's inauguration, according to a former U.S. Department of Energy staffer. (Al Grillo/Associated Press)

The Keystone XL tweets started early.

Blaise Boehmer @boehmerB

Stephen Harper

 

✔ @stephenharper

The final ballots were still being counted when speculation began about the fate of the Keystone XL pipeline. President Obama killed the project a year ago, which led the project's backer, Calgary-based TransCanada, to file a lawsuit against the U.S. government, as well as a NAFTA challenge.

That legal action is probably not needed with Donald Trump in charge.

Here is what the president-elect said about the thought-to-be-dead pipeline while campaigning in North Dakota last May. 

"I would absolutely approve it, 100 per cent, but I would want a better deal. I want it built, but I want a piece of the profits," Trump said. "That's how we're going to make our country rich again."

'I think [approving Keystone XL] it's something he does in the first week, if not the first two or three days.' - Joseph McMonigle, president of Abraham Group

It certainly sounds like Trump wants a cut from TransCanada, something that's likely to be difficult under NAFTA.

Of course, we all know Trump is no fan of NAFTA. But there are other challenges to charging Canada to move energy through the United States.

"It would start a 'me too,''' said Jackie Forrest, vice-president of energy research with ARC Financial in Calgary.

"We import a lot of [natural] gas into eastern Canada — should there be a charge for that? That one simple issue — we will charge for Keystone XL — there's a lot of domino effects that would come out of the system if we started charging a toll for moving energy."

Quick approval?

Joe McMonigle, who was chief of staff in the U.S. Department on Energy under President George W. Bush, said Trump's demand for profit-sharing was simply campaign rhetoric and he expects a Keystone XL approval quickly.

"I think Keystone is going to be one of the very first actions that President Trump will take after the inauguration," McMonigle said. "It's a very simple approval for him, a quick reversal of an Obama policy and quite easy for him to do. I think it's something he does in the first week, if not the first two or three days."

TransCanada released a statement Wednesday afternoon saying it is exploring ways to work with the incoming administration.

Christopher Sands, the director of the Canadian Studies program at Johns Hopkins University, also expects Keystone XL to be approved in short order, but said that TransCanada needs to first reapply for a permit and drop its U.S. legal challenges — but also to make the benefits of Keystone XL very clear to Trump.

"Putting it together in a nice package gives Trump the ability to say 'I'm doing something for America' and not just offering concessions to a foreign country," said Sands.

Iran and oil supply

The price of oil popped up Wednesday slightly from its dip after the election result was announced. That's because the over-supply issue just got a little murkier. Trump has vowed to tear up the Iran nuclear deal, which would mean re-imposing sanctions — and potentially removing a million barrels per day of supply off the market.

"There is a lot of momentum in Congress and bipartisan support for re-imposing Iran sanctions," said McMonigle. "He would have support in Congress, he wouldn't be flouting Congress."

OPEC was looking to reduce supply by approximately 700,000 barrels per day in its hoped-for agreement later this month. That deal was appearing to fall apart, as members of the cartel were looking for exemptions. If the Iran deal is scrapped, the OPEC deal might not be necessary anymore.

On the flip side, though, Trump has also talked about U.S. energy independence and growing U.S. production. Right now, the United States consumes just under 20 million barrels per day of oil; it produces 8.6 million bpd. That's still a considerable gap. If production ramps up under Trump, OPEC will be scrambling to protect its market share.

However, there is a general impression in the market that Trump has warmer feelings toward fossil fuels than Hillary Clinton.

"If you look at all of the policies that he's talked about, you would say that's a more favourable environment toward oil and gas producers than under a Clinton administration," said Forrest.

ARC Financial's Jackie Forrest said so much is still unknown about Trump's energy policy. (Kyle Bakx/CBC)

Carbon taxes and climate change

Trump certainly has a less favourable attitude toward renewable energy and climate change policy.

You could see that reflected in the markets Wednesday. Shares in Vesta Wind Systems, the world's largest wind turbine maker, dropped nearly 15 per cent today, while coal producers like Cloud Peak were up by a similar margin.

Trump has promised to pull out of the Paris Accord, and his future nomination of a conservative Supreme Court justice means it is more likely President Obama's Clean Power Act could die in the courts, where it is being litigated right now.

Meanwhile, Canada is moving toward pricing carbon.

"The fact that Trudeau is talking about a $50 per tonne carbon tax would mean that our industries, like the oil and gas industry, that sell into the United States will have higher costs," said Forrest. "So it does put us at a competitive disadvantage vis-a-vis the U.S."

But she also cautions that many of Trump's policies are vague and that there is much to be nailed down.

"There are so many things that are talked about during an election. I'm going to be listening for what are the policies that are rising to the top."