Alberta has $1.5 billion riding on the U.S. election.
If President Donald Trump is re-elected, the Keystone XL pipeline — a cross-border project Alberta Premier Jason Kenney has poured public money into — has fewer stumbling blocks.
But if former vice-president Joe Biden wins, Keystone XL is all but done for. Biden has vowed to cancel the contentious pipeline if elected, calling Alberta’s oil “high pollutant” and “tarsands that we don’t need.”
The fact that the US$14.4 billion pipeline is already under construction wouldn’t stop Biden — who's ahead in the polls — from ripping it up and walking away, said James Coleman, a pipeline law expert and associate professor at Southern Methodist University in Dallas. And the pipeline still faces legal battles and possible delays, even if Trump is re-elected, he added.
“It’s the longest of long shots,” said Coleman, who briefly did work for Keystone XL’s owner, TC Energy, which was then known as TransCanada.
“(If Biden wins), best-case is you’re keeping it on life support.”
Kenney has said the project is a wise investment. Richard Masson, a former oilsands policy adviser to the Alberta government and an executive fellow at the University of Calgary’s School of Public Policy, said the province likely sees it as a necessary risk.
Public opposition to energy infrastructure such as power lines and pipelines has grown in recent years, making the projects appear riskier to private investors and harder to advance without some sort of government investment, Masson said.
TC Energy has said Keystone XL, which would deliver Alberta oil to refineries on the Gulf Coast, would spur investment and create jobs that the economically stricken province needs.
“It’s a huge bet,” Masson said. “But it shows how important it is to the future of the province.”
President @realdonaldtrump Donald Trump approved Keystone XL, but @JoeBiden says he’d cancel it. Alberta, meanwhile has $1.5 billion riding on the pipeline, and the outcome of the 2020 presidential election. #cdnpoli #ableg #USElection2020
It may have been wiser for Alberta to wait to invest in Keystone XL until after the election, said University of Calgary political scientist Melanee Thomas.
“You don’t roll the dice like that on another country’s election,” she said.
Still, Alberta now finds itself in a strange situation.
On one hand, Trump’s brand is radioactive in Canada. One recent Pew Research Centre survey showed 20 per cent of respondents had confidence in the president, the lowest level the pollster has recorded in this country. Canadian political leaders, including Kenney, haven’t been particularly friendly toward the Republican candidate either, and lambasted Trump in the spring for trying to stop shipments of vital N95 masks from crossing the border into Canada.
On the other hand, Alberta’s hopes are riding on a pipeline that is vastly more possible under a second Trump administration.
“It’s a complicated situation, and Alberta’s got a lot at stake,” Masson said.
How did we get here?
Battles over the fate of Keystone XL, which was proposed in 2008, have lasted more than a decade.
The pipeline would run from Hardisty, Alta., southeast of Edmonton, across the U.S. border to Nebraska. From there, it would link to the Keystone pipeline system that carries crude south to Texas. Since the project crosses the Canada-U.S. border, it requires a federal government permit.
Successive Alberta governments have seen Keystone XL as essential for getting the province’s crude to Gulf Coast refineries that are equipped to process the thick bitumen. There has been lots of federal support, too. Former Conservative prime minister Stephen Harper said supporting the project was a “no-brainer.” And Prime Minister Justin Trudeau’s Liberal government also backs the project, but perhaps less enthusiastically.
“It has been a long position of mine that we need to get our resources to new markets safely and securely and that’s why I’ve always advocated for the Keystone XL pipeline,” Trudeau said in May.
Crude from the oilsands already sells at a discount compared to American oil because it’s harder to refine and must be transported farther. But that discount has become even steeper in recent years, rising from its usual US$10 to $15 per barrel to $50 at times, a problem producers blame on a lack of pipeline capacity that has led to a glut of oil.
Without a pipeline, producers must take on the expense of shipping oil by rail, or sell at a discount to refineries less equipped to process it in the American midwest. Ideally, Keystone XL would give Canadian producers easier access to the market on the Gulf, and therefore allow companies and governments to stop leaving so much money on the table, Masson said.
“We’re just losing our shirts,” Masson said. “That means companies can’t invest, jobs get cut, (we lose) taxes and royalties.”
But in the 2010s, Keystone XL became somewhat of a political football south of the border.
Environmentalists argued crude from the oilsands, which is more emissions-intensive than other types of oil, could contribute to the accelerating climate crisis. Pipeline proponents argued that the crude would get to the Gulf anyway — companies can also ship it by rail, although it’s more dangerous and costly. Pipeline construction would also create jobs.
After years of debate, former president Barack Obama rejected the project in 2015. Keystone XL “would not make a meaningful long-term contribution to our economy,” he said, but would undermine America’s “global leadership” on climate. Trump later revived the project when he took office.
Somewhere along the way, Keystone XL had also become a symbolic issue, used by politicians to signal their position on environmentalism as a whole, Masson said.
“(The Obama administration) wanted something that looked environmentally friendly,” he added.
In March, as oil prices plummeted amid COVID-19, Kenney — who, during his campaign to become premier, promised Albertans a focus on jobs, the economy and pipelines — announced that Alberta would invest $1.5 billion into the project to get it moving. The province also put forward a $6-billion loan guarantee.
What happens now?
The outcome of the U.S. election is far from guaranteed.
Even if Trump is re-elected, Keystone XL faces more legal hurdles in the months ahead. Though construction began this summer in eastern Alberta, so did court challenges that could be costly and provoke delays: one lawsuit was filed this summer by the Fort Peck Assiniboine and Sioux Tribes of northeast Montana; a second lawsuit from environmental groups followed days later. In yet another case, U.S. courts blocked a key permit in July.
“There’s no guarantee it will be built,” said Southern Methodist University’s James Coleman. “They’ve been trying to get it built for four years, and they haven’t made much progress.”
If Biden wins, Kenney has said he thinks the former vice-president can be swayed.
“Empirically, that statement is ridiculous,” Thomas said, adding a provincial government is unlikely to change a new president’s mind.
Warren Mabee, the director of the Institute for Energy and Environmental Policy at Queen’s University, said it’s also difficult because Biden, if elected, will be under tremendous pressure to address not only the climate crisis, but also movements protesting racism in policing, and inequalities laid bare by COVID-19. Although the connection between those things is not always obvious, blueprints for a Green New Deal — which are largely incompatible with pipeline development — are often steeped in social justice principles, Mabee said.
“If Biden is elected, if he becomes the president, he’ll be looking for a signature thing to do,” Mabee added.
“He has to address the social unrest in the country, and the Green New Deal gives him a lot of tools to that.”
Biden, who is also trying to win over progressives in the November election, has a lot of legal leeway to deny Keystone XL permits it needs, thereby axing the project, Coleman said. Though that might prompt a lawsuit from TC Energy that could take years to settle, previous cases have tended to turn out well for the U.S. government, he added.
“Suing your way to approval with a hostile administration is very, very difficult.”
There are other factors at play: Kenney has argued that Biden would have to answer to the unions that back the pipeline, and that it might be politically unpopular to rip up a pipeline that has already been placed in the ground. (One union that supports the project has backed Biden, others continue to stand behind TC Energy.)
Biden will also likely face a powerful lobbying effort from American oil boosters. Even if he kills the project, TC Energy could try again with the next president, if the company still thinks the pipeline is economically viable.
Coleman said it likely won’t matter much to the American public if the project is halted before crude starts flowing.
“I’m sure the Alberta government doesn’t want to say this, and I understand why,” he added.
If Keystone fails, Alberta likely isn’t getting its $1.5 billion back, and the situation in the oilpatch won’t get better, Mabee said. (Kenney has said the province believes it could recover some of the funds.)
“They might not see anything get much worse because it’s already pretty bad,” Mabee said. TC Energy, for example, announced layoffs on Oct. 1.
Whether the pipeline project passes or fails, the global balance of oil will not undergo a dramatic shift, Masson said; companies will just continue to send oil to the Gulf by rail.
“(Pipeline opponents) think that if they can stop a pipeline they can stop growth of oil, that it will somehow have an impact on consumption. It doesn’t really,” Masson said.
The outcome of the U.S. election likely won’t dent Kenney’s political brand, Thomas said. Though the Alberta government should face accountability if its investment doesn’t pan out, she said, the political environment in the province is also so polarized that it would be easy for Kenney to blame opponents on the left.
“Even if it hurts Alberta, the premier will spin it,” she added.
In a big picture sense, however, a Biden presidency would likely accelerate America’s transition to green energy, Mabee said. The former vice-president has said he wants to see the country rely more on clean energy and less on oil, and since America is a major customer for Canadian crude, that means the oilpatch will have to adapt.
“This is not an anti-oil screed, it’s just understanding that the market is shifting,” he said.
“It’s interesting. I think we have to wait and see what happens in November.”