Keystone XL pipeline project scrapped in blow to Canada’s energy plan

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TC Energy Corp . is terminating the Keystone XL pipeline, ending a project that appeared to have run out of options after Joe Biden pulled its permit as one of his first official acts as U.S. President.

The Calgary-based company’s decision on Wednesday formally ends a 13-year regulatory odyssey that saw the proposed pipeline blocked twice by former president Barack Obama and revived by his successor Donald Trump. The project’s cancellation is a significant blow to Alberta, whose economy has struggled in the face of constrained pipeline access and whose government bought an ownership stake last year.

Keystone XL, which had become a focal point for climate change activists in Canada and the United States, was designed to ship 830,000 barrels of crude a day along a 1,947-kilometre route from Hardisty, Alta., to Steele City, Neb. It would have given Alberta oil companies a long-sought direct route to refineries on the U.S. Gulf Coast.

Does Canada need another pipeline? That’s the question federal officials were asking after Keystone XL cancellation

TC Energy, which first proposed the massive project in 2008, suspended construction in January after Mr. Biden revoked a presidential permit issued by the previous administration. The company took a “comprehensive review of its options” in the ensuing months before ultimately deciding to walk away, it said in a statement.

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john sopinski/THE GLOBE AND MAIL, SOURCE: tc energy

The firm said it will now work with governments, regulators and Indigenous groups to safely wind up the project. The company had already built roughly 150 kilometres of pipeline in Alberta, a border crossing between Saskatchewan and Montana, and it had also done construction work in several American states.

With the cancellation, Canada’s energy industry is left with two export pipelines under construction: the $12.6-billion Trans Mountain expansion between Alberta and the Pacific Coast and Enbridge Inc.’s Line 3 replacement, between Alberta and the U.S. Midwest. In recent years, Enbridge’s Northern Gateway project proposal and TC Energy’s Energy East project were also cancelled after facing legal and regulatory delays.

Keystone XL was targeted by environmentalists almost as soon as it was proposed. International activists, landowners in Nebraska and various celebrities waged a lengthy campaign against it, arguing that it would go against global efforts to combat climate change and could contaminate a massive aquifer that serves as water source for a large part of the U.S.

After Mr. Biden pulled the permit in January, TC Energy said little about how it would proceed. Alberta Premier Jason Kenney promised to keep fighting, including by filing a lawsuit under provisions of the North American Free Trade Agreement that remain in effect, though any such case would require the company to join.

Neither the company nor the Alberta government said Wednesday whether that option remains on the table. TC Energy filed a US$15-billion lawsuit seeking compensation under NAFTA after Mr. Obama blocked the pipeline in 2015, but it suspended the lawsuit after Mr. Trump signed the construction permit as soon as he took office.

“The government is committed to recouping its investment in the project on behalf of Albertans,” said a statement from Alberta’s Energy Minister, Sonya Savage. “We continue to examine all our legal options regarding the termination of the Keystone XL project.”

Ottawa supported the pipeline and said after the U.S. election that it would press Mr. Biden to allow it to continue. But the federal government showed little appetite to continue that battle once the permit was revoked and quickly made it clear it was time to move on. In the days that followed the decision, Mr. Trudeau said he was disappointed but urged Canadians to focus on the areas where the two countries agreed. When Mr. Trudeau and Mr. Biden held their first bilateral meeting in February, neither leader brought up the pipeline in their remarks afterward.

The Alberta government said it estimates the province’s losses as a result of the cancellation would be about $1.3-billion.

With Alberta’s economy suffering from the years-long downturn in domestic oil prices, and made worse by the pandemic, Mr. Kenney announced last March that his government had agreed to contribute US$1.1-billion for an ownership stake in Keystone XL and guarantee US$4.2-billion of debt. At the time, the Premier said the project would likely be scrapped without government support, as TC Energy was unable to find any private-sector partners to take on the risk.

Critics warned the government was putting taxpayer dollars in jeopardy, because the project still faced a series of court challenges in the U.S.

Two months after Alberta bought its stake, Mr. Biden promised to rescind the pipeline’s presidential permit if he became president, putting the pipeline’s fate at the mercy of the American election.

James Coleman of the Southern Methodist University’s Dedman School of Law said the “13-year-saga” of the Keystone XL pipeline has shaped the way opposition is organized to major energy projects in the U.S., and sparked much wider environmental movements.

“If I try to shut down a coal power plant, there are a lot of local communities that depend on that power plant that are going to be my enemy. But if I shut down a pipeline project, I’m going to have a lot of allies – including Indigenous groups, and every farmer that doesn’t want that pipeline going through their backyard,” he said.

Prof. Coleman, who studies the legal battles around major energy projects, said it’s increasingly difficult to build anything of the pipeline’s size without some form of government backing. He said private companies are unlikely to risk funds on a project that is far from certain, and governments have the ability to be more patient with their capital.

He said that project’s termination may not end the legal battles that overshadowed it.

Just last week, a Montana federal court said a Keystone XL lawsuit from Indigenous and environmental groups – who are challenging presidential authority to issue cross-border permits for pipelines – can still proceed.

The district court judge said although Mr. Biden revoked the 2019 permit issued by Mr. Trump, “the possibility remains that he, or a future president, could issue unilaterally another permit.”

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