Keystone Rejection Tests Trudeau’s Balancing Act on Climate and Energy

OTTAWA — One of President Biden’s first acts upon taking office was to cancel the permit for the Keystone XL pipeline, the long-debated project to transport crude from Canada’s oil sands to the United States.

But Canadian officials, notably in Alberta, the province where the pipeline originates, are not giving up so fast.

The nearly 1,200-mile Keystone XL was intended to carry crude oil from Canada to Nebraska, where it would connect with an existing network to deliver the crude to refineries on the Gulf of Mexico.

In canceling the pipeline, Mr. Biden took some of his first steps toward reversing the legacy of the Trump administration, which revived the project after it was rejected by President Barack Obama in 2015.

Prime Minister Justin Trudeau has long supported the pipeline as part of an effort to balance his priority to fight climate change with his support for Canada’s energy industry in Alberta and in other western provinces.

“We are disappointed but acknowledge the president’s decision to fulfill his election campaign promise on Keystone XL,” Mr. Trudeau said in a statement late Wednesday that went on to praise other decisions by Mr. Biden, including a move to rejoin the Paris climate accord. Mr. Trudeau and his officials had been urging the incoming U.S. administration for weeks not to cancel the Keystone XL permit.

Days before Mr. Biden’s official announcement, the premier of Alberta had issued a statement vowing legal action. On Wednesday, Jason Kenney, the premier, demanded that Mr. Trudeau also bring trade sanctions against the United States if he is unable to persuade the American president to reverse course.

“This is a gut punch for the Canadian and Alberta economies,” Mr. Kenney said at a news conference. “It is an insult directed at the United States’ most important ally and trading partner on Day 1 of a new administration.”

Mr. Kenney also criticized the Biden transition team for declining to meet with Alberta officials to discuss the issue. “In my books, that’s not how you treat a friend,” he said.

Canada exports about 80 percent of its oil to the United States, most of it coming from the oil sands, which, along with the energy industry, are critical to Alberta’s economy. Even during the current oil price slump, the sector provides about 140,000 jobs and, before the collapse of oil prices, royalties from the oil and gas industry made up about 20 percent of Alberta’s budget.

The oil industry had pushed for development of the pipeline in hopes that a direct route to the Gulf of Mexico, where refineries are equipped to process the heavy, low-grade oil from the oil sands in Canada’s interior, would eliminate shipping bottlenecks and lower prices, said Andrew Leach, an energy and environmental economist at the University of Alberta in Edmonton.

But the pipeline project was heavily opposed by environmentalists, American farmers and ranchers, as well as Indigenous groups in the United States who feared it would alter and possibly harm their lands.

“President Biden’s decision to reject Keystone XL on his first day signaled a new era,” said Anthony Swift, the director of the Canada Project at the Washington-based Natural Resources Defense Council, an environmental group long critical of the oil sands.

“New fossil fuel development projects are going to be placed under some sort of a climate test that assesses whether these projects are consistent with our international climate goals,” Mr. Swift added.

Faith Spotted Eagle, an elder in the Yankton Sioux Tribe of South Dakota and an early opponent of the pipeline, said that Mr. Biden’s decision was significant for Native Americans.

“I’m gratified that our treaty rights have been honored,” she said. “This is a vindication.”

American environmentalists had targeted the Keystone pipeline as part of their effort to shut down the oil sands, which they say are a particularly dirty energy source. But even with the demise of Keystone, that effort seems out of reach.

There are numerous pipelines between the two countries, in addition to railways, through which Canada sends oil to American refineries. And two other Canadian pipelines serving the United States are currently being expanded, making it likely that production in the oil sands will continue.

Still, the question, Mr. Leach said, is whether these other pipelines are also targets of the new U.S. administration: Is Mr. Biden “saying basically we don’t want cross-border pipelines, or we just don’t want this particular pipeline?”

One of the pipelines currently being expanded is in the Midwestern United States. Another links the oil sands to a port in British Columbia that can serve refineries on the United States’ Pacific Coast by ship and which also has a spur line to Washington State. Both have been targeted by protests.

There is another pipeline — running from Western Canada through the Midwestern United States — whose permit Michigan has proposed revoking for environmental reasons, a move that could choke off much of the pipeline’s route.

Mr. Biden’s announcement to cancel the Keystone XL fulfilled a promise he had repeatedly made on the campaign trail as part of his climate-change agenda, though the president has not announced any plans for the other pipelines shared by Canada and the United States.

In a statement issued Wednesday before Mr. Biden took the action, TC Energy, the company that owns Keystone, said that it was disappointed by Mr. Biden’s choice and that it would suspend work on the pipeline while it considered its options.

The cancellation will “lead to the layoff of thousands of union workers and negatively impact groundbreaking industry commitments to use new renewable energy as well as historic equity partnerships with Indigenous communities,” the company said.

Chris Bloomer, president and chief executive of the Canadian Energy Pipeline Association, said that the demise of Keystone XL had more to do with opposition to the oil sands than the project itself.

“It seems that no matter what the industry does, there’s no basis for a middle ground or compromise,” he said from Calgary. “The appetite among environmentalists to shut things down is insatiable.”

The likelihood of Mr. Kenney or TC Energy prevailing against Mr. Biden through litigation is slim, said Kristen van de Biezenbos, a law professor at the University of Calgary in Alberta.

Challenges in American courts or through investor provisions of trade agreements could take years to resolve, would likely fail and, ultimately, wouldn’t restore the presidential permit needed for the pipeline, she said.

And a Canadian victory in court wouldn’t eliminate the Keystone project’s other hurdles — legal challenges from environmental groups, regulatory roadblocks within states and the unfavorable economic climate that have scared off investors and stalled construction.

“I really wonder about the wisdom of continuing to pursue this,” she said. “It would be faster to build a pipeline in Canada.”

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