February 2021, Vol. 248, No. 2

Spotlight

Keystone XL Comes Up Short in Decade-Plus Battle

As promised on the campaign trail, U.S. President Joe Biden formally revoked a key permit needed to build the Keystone XL pipeline, dashing the hopes of much of the Canadian crude oil sector. 

The expected decision by the new administration likely means the $8 billion project has come to its unceremonious end after over a decade of setbacks brought on by environmentalists’ court challenges and legal challenges. 

Canada’s ambassador to Washington, D.C., told CTV television that Ottawa was “very disappointed,” though the official response continued to be restrained as recently as Jan. 23. 

“We have a whole range of energy-related opportunities with the United States that we are interested in discussing with the Biden team,” Canadian Environment Minister Jonathan Wilkinson told Reuters. He cited efforts toward clean electricity, decarbonization of industry, transportation and methane emissions. 

Calgary-based TC Energy, which owns the project, will eliminate more than 1,000 construction jobs in coming weeks and halt work on the Keystone XL oil pipeline, the company said in an email to employees.  

“I believe this will send a concerning signal to infrastructure developers that resonates far beyond our project and will stifle innovation for a practical transition towards sustainable energy,” said KXL President Richard Prior in the email. 

The project, which is already under construction in Canada, had been expected by the company to eventually carry 830,000 bpd of Alberta oil sands crude to Nebraska, where it has been stalled for 12 years by challenges from Native American tribes, environmentalists and landowners.  

TC Energy told Reuters it will suspend construction and warned there could be a “substantive” predominantly non-cash, after-tax charge to earnings in the first quarter of 2021. 

It a written statement, Association of Oil Pipe Lines Chief Executive Andy Black said, “Killing 10,000 jobs and taking $2.2 billion in payroll out of workers’ pockets is not what Americans need or want right now.” 

Canadian producer Suncor Energy said it backed expanding market access to the U.S. through pipelines like Keystone XL, which he said would provide “responsibly sourced oil to U.S. refineries for the benefit of U.S. consumers.” 

However, in November, a Canada Energy Regulator report stated that   western Canadian crude exports are expected to remain below total pipeline capacity over the next 30 years if the Keystone XL and two other projects proceeded. 

A renewed interest in the  Keystone XL began in late January 2020, when then-President Donald Trump’s administration approved a right-of-way, allowing the oil sands pipeline to be built across U.S. federal land. 

Signed by Interior Secretary David Bernhard, the authorization covered 46 miles (74 km) of the Keystone XL route across Montana, which is under the jurisdiction of the Bureau of Land Management and the U.S. Army Corps of Engineers, according to a spokesman for the Interior Department. 

The project, itself, was a 36-inch,1,660-mile (2,672-km) pipeline designed to transport diluted bitumen from the oil-rich tar sands of Alberta, Canada, through Saskatchewan, then on into the U.S. heartland, Nebraska. 

In a statement following the administration’s action, Neb. Gov. Ricketts said,  “Keystone XL is a critical part of putting together an all-of-the-above strategy for North American energy independence. “Failure to construct the pipeline would mean more dependence on overseas energy sources as well as fewer jobs and less property tax relief for Nebraskans.  This is a project that would greatly benefit not just Nebraska but also our whole country, and it is our hope that TC Energy presses forward.” 

As Keystone XL progressed, it became the most studied cross-border project in the history of North America, having been evaluated three separate times by the U.S. State Department, as well as by the environmental departments of all three states along the route.  

The Keystone XL first became a focal point of U.S. politics in 2011, two years after it was proposed, when about 2,000 demonstrators came to Washington, D.C., for a two-week rally that culminated with many of the participants being arrested.  

This had come on the heels of the State Department’s release of a draft environmental impact report that said the pipeline would have only “limited effect on the environment.” Larger protests, along with court decisions and counter-decisions, reviews, decries and presidential memoranda followed. 

Canada, the world’s fourth-largest crude producer, ships most of that output to U.S. refineries. In 2019, the United States received 3.8 MMbpd of crude oil from Canada, more than half its daily imports of 6.8 MMbpd.