Keystone XL Pipeline: A Commentary
(Image: nrdc.org)
“Now is the critical hour,” Jason Kenney told reporters. “If this really is a top priority, as it should be, then we need the Government of Canada to stand up for Canadian workers, for Canadian jobs, for the Canada-U.S. relationship right now, today and tomorrow.” Mere hours after the inauguration of Joe Biden as U.S. president on January 20th, Kenney cancelled the cross-border permit for the Alberta-to-Texas oil pipeline through an executive order. The Keystone XL pipeline was set to carry 830,000 barrels of bitumen per day from southern Alberta to join the already existing Keystone pipeline in Nebraska. TC Energy, formerly TransCanada, prefers the more direct route of the new line and the expanded capacity it would provide against Keystone’s current rate of 550,000 barrels per day. TC Energy agreed to spend US$1.7 billion to fully operate the pipeline on renewable energy and made a US$785-million deal with First Nations in both countries.
Advocates have argued that the increased supply of oil from Canada would decrease dependency on Middle Eastern supplies and lower the consumer price. However, environmentalists have contested these claims, arguing that all oil production must halt in the face of the climate crisis. The alternative to pipelines is transportation via rail, a method that, according to a 2016 study by the University of Alberta, produces between 61 and 77 percent more greenhouse gas emissions and roughly doubles transportation costs. This additional cost may limit further production of the oil sands, as Alberta is still struggling with production capabilities that exceed its transportation capacity. A pipeline could release this bottleneck and increase Canadian oil prices.
“Alberta's oil has among the highest extraction costs and emissions levels in the world. Our days as a globally significant oil resource are over. If we truly care about our oil workers, we have to recognize that.
What we need now, as a province, is not a desperate doubling-down on a dying industry. We should not be pouring resources (including billions of taxpayer dollars) into infrastructure projects that will be defunct in a decade or so. Instead, we should be using Albertans' ingenuity and expertise to develop new ways forward.”
Dr. Gerda Kits, Associate Professor of Economics
The 1,900km pipeline has had a tenuous past, with on-and-off again changes between presidencies since it was first proposed in 2008. Joe Biden’s cancellation of the project marks the third time a U.S. president has blocked the pipeline and has been heralded by environmentalists. Obama vetoed it following this decision in 2015. Trump approved the pipeline’s construction through an executive order during his presidency in 2017, but the construction was delayed by a U.S. federal judge who called for more time to study the potential environmental impact. Anxious for economic stimulation during the pandemic in March of 2020, the United Conservative Party agreed to invest $1.5 billion in Keystone XL with an added $6 billion loan guarantee in 2021. After environmental assessments and a rerouting of the pipeline’s path in order to avoid Nebraska’s sensitive Sandhills region, the Senate approved a bill to build Keystone XL. Since construction began in April of last year, around 200km of pipe have already been installed before the project was halted by Biden.
In spite of Kenney’s call for “Canada to make meaningful trade and economic sanctions,” Trudeau took no steps towards such action following his first meeting with Biden. “The Prime Minister raised Canada’s disappointment with the United States' decision on the Keystone XL pipeline,” a statement said. Canada could potentially seek damages for the cancellation by suing the Biden administration in federal court and/or launching a Chapter 11 case under the old North American Free Trade Agreement (NAFTA). However, according to international trade lawyers such as Mark Warner, this action does not have great potential.
Responses to the cancellation have been mixed in a time that is both economically and environmentally tense. TC Energy has said that more than 1,000 construction jobs will be lost in the coming weeks. Chris Bloomer, president and CEO of the Canadian Energy Pipeline Association agreed. “This is a loss of billions of dollars of future revenue,” he stated. He acknowledged the current shift towards a more sustainable economy, but stated: “[The] transition is not going to happen overnight, and you can’t destroy the economy to achieve that.” Angeline Cheek, an activist from the Fort Peck Assiniboine Sioux Tribal Nation in Montana, celebrates this decision, stating: “Water is the last resource we have for our people… I think that it’s our job to protect it.”
Projections for peak provincial oil production range from 2020 to 2050, leaving Alberta to decide how to adjust.