President Biden signs Executive Order to cancel Keystone XL pipeline

By Bruce Lantz

The oil and gas industry’s worst fears came true Wednesday January 20, when U.S. President Joe Biden blocked the Keystone XL pipeline.

Friday, when Biden makes his first foreign leader call, it will be to Canadian Prime Minister Justin Trudeau, the White House has confirmed. Keystone XL is expected to be a focus. The leaders are likely to discuss whether the Keystone permit had to be revoked or whether there are ways to work across the border instead of Biden’s “Buy American” approach.

The US$8-billion pipeline could take 830,000 barrels a day of Alberta tarsands crude oil 1,897 kilometres to Nebraska and link with an existing pipeline to the Gulf Coast, creating thousands of much-needed jobs while opening up new export opportunities for Canadian suppliers.

The pipeline’s owner, Calgary’s TC Energy Corp. [TRP-TSX, NYSE], has been overcoming hurdles for a decade – with the project first banned by former U.S. President Barack Obama (when Biden was his vice-president), then approved by former President Donald Trump in 2019, and now quashed by Biden literally moments after he took office.

It was a blow to industry. Alberta Premier Jason Kenny, whose government has invested US$1.5 billion in the project and who has threatened legal action against the U.S., called Biden’s move a “gut punch” that attacked the trade relationship between Canada and the U.S. Trudeau’s government has also warned that Biden’s revocation of the pipeline permit could lead to them seeking damages and TC Energy could also seek compensation under the North American Free Trade Agreement. When the Obama government reject the pipeline in 2015, the company launched a lawsuit and a multibillion-dollar claim against Washington but withdrew it when Trump supported the project.

In a statement Wednesday evening, Trudeau said the cancellation was disappointing. “While we welcome the President’s commitment to fight climate change, we are disappointed but acknowledge the President’s decision to fulfill his election campaign promise on Keystone XL,” he said.

Biden’s camp said as early as last May that he would cancel the project if elected, over concerns about fossil fuels contributing to climate change. About 200 kilometres of pipe has already been installed on both sides of the Canada-U.S. border, and construction has begun on pump stations in Alberta and several U.S. states.

“CAPP is very disappointed by President Joe Biden’s cancellation of the Keystone XL pipeline,” said Tim McMillan, president and CEO of the Canadian Association of Petroleum Producers.

“This action is killing thousands of Canadian and American jobs at a time when both economies badly need private investment. In addition, it wipes out Indigenous equity investment and employment opportunities created by Indigenous leaders who are working to raise quality of life and reduce poverty in their communities.”

TC Energy has said it has developed new sustainable energy initiatives costing US$1.7 billion for the Keystone project that company officials say would achieve net zero emissions when it would have gone into service in 2023 and promised it will be fully powered by renewable energy sources across the project. The company also has promised to use only union labour.

But as word of Biden’s plans to rescind U.S. approval for the project, TC Energy announced it was suspending work on Keystone XL. In a statement Wednesday morning, the company said it was disappointed and warned it would lead to the layoff of thousands of unionized workers.

“TC Energy will review the decision, assess its implications and consider its options,” the statement said.

The company has a deal with four labour unions to build the pipeline and has an agreement with five Indigenous tribes to take an ownership stake in it of about C$785 million. The Progressive Contractors Association of Canada said in a news release that Biden is “putting politics before reason”. The association said the pipeline would have generated up to 60,000 direct and indirect jobs in Canada and the U.S.

“This is another example of why Canada needs to continue to diversify and develop greater market access for our resources,” said McMillan. “Canadian oil and natural gas is produced with some of the highest environmental and safety standards in the world and we have an important role to play in providing lower-emissions energy.

“CAPP will continue to support efforts to open the door for collaboration with President Biden and his administration to save Keystone XL. Co-operation between our countries has resulted in one of the most successful trading relationships in history.”