Keystone XL is cancelled — so now what?


The announcement that TC Energy is cancelling the problem-plagued Keystone XL pipeline project wasn’t a big surprise.

It seemed unlikely the Calgary-based company could dig its way out of U.S. President Joe Biden’s decision last January to yank its cross-border permit. 

After evaluating its options, it appears TC Energy reached that same conclusion on Wednesday.

But this week’s decision to pull the plug doesn’t put to rest a couple of key questions that have been hanging over the project — not just for Keystone XL, but for the Alberta government, environmental groups and other pipeline projects.

Can Alberta still get some money back? 

Last year, Alberta invested $1.5 billion, plus loan guarantees, in Keystone XL to help kick-start a project beset by legal disputes and protests in the U.S.

The money was aimed at getting construction started on the Canadian leg of the project, which it did for a time.

U.S. President Joe Biden signs his first executive orders in the Oval Office of the White House on Jan. 20, including one that cancelled the permit for Keystone XL. (Evan Vucci/The Associated Press)

On Wednesday, the province said the material cost to the government was $1.3 billion, but that it wasn’t giving up on retrieving what it could.

“As stated, we remain committed to recouping the government’s investment in the project on behalf of Albertans,” a government spokesperson said in an email.

That may mean beginning the liquidation process of pipe and other assets to help offset some of the costs. But as CBC News reported last week, the pipe that is already underground will stay there for now.

There could still be a market for what’s left over, but how far that would go toward recouping Alberta’s investment is another unknown at this point.

Dennis McConaghy, a former TC Energy executive who has authored books on energy issues, thinks there will be a market for the spare parts.

“The pipe will be useful,” he said. “The question about being able to salvage any of the expenditures they may have made on pumps will depend on whether those specific kinds of pumps can find markets somewhere in the world. Eventually, that will probably happen.”

What is not recoverable are the expenses paid out on camps, engineering and the workforce, he said.

McConaghy speculated that the formal termination of the project may help the company with either some of its salvage activities or litigation — if that’s something it pursues.

WATCH | Expert explains why politics played a role in the demise of Keystone XL

University of Calgary’s Richard Masson says politics played a role at the death of the Keystone XL project pipeline. The Alberta government and TC Energy announced today the termination of the pipeline project. 3:38

What about legal action?

In referencing its commitment to recoup its investment, Alberta’s United Conservative government also noted “we continue to examine all our legal options regarding the termination of the Keystone XL project.” 

Using history as a guide, it might try to do this in a couple of ways.

TC Energy filed a lawsuit in U.S. Federal Court in Texas against the Obama administration after it halted the project in 2015, asserting that then-President Barack Obama’s decision to deny construction of Keystone XL exceeded his power under the U.S. Constitution. 

That lawsuit was ultimately suspended after Donald Trump inked the required construction permit to get the project moving again shortly after winning the White House.

James Coleman, an associate professor of energy law at Southern Methodist University in Dallas, said he’ll be watching to see if Canada and TC Energy are weighing a challenge under the North American Free Trade Agreement (NAFTA).

Though that trade agreement was succeeded last year by the Canada-U.S.-Mexico Agreement, Coleman said there’s a three-year window where a claim can be made for an investment made under NAFTA.

“They could bring a claim under NAFTA and say they were treated in a discriminatory fashion,” Coleman said. “With that said, nobody’s ever won a NAFTA suit against the United States. So I think most people would say your odds of success are less than 50-50.”

What does this mean for Jason Kenney’s UCP government?

On the same day the news broke about the cancellation of the Keystone project, Kenney also shared that a $1.3 billion hydrogen project is in the works for Edmonton.

But only one of those stories made news in the Wall Street Journal, the New York Times and CNN.

Alberta Premier Jason Kenney marked the start of construction of the Keystone XL pipeline in the province, in the town of Oyen, last summer. (Flickr/Alberta Government)

When Kenney made his big bet on Keystone XL last year, it was in keeping with his campaign promise of jobs, pipelines and a better economy. It also came at a time when the oilpatch was hit hard by a deep plunge in crude prices.

The Alberta government stood by that decision on Thursday, as the NDP again called on them to release the full details of the investment agreement.

“There’s full transparency,” Energy Minister Sonya Savage told the legislature. “We supported this pipeline because we believe it would have brought higher prices for Alberta oil, increase oilsands production and brought us $30 billion a year in royalties.”

Regardless, it’s another blow on a government priority.

“It’s just another cumulative thing,” said Duane Bratt, a political scientist at Mount Royal University in Calgary.

“If you just pull off the energy file — the whole ‘fight back’ strategy, the Allen inquiry, the war room, the investment in Keystone, the carbon tax fight — there is no wins there.”

Setting politics aside, the focus for Alberta’s oilpatch will be seeing completion of the Trans Mountain expansion pipeline to Burnaby, B.C., and Enbridge’s Line 3 replacement pipeline connecting to Superior, Wis.

“That just really homes in the magnifying glass,” said Thomas Kirk-Pearson, a senior research associate with energy data analytics firm Enverus.

“Without those projects, you’re going to have a pretty hard limit on how high production can go in Western Canada.”

Opponents of the Keystone XL pipeline demonstrate on the Dodge Street pedestrian bridge during rush hour in Omaha, Neb., in 2017. (Nati Harnik/Associated Press)

Both projects face some strong opposition over concern around their environmental and climate change impact — and this week’s news is expected to rally support to further protests.

“This is huge for people who’ve been resisting new fossil fuel infrastructure and calling for alternatives, because this was the first really big pipeline battle,” said Keith Stewart, a senior energy strategist with Greenpeace Canada.

Beyond that, he said, Keystone also informed how current and future environmental campaigns could be done.

“The Keystone fight represented a shift in strategy from the environmental movement and an increasing recognition that we have to work in partnership with, and often behind the leadership of, Indigenous communities.”

No doubt, industry, government and environmental leaders have learned much from Keystone XL’s long odyssey. And the lessons likely won’t have ended after this week.

Read more at CBC.ca