This summer brings a double-whammy positive boost for Alberta’s oil.
The Prairie Connector is expected to be a booming reality by 2027, while the Northern Shield Energy Corridor big deal struck between Alberta and Ontario will take longer to develop.
Lots of complex discussions, negotiations, permits and other fine print challenges.
The massive Prairie Connector project is an exciting, re-focused and promising Plan B for the ill-fated Keystone XL (KXL). When completed and up and flowing, it will ultimately move 550,000 barrels of crude oil per day from Hardisty, Alberta to the U.S. border, and linking to a U.S. partner network, ending up in Wyoming.
Oil industry leaders and analysts enthusiastically agree that Prairie Connector will unlock production capacity and absorb Alberta’s crude output, accommodate planned oil sands expansions and increase Canada’s crude exports to the U.S. by an estimated 12 per cent.
They also underscore that Prairie Connector will also be a huge boost for the Alberta economy, with the construction of more than 380 kilometres of new pipe, leveraging 150 kilometres of existing infrastructure, generating Alberta jobs and driving major capital investment.
In industry-speak, Prairie Connector will also guarantee the Alberta oil sector long-term egress. Binding shipper commitments, it will provide producers a direct, long-term pathway to high-demand U.S. refining markets like Cushing, Oklahoma and the Gulf Coast.
With industry smarts and curious optimism, some analysts are off-the-record wondering what Prairie Connector can do right that Keystone and the ill-fated KXL could not.
Because when KXL was proposed in 2008, it was to be an expansion of the existing Keystone pipeline system to carry up to 830,000 barrels per day of crude from Alberta to Nebraska, where it would connect with pipelines supplying refineries in the U.S. Midwest and along the Gulf Coast.
“It was stop, start, delay, review, and stop and start again, and Keystone XL became a political flashpoint in Washington,” explains the internationally respected Dr. Bob Schulz, professor of Strategy, Petroleum Land Management, Business and the Environment at the University of Calgary’s Haskayne School of Business.
“Moving mostly thick heavy oilsands oil from northern Alberta to Gulf refineries appeared to be relatively easy when TC Energy planning started about 25 years ago. After all, U.S. Gulf refineries invested billions to reconfigure their refineries from light crude to heavy crude. Then successive U.S. administrations alternately approved and revoked the cross-border permit required for the pipeline.”
He explains that TC Energy started Keystone pipeline operations in 2010, and flowed heavy oil from Hardisty in northern Alberta down to southern Alberta and then laterally north of the U.S. border, through Saskatchewan and most of Manitoba on the Canadian side. “The line turned right 90 degrees and headed south in a fairly straight line down to Steele City Nebraska. There were no problems! Four Keystone phases were implemented to move Alberta oil to the Gulf refineries.
“For at least 10 years, the major expansion for Keystone was going to be the new Keystone XL route in a straight line from southern Alberta to SE Nebraska. And then the commotion happened! The activist world had changed. Alberta oil became a climate change villain. And KXL became a political football kicked around by activists and U.S. politicking.”
According to Kenneth P. Green, a senior fellow with the globally respected Fraser Institute, “KXL faced extreme opposition and demonization from environmental and Indigenous groups, which turned what would have been, 10 years earlier, a routine pipeline project into a global cause célèbre for climate activists.
“So, after years of activist and legalistic delay, KXL was unceremoniously killed off when President Joe Biden revoked a previously approved presidential permit for KXL to cross the U.S. border.”
TC Energy Corp., which owned the Keystone network before spinning it off into South Bow, abandoned the project in 2021.
Today the South Bow’s Prairie Connector plan is a beacon of exciting optimism for Alberta oil.
In a formal statement, South Bow explained that while its existing pipeline system safely delivers 1.25 million barrels of crude oil every day, with a solid market position connecting Alberta crude oil supplies to U.S. refining markets in Illinois, Oklahoma and the U.S. Gulf Coast.
While the company concedes that transforming Prairie Connect into a reality is complex process, pending completion of permitting processes and final investment viability decisions, it is an exciting work in progress.
South Bow outlined target details.
- 2026-2027: Ongoing engagement and early-stage planning work
- Mid-2027: Target for final investment decision
- Mid-2027-2028: Commencement of construction
- Late 2028: Anticipated to be in service
KXL was haggled and argued about for 18 years, so why is Prairie Connector more encouraging?
“Eventually, with uncertain and volatile American politics,” Schulz points out, “the best solution for South Bow was to modify the pipeline route with a large U.S. partner. The South Bow solution is more achievable rather than hoping for U.S. activist changes, and whipsaw changes in U.S. politics.”
This March, Canada’s South Bow launched an open season (industry jargon for inviting potential customers to reserve capacity on Prairie Connector) using the existing KXL infrastructure and Canadian federal permits that were originally issued in-place for the cancelled KXL.
In May, South Bow announced the good news! Working with U.S. partner Bridger Pipeline, it had secured 20-year shipper commitments and said that the company will finalize a decision whether to proceed with Prairie Connector by mid-2027.
While making the positive announcement, and the idea still stinging from the U.S. pulling the plug on KXL, South Bow president and CEO Bevin Wirzba cautioned that the project would not proceed until there is tangible proof that the permit for the border crossing segment – signed by President Trump this April – is solid and durable.
The likelihood of Prairie Connector happening soon is only one of the double-whammy win-wins for Alberta oil.
This July, the premiers of Alberta and Ontario unveiled a proposed 3,300-kilometre Northern Shield Energy Corridor pipeline to transport oil from Western Canada to refineries in southern Ontario. The pipeline would transport an estimated 500,000 barrels per day (with possible expansion to 800,000 barrels per day) from Hardisty, Alberta, traveling near Regina and Winnipeg before reaching Sarnia, Ontario.
Insiders and politicians note that Northern Shield is still in its infancy and there is no estimated price tag or announced timeline. But the intent of Northern Shield is to carry oil, natural gas and other energy products from Alberta and Saskatchewan to refineries and ports in southern Ontario.
The Ontario premier’s office confirmed that, so far, the feasibility study has cost $11 million, although the final cost will be determined once completed, likely by the end of the year.
For Alberta, “Prairie Connector, the resurrection of KXL, might stand as a minor miracle, and one that Canada, and Alberta in particular, could use given today’s economic doldrums,” the Fraser Institute’s Green notes with enthusiasm.
“Canada still has a product with massive market value sitting underground in Alberta, and a world-class market a thousand miles south, which is eager to buy. Whether it’s this new KXL pipeline redux, or another project waiting in the wings, Alberta’s oil will flow, and that’s a good thing for the entire country.”
Bob Schulz echoes that the time is now for Alberta oil!
“There have been no new U.S. Gulf refineries for 50 years, and probably more than half of the refining capacity is more than 100 years old! They are time bombs! Besides, Alberta is running out of time and resource runway for an alternate economy that will provide the needed jobs and recurring provincial revenues.”