How Biden’s Keystone XL Pipeline cancellation could test US-Canada relations

Kathryn Harrison: I think for some people it is surprising because there’s been a lot of denial from politicians. But honestly, it shouldn’t be a surprise to anyone. Joe Biden was part of the Obama administration that rejected the pipeline in 2015. In May of 2020, he said he had opposed it all along and would cancel the pipeline if he was elected. He was elected, he said no. 

There are a lot of reasons. The oil industry is extremely important in Alberta as a source of employment, but also the oil that will flow through the pipeline is owned by Alberta. So, the provincial government relies very heavily on royalties paid by oil companies for the production of that oil. And finally, Mr. Kenney’s government invested in the spring of 2020 in the pipeline at a time that the project was struggling and couldn’t find private-sector investment. The provincial government invested $1.5 billion CAD [$1.18 USD] and offered another $6 billion CAD [$4.71 USD] in loan guarantees to move the project forward, despite the uncertainty. So, I think Mr. Kenney’s outrage now is, in part, shifting blame and trying to overcome what has really been a quite embarrassing failure to manage his own taxpayers’ money. 

Trudeau’s climate policy has been a very complicated one. On one hand, the Trudeau government has adopted some very good policies to address Canada’s own emissions. On the other hand, the Trudeau government has also been supportive of expanded production of Canadian oil and export. The interesting question right now is to what degree Trudeau will end up owning the failure, the rejection of the Keystone XL Pipeline, even as he may get credit for some of his climate policies, or whether, in fact, this will be a wake-up call for Canada’s oil industry that perhaps as the rest of the world takes action on climate change, markets for our very carbon-intensive oil will evaporate fairly quickly. 

In saying no to Keystone XL, President Biden is saying he doesn’t want to increase imports from Canada even further. They are not shutting down the existing pipelines. Canada exports about 4 million barrels of oil per day, and that’s not going to change overnight. It really is a moment of uncertainty for Canada’s oil industry. And how much oil will we be able to sell to foreign markets if we can’t get our oil to the US? 

I think there’s a huge overlap. I think that the Trudeau government, the plan that they announced in December is a serious climate plan. It’s not yet consistent with what needs to happen to limit global warming to below 2 degrees Celsius, but everything the US does makes it easier for Canada to act.

One of the biggest areas I expect they’ll work together on is emissions from motor vehicles. Canada and the US have a highly integrated automobile manufacturing sector. Canada is the smaller partner in that sector, so it would have been very difficult for Canada to set its own standards for greenhouse gas emissions from motor vehicles independent of the US. So, it’s great news for Canada that Biden is already moving forward to amend the regulations for motor vehicle emissions that were put in place by the Trump administration. I expect we will see some action from the Biden administration on electric vehicles. So, I think there are a lot of actions that the US can take that Canada will match and others that will make it easier for Canada to move forward with its own climate plan.