Canada must ‘respect’ decision to cancel Keystone XL, minister says

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Canada’s energy minister said the country must “respect” Joe Biden’s decision to scrap the controversial Keystone XL pipeline and dismissed calls from provincial politicians to pursue punitive measures against the US.

“This was a significant campaign promise by candidate Biden. It is one that he has kept as President Biden,” said Seamus O’Regan, the natural resources minister in the federal Liberal government. “We have to respect that.”

His comments to the Financial Times suggest the federal government will make no further efforts to change Mr Biden’s mind, despite mounting anger about the decision in Canada’s oil-producing western provinces.

“We made our case in every way we could,” Mr O’Regan said. But there is “every indication that he means business on this”, he added, referring to the new US president’s decision.

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Mr Biden made the cancellation of TC Energy’s permit to build the US leg of Keystone XL one of his first acts as president.

The $8bn project would have involved construction of a pipeline to carry bitumen from the oil sands of northern Alberta to refineries in Texas.

Environmentalists cheered the move as a significant first step in Mr Biden’s plan to tackle the climate crisis. Production from Canada’s ultra-heavy oil deposits is more carbon intensive than most other forms of crude, although companies have vowed to reduce emissions from operations. 

The US move caused shock in Canada — and has opened another bitter schism between Ottawa and politicians in the western province of Alberta, who believe the federal government has been insufficiently supportive.

Justin Trudeau, Canada’s prime minister, said in a statement shortly after the cancellation that he was “disappointed but acknowledge[d]” the decision.

Politicians in Alberta reacted angrily to the termination of the project, which was proposed more than a decade ago and in which the province had taken a $1bn stake to push its progress.

On Thursday Jason Kenney, the province’s United Conservative party premier, sent a letter to Mr Trudeau criticising the “lack of federal response” to the permit cancellation and calling for “a path to reconsideration for Keystone XL”.

“I’m not giving up,” Mr Kenney told the FT on Friday. He urged the Canadian government to impose economic sanctions on the US for “violation of at least the spirit of the investment protection provisions of Nafta”, referring to the trade pact between North American countries.

But Mr O’Regan seemed to rule out any such measures, telling the FT it was in Canada’s interests to look ahead to other areas of the co-operation with the US now and not dwell on the Keystone XL saga.

“The windshield is bigger than the rear-view mirror,” he said. “Pretty basic market dynamics is that you listen to the customer . . . and the customer has changed in terms of what it is demanding and wanting from the product.”

Mr Kenney rejected that stance.

“The Trudeau government didn’t use that kind of language or approach when it came to [Donald] Trump’s election commitment to tear up Nafta and impose steel tariffs,” he said.

“We engaged. We defended our interests. We threatened retaliatory action. And we ultimately succeeded. We didn’t say, ‘Oh, well, you know, Trump’s the customer, he doesn’t like the trade agreement, therefore we’ll move on’.”

Alberta has waged a public relations war in the past two decades, promoting projects that have been vilified internationally by environmental campaigners and from which global investors and financiers have fled.

The pipeline cancellation marks an abrupt — but expected — shift from Mr Biden, who made climate change central to his campaign and had explicitly promised to scrap the project. Before he was elected in 2016, his predecessor, Mr Trump, promised to ensure Keystone XL’s construction and issued a permit allowing it early in 2017. Court battles prevented progress.

The project would have carried 830,000 barrels a day of bitumen from Hardisty, a central Alberta oil-gathering point, to the US coast on the Gulf of Mexico.

Mr Kenney said he feared other Canadian oil pipeline projects, such as a planned expansion of Enbridge’s Line 3 in the US Midwest, could now be at risk, particularly in light of Mr Biden’s appointment of Gina McCarthy, a former head of the Environmental Protection Agency, as his climate tsar.

“She was an environmental activist actively opposed to Canadian energy pipelines to the US,” he said.

Supporters of Keystone XL have maintained that further growth from Canada’s oil sands — the single biggest source of foreign oil in the US — is threatened by lack of pipeline export infrastructure.

But a pipeline project to the west coast of Canada bought by the country’s federal government in 2018 would increase export capacity, say analysts. Exports from Canada to the US were close to 4m b/d last week, near a record high.

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