Trump’s push for Keystone XL revival could drive wedge in Liberal ranks

As U.S. President Donald Trump continues to destabilize the Canadian economy with tariff threats, divisions in the Liberal Party are emerging at the highest levels over the role of fossil fuel pipelines in the dispute. 

As first reported by Le Devoir, Energy and Natural Resources Minister Jonathan Wilkinson says he’s open to a conversation with the White House to revive the Keystone XL pipeline that would send Alberta crude to the American Midwest. The comments came after Trump declared on social media he wants the approximately 1,900 kilometre pipeline built. 

In a statement to Canada’s National Observer Wednesday, Wilkinson’s office explained that there have not been talks with the U.S. administration on this yet, but the Canadian government is open to the idea as one possible way to duck tariffs. If tariffs are placed on Canadian energy, steel and aluminum, there’s no business case to be had, officials say. 

The statement noted, “The project in its current form has been fully permitted on the Canadian side. A private sector proponent would need to step forward to advance the project, and there is not currently one expressing they would do so.”

As Wilkinson floats the possibility of reviving the project, his close colleague Environment and Climate Change Minister Steven Guilbeault said in a phone interview with Canada’s National Observer from international biodiversity talks in Rome, that he believes it’s important to remind Canadians of a few facts.

First, as Wilkinson’s statement acknowledges, there is currently no private sector proponent for the pipeline, he said. Second, Guilbeault says any company considering building the pipeline is unlikely to find a business case given the energy transition at hand. The authoritative International Energy Agency predicts global demand for oil will peak by 2030 at the latest, thanks to the falling cost of renewable energy, and efforts around the world to electrify power grids, transportation and buildings. 

“This is where the world is heading,” he said. “So, you're talking about companies that would be making investments, and none of these projects would be ready at least for a decade … the economics just doesn't make a whole lot of sense for me.”

Beyond economics, there is a problem with the “social acceptability” of new pipelines, he said. 

“Yes, what's happening south of the border is worrisome, but we've still made climate commitments … that doesn't go away because of Donald Trump,” he added.

In a statement sent Friday, a spokesperson for Wilkinson emphasized the two ministers see eye to eye. 

“Minister Wilkinson echoes Minister Guilbeault: the International Energy Agency finds that global oil demand will peak before 2030, meanwhile the world is increasingly electrifying and renewable energy is getting less and less expensive,” the spokesperson said. “As Minister Guilbeault said, the Government of Canada remains deeply committed to our climate targets – and with emissions going down while the economy grows for the first time in history, our plan is working.”

The $9-billion Keystone XL project has long been challenged by shifting political headwinds. First proposed in 2008, the project was rejected in 2015 by President Barack Obama, citing concerns over climate change. But in 2017, Trump reversed the decision and his administration approved the pipeline. Then, on his first day in office, President Joe Biden revoked the permit for Keystone XL. 

Months after Biden’s decision, TC Energy, the company behind Keystone XL, abandoned the project and sought to recoup US$15 billion under a legacy NAFTA claim — which was thrown out by a U.S. tribunal last year. TC Energy has since carved its oil business out to subsidiary South Bow to focus on gas. 

(Map of the Keystone XL route via Keystone XL)

Toddler in Chief

Trump seems to be of two minds on what he wants from Canada. On one hand, he claims the United States does not need any key exports from Canada, including oil and gas, and at the same time, he’s pushing for a new pipeline built to provide the country with more Canadian crude. 

Keith Stewart, senior strategist with Greenpeace Canada, said Canadian officials are getting whiplash trying to follow what Trump says. 

“He's just tossing out lit matches to see if anything catches fire to distract us,” Stewart said. “Basically, we've got to stop trying to appease the toddler in chief south of the border and just get on with building an economy that's going to create jobs, help us fight climate change and reduce our reliance on the U.S. because they're clearly an unreliable partner.”

Liberal leadership front-runners Mark Carney and Chrystia Freeland are keeping the door open to new pipelines. Freeland has said she supports exporting more LNG, and Carney has said, more vaguely, he supports “the concept” of an East-West pipeline. 

Balancing Canada’s resource extraction economy with climate goals cuts to the core of the Liberal Party, and if Trump carries out his tariff threat, using oil and gas as leverage to get tariffs removed is likely to sow division between the business and environmental wings in the Liberal ranks, says Asa McKercher, research chair in Canada-U.S. relations at St. Francis Xavier University.

“There's always been a clash within the Liberal Party in those wings, and so, I think a Liberal leader would have to tread carefully,” he said. 

Carney — as a former central banker who has advocated for financial institutions to take the climate crisis seriously — personifies this division, but it is unclear how he would manage it. His team did not return a request for comment. 

“I think he would be eager to take some action on climate change probably through market-based solutions, but I think he would also want to signal that he's business-friendly and a change from the previous government and maybe Keystone XL is the way to do that,” McKercher said. “Do the fossil fuel stuff, but also try for some action on climate. It just seems like such a classic Liberal thing to do.”

For years, Justin Trudeau’s government has been criticized for trying to cut emissions while supporting increased oil and gas production. In 2021, Canada’s climate watchdog Jerry DeMarco accused Ottawa of “policy incoherence” for decisions, like building the Trans Mountain expansion project, that undermine long-term emission reduction goals. DeMarco described it as some departments pushing a boulder up a hill, while other departments push it back down. 

Pulling out of a tailspin

Close observers say the federal election is prompting government ministers and leadership hopefuls to float the possibility of more pipelines, despite no interest expressed by pipeline companies.

The vague nature of the plans could stem from uncertainty about what Trump actually wants to do. At the same time, Liberals don’t want to be seen by the public to be preemptively taking potential solutions off the table, McKercher said. 

Liberals are also being careful to not give Pierre Poilievre’s Conservatives any ammunition during this pre-election period.

“Wilkinson knows there's no proponent for these things, but I think what they're doing is like when my kids were little and they eventually figured out that when I say, ‘We'll talk about it,’ that means ‘no’ without getting into a big fight over no,” Stewart said. Liberals will “talk about [pipelines] as a way to inoculate against Conservative attacks.”

Recent polling suggests that as the Trump threat looms, Liberals are pulling out of a years-long tailspin. Leger found that with Carney at the helm, Liberals enjoy a two-point advantage over Conservatives. Similarly, in a poll conducted for Global News, Ipsos found Liberals have a two-point lead over the Conservatives — the first time since 2021 Grits have had the upper hand. 

“The ballot question is now clearly who is best able to manage Donald Trump,” said Queen’s University political studies professor Jonathan Rose. “It is not a surprise that Canadians put greater trust in a Carney-led Liberal party than Pierre Poilievre. 

“While he has moderated his pro-America rhetoric, Canadians still see Poilievre as the anti-woke, anti-drug and crime leader,” he said. “Well, this may appeal to People Party voters and those on the right, [but] it doesn’t do much to broaden the party’s support which he will need to do. It also may be the case of him being so clearly fixated on crafting one image, that it is hard to change the minds of voters.”

Stewart characterized Poilievre’s problem in similar terms, noting that while he has been a thorn in the Liberals side, the Trump threat undermines Poilievre’s pitch to voters. 

After nearly a decade in power, there was a desire for change from the Liberal approach. But now, “there’s hurricane force winds of change from south of the border, and people are thinking ‘Okay, who can actually manage that?” Stewart said.

“I look at what the Liberals are doing and it's basically batten down the hatches, keep options open, and just project that we can deal with this,” he said. “If you're going to be a ship in a hurricane you don't want to hand it to a new captain who talks a big game but doesn't seem the right guy for this particular moment.”

John Woodside / Local Journalism Initiative / Canada’s National Observer