In late 2015, U.S. Vice-President Joe Biden stood alongside President Barack Obama, as the latter blocked the proposed Keystone XL oil pipeline. Mr. Obama declared the project – which aimed to carry Alberta oil to Texas refineries – not in the U.S.’s national interest. He refused to approve the pipeline’s crossing of the border.
The election of Donald Trump a year later resurrected the project. Mr. Trump put it on a short list of things he promised to get done in his first days in office. Despite Mr. Trump’s enthusiastic support, actual construction of Keystone XL made little progress over the past three-plus years. It remained ensnared in legal and regulatory trouble – all of it south of the Canada-U.S. border.
It was only in March that pipeline backer TC Energy decided to officially proceed, after the government of Alberta shifted much of the risk from investors to taxpayers, via $7.5-billion of cash investment and loan guarantees.
This page called Premier Jason Kenney’s move a risky bet. Unlike Ottawa’s purchase of the Trans Mountain pipeline, Alberta put its money on a project whose fate rests on decisions made in another country. The bond-rating agency Moody’s said political risk could lead to the project’s cancellation.
And now, not even two months later, those political risks across the border are once more an existential threat. On Monday, Mr. Biden’s campaign announced that, if elected, the presumptive Democratic nominee will reverse Mr. Trump’s decision, and reprise Mr. Obama’s 2015 block. His campaign pledged that he will “proudly stand in the Roosevelt Room again as President and stop it for good by rescinding the Keystone XL pipeline permit.”
That is a negative for the oil patch, for Alberta and for the Canadian economy. After increases in oil production over the past decade, Canada’s export capacity is full, which weighs on the prices received by Canadian producers, and lowers the amount of money, royalties and taxes returned to Canada for each barrel exported. Pipelines are the cheapest way to move oil, and Keystone XL is the biggest of three new pipelines under development.
The completion of the Trans Mountain expansion, now under construction, will give the oil industry some breathing room. Without Keystone XL, however, Canada’s export capacity eventually could be jammed again, saddling oil producers with high shipping costs and chronic price discounts, at a cost of billions of dollars to Canadians.
This latest oil blockage in the U.S. may also ricochet into Canadian politics. Mr. Biden’s pledge could revive talk of the controversy-sowing Energy East pipeline, one that could have moved Alberta oil to a refinery and tidewater in New Brunswick. That Keystone XL has been moving ahead – and, for now, still is – freed Canada from such debates.
For Mr. Biden, who needs the support of progressive U.S. voters, opposing Keystone XL was an easy stand to take. For millions of Democratic voters, this one pipeline was long ago transformed into a symbol of global warming. Saying no to Keystone has obvious political upsides for Mr. Biden. The downsides are all borne by Canada.
Alberta and Ottawa have so far avoided criticizing Mr. Biden, understandably reluctant to wade into an American election. Canadians in large numbers want to see Mr. Biden take the White House, but this is a reminder that while his victory would have benefits for Canada, it would not come without costs.
On Monday, the government of Alberta tried to make the case that the pipeline was “safe,” and without it, the U.S., and the world, will be importing more oil from other less-stable countries such as Venezuela. That is true. American and global oil demand will not be magically reduced by 830,000 barrels a day if Keystone XL is never built. Unfortunately, Mr. Biden’s voters do not know that, and do not care to know it. For many Democrats, opposition to this one pipeline has become a litmus test of a candidate’s environmentalism.
The way to cut greenhouse gas emissions is through carbon taxes, regulations and other measures that do not make for simple campaign announcements. As Canadians know, real climate actions have costs, including political costs. Saying no to Keystone XL is not about the climate; it’s about improving Mr. Biden’s electoral forecast.
But his promise leaves Canada, more than ever, as a bystander to the fate of a key piece of national economic infrastructure. That could prove very costly.
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