Why Biden scrapped the Keystone pipeline with Canada
One of President Joe Biden's first steps was the cancellation of the Keystone XL pipeline. A fundamental work for Canada
Joe Biden, who was sworn in as the new president of the United States on Wednesday, halted construction on the Keystone XL pipeline on his first day in office.
The news had already been anticipated by American newspapers, immediately alarming Canada. And in particular the province of Alberta, where the country's oil fields and industry are concentrated, which sees – at this point – in the Keystone XL a fundamental project for the development of its energy sector.
WHAT IS THE KEYSTONE XL
The Keystone XL is a 1,900 kilometer long pipeline with a transport capacity of 830,000 barrels of oil per day, for a cost initially estimated at 8 billion dollars. It was supposed to connect the city of Hardisty in Alberta to Steele City in Nebraska, passing through the states of Montana and South Dakota. From Steele City, the pipeline would connect to existing pipelines, allowing Canadian crude to be transported to American refineries on the Gulf coast of Mexico, specially designed to process such qualities.
The Keystone XL received approval from Canadian regulators in 2010. However, in 2015 then President Barack Obama halted the project, arguing that it would help undermine US leadership in the transition to more sustainable energy sources. The decision was overturned in 2017 by Donald Trump, who therefore gave the green light to the works, defining them as positive for employment and for the well-being of local economies.
Despite the support of the Trump administration, the realization of the Keystone XL has nevertheless met with delays and forms of popular and legal opposition.
Now Biden has turned the situation upside down again and canceled the project, giving reasons similar to those of Obama: the Keystone XL – reads the executive order – is contrary to the American national interest, is not useful for energy security and undermines the credibility of Washington in the fight against global warming.
It is not an unexpected choice: during the election campaign he promised it , as well as saying he wanted a more general "transition from the oil industry". What is striking, more than the decision itself, are the timing: Biden has chosen to proceed immediately, from day one, without leaving time for in-depth discussions with the Canadian government.
WHY CANADA SUPPORTS THE KEYSTONE XL
Canadian Prime Minister Justin Trudeau, although he strongly insists on tackling climate change, supports the Keystone XL. It has to do with the political need not to upset the inhabitants of the province of Alberta – who reject the agenda of his Liberal Party – and to support the national oil industry which is concentrated right here: Alberta's reserves are the third most large in the world and make Canada the fourth largest producer of crude oil on the planet.
The extractive sector (oil, gas and minerals) is worth 8 percent of Canadian GDP, but 27 percent of that of Alberta.
For the province, therefore, the Keystone XL is fundamental, because it would strengthen its access to the US market – on which it almost entirely depends – and would allow it to solve the problem of under-capacity of its own pipelines. The network of oil pipelines at its disposal is in fact inadequate for production volumes and does not allow exports to express themselves fully, with negative repercussions on prices .
First of all, the premier of Alberta Jason Kenney, conservative, spoke with particular enthusiasm on the cancellation of the Keystone XL, who asked Biden to show respect to Canada and discuss the fate of the project together. Kenney particularly insisted on the value of the pipeline for relations between the two countries, which he defined as “partners in prosperity, […] in the fight against climate change, […] in energy security”. There are strong economic, political and strategic ties between the United States and Canada.
The Keystone XL is so important to Alberta's interests that the provincial government invested $ 1.1 billion directly into the project to ensure it was built. Money that appears to have been lost.
WHY BIDEN OPPOSES THE KEYSTONE XL
Biden opposes the Keystone XL mainly for two reasons, well summarized by theNew York Times : because the pipeline would carry the polluting oil of the oil sands , and because the work embodies the reluctance of the United States to distance itself from fossil sources. While Biden rejoined the Paris climate accords, he said he wants to zero US net emissions by 2050 and wants America to regain climate leadership. Deleting the Keystone XL is a simple move but with a great symbolic value, which reaffirms the climate commitments of the new administration and the "detachment" from the previous one.
The oil taken from the Alberta fields, called oil sands or tar sands, is precisely a dense and viscous bitumen. The extraction process is complicated and requires a lot of energy: it is estimated that a barrel of bitumen from the sands produces 30 percent more greenhouse gas emissions than a barrel of conventional oil. However, the Canadian government recalls that the environmental impact of bitumen has decreased thanks to technological innovation, which has allowed the development of more energy-efficient extraction methods.
THE KEYSTONE XL IS CONVENIENT OR NOT?
Some analysts have wondered whether, regardless of the motivations of the two parties, the Keystone XL makes "sense" from an economic point of view. First of all, we must take into account the transition underway towards renewable sources : it does not mean that fossil fuels will disappear, but their use will certainly go down. Investors are also abandoning the most polluting extractive projects, such as those in the oil sands , to focus on something else: on renewables, often. The latest case is that of Equinor yesterday.
It is not only a matter of public pressure, but also of economic convenience. Producing bitumen from Canadian sands guarantees good profits only when oil sells for more than 60-65 dollars a barrel. But the cost year, global prices first plummeted and then averaged around $ 40, and forecasts say they will remain below $ 50 until 2022.
BETWEEN ANTI-BIDEN FUNDING AND GREEN ANNOUNCEMENTS
On Sunday TC Energy, the Canadian company that owns the project, announced that by 2023 all operations related to the Keystone XL will be net zero emissions. And that by 2030 the pipeline will be powered exclusively by renewable sources. But the green effort was not enough to save the conduct.
TC Energy had also been ahead of the curve, funding the election campaigns of Republican Party candidates in Georgia Senate ballots – Kelly Loeffler and David Perdue – with the aim of hindering the implementation of Biden's climate agenda. It did not work.
AND NOW?
In a statement released last Sunday, Kenney said he would partner with TC Energy and use “all available legal avenues to protect” Alberta's interests in Keystone XL.
The old free trade agreement between Canada, the United States and Mexico – NAFTA, later replaced by the USMCA – provided for companies to sue the three governments if they felt they had been harmed by various laws or regulations. With the transition to the USMCA, however, the mechanism that regulated disputes between states and companies, contained in Chapter 11 of the old NAFTA, will be eliminated as regards relations between the United States and Canada. But not immediately.
Theoretically, therefore, TC Energy could sue the US government for canceling building permits for the Keystone XL by July 1, 2023.
Proceeding in this way, however, would immediately ruin relations between Canada and the new Biden administration. Ottawa, on the other hand, is focusing heavily on resuming contacts with Washington after four years of Trump presidency, which has damaged virtually every point on Trudeau's international agenda . On the other hand, the alignment between the Canadian prime minister and the new American president will certainly be greater.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/energia/keystone-xl-joe-biden/ on Sat, 23 Jan 2021 08:12:08 +0000.