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jeffrey simpson

The United States, having nearly doubled production in the past six years, is now the world's largest producer of oil, the burning of which produces greenhouse gases that contribute to global warming.

The U.S. has surpassed Saudi Arabia and produces slightly less than three times more oil than Canada. U.S. production reached 9.3 million barrels a day in 2015, as companies drilled and fracked and pumped as never before.

Domestic gasoline prices fell, so Americans scooped up bigger vehicles that manufacturers could supply while spurning smaller gas-saving ones. Hybrid car sales slumped. So did sales of compact vehicles. Crossovers and SUV models, by contrast, soared.

Oil production and sales of gas-guzzling cars had a banner year in the United States. At the same time as the U.S. was pumping and fracking like crazy, however, President Barack Obama launched an international crusade against climate change, one casualty of which was TransCanada PipeLines' Keystone XL pipeline.

Keystone XL was supposed to deliver bitumen oil from Alberta to U.S. refineries of heavy oil on the Gulf of Mexico coast. These refineries for years had imported heavy oil – and therefore dirtier oil than conventional stuff – from such politically insalubrious places as Venezuela. Those imports and that refining will continue, except the oil won't be from Canada but from other places.

The Keystone saga, which has already dragged on for six years, never dies. True, Mr. Obama nixed Keystone after stringing Canada along for years in a way unbecoming of a close ally. Now, TransCanada has launched two lawsuits asking for damages of $15-billion (U.S.) and a ruling that the President exceeded his constitutional authority in making the decision.

TransCanada is 100-per-cent correct that the Obama decision was 100-per-cent politics. "The activists' strategy succeeded," TransCanada declared, referring to the environmental lobbies that coalesced around opposing Keystone.

They raised money off the campaign, and they made Keystone XL within the Democratic Party coalition a litmus test for the President of his environmental commitment. In a fight between Democratic (or Republican) Party interests – that is, domestic politics – and Canada-U.S. relations, Canada will lose every time, as happened in this case.

That Keystone XL should have become such a magnetic target was a matter of timing and politics on both sides of the border.

The geography of Canada and the U.S. is honeycombed with pipelines and railways carrying oil. Keystone XL was a large project but by no means the only one.

Yet, Keystone XL became the environmentalists' rallying cry, notwithstanding the U.S. State Department's finding that bitumen oil likely would make its way south by other means, probably rail, and that it would be supplanting equally heavy oil at Gulf refineries from other places.

Ironically, when the original Canada-U.S. free-trade agreement was negotiated, one U.S. objective was assured access to Canadian energy, especially oil. The Americans wanted as guaranteed access as they could get.

That was then, and now is now, what with the U.S. becoming the world's biggest producer of oil. Canadian imported oil is useful but not essential.

Also, almost nobody took climate change seriously in the late 1980s when Canada and the U.S. negotiated free trade. Today, climate change is the focus of political attention in parts of the world, especially the advanced developed countries, with major environmental groups and some governments focused on how to reduce GHG emissions.

Keystone XL became a bull'seye target for concern in the U.S. about GHGs during the buildup of all that fracking and pumping that made the U.S. No. 1 in oil production. Any objective analysis of the environmental threat from an oil pipeline spill, compared with thousands of rigs of fracking away, would have to favour the pipeline.

Neither the administration nor the environmentalists who support it did such a comparison. They focused successfully on the Keystone project, put their considerable fundraising and political muscle into fighting the pipeline and won the battle. And the Alberta and federal government never did much to improve the environmental record of bitumen.

Who knows whether TransCanada has a chance in court? The litigation will take years and cost millions of dollars.

TransCanada's case is plausible under the North American free-trade agreement, under which investing companies are supposed to be protected from political decisions.

The courts, however, will most likely uphold presidential prerogatives, including the issuance of permits for pipelines. In this case, the President's exercise of these prerogatives was completely political.

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