Canadian efforts to get President Biden to license the Keystone XL pipeline have failed, with TransCanada (TC) Energy formally having to give up the controversial $ 9 billion project. While this undoubtedly appeals to environmental activists, it is a massive geopolitical mistake by the Biden administration, which puts politics and ideology before national interests.
As I wrote earlier, the Keystone XL pipeline is already part of an existing transnational network that is divided into phases that traverse Canada and the United States. At the center of the recent Keystone debate is the proposed fourth phase, which would move heavy oil sands from Hardisty, Alberta, Canada, via Montana to Steele City, Nebraska, with a capacity of 830,000 barrels per day (bpd). Some estimates suggest that this would have reduced America’s reliance on heavy imports of crude oil from Venezuela and the Middle East by 40%.
Alberta’s tar sands have an estimated 17% higher emissions than other sources (equal to or less than Venezuelan or California oil). Environmental activists have claimed that this means the pipeline should be stopped in order to import « cleaner » oil from distant continents.
However, the “Not In My Backyard” (NIMBY) approach will backfire. Regardless of the government’s decision to get out of business, Canadian tar sands will be developed. Without the fourth phase to safely pipeline the oil to the United States, the extracted crude will continue to be brought to the United States by rail and truck – increasing both greenhouse gas emissions and environmental safety.
The relative environmental cost of transportation have a clear winner. Rail transport – many times cheaper than trucking – costs $ 1,000 per million barrel miles compared to $ 500 by pipeline. Pipelines are also the safest form of transportation. According to a study by the US Department of Transportation, the likelihood of a spill is much lower than with a truck or train. In addition, satellite-based surveillance and high-tech control systems in today’s pipelines mean fewer serious leaks when they occur and a much lower risk to human life. An oil car derailed in Quebec in 2013 killed 47 people, while the worst pipeline disaster in North America in the past decade killed two.
Without the Keystone XL pipeline, the US will continue to do record imports Set up Canada – over 3.8 million barrels a day. The current expansions are set to add another 950,000 bpd by 2025.
Shortly before TC Energy, oil sands producer MEG Energy, issued a declaration of revocation
announced the top construction of the Trans Mountain Expansion, ending at Westridge Marine Terminal in Burnaby, British Columbia. This segment will increase the current capacity from 300,000 bpd to 890,000 bpd. The Trudeau Administration bought the project in 2018 to ensure its development to open Canadian oil markets to China.
If exports are not going to the US, the likely recipients are countries with far worse environmental regulations like China or India. Without this vital supply to American refineries, companies will continue to rely on heavy imports of crude oil from less friendly countries like Venezuela, Saudi Arabia, and Russia.
In a decision, President Biden simultaneously increased the domestic price of energy and widened the gap between the US and Canada. The demise of Keystone XL is highlighted by the government’s policy of ending resistance to the massive Nord Stream 2 natural gas pipeline that connects Russia with Germany. While claiming an environmental victory domestically, Biden has given Russia the opportunity to make billions of dollars exporting hydrocarbons to Europe.
An additional offense for the Canadian government was the financial implications of the cancellation. The Province of Alberta has invested heavily in the project because of the potential benefits and taxpayers will pay $ 1.3 billion.
The US has proven to be an unreliable business and strategic partner in this case. We shouldn’t be surprised if Canadian companies forego future business with American colleagues in favor of less environmentally friendly but more reliable partners in the Pacific – in China.
I am a Senior Fellow with the Atlantic Council and a founding director of International Market Analysis, a Washington, D.C. resident global risk advisory boutique. I recommend
I am a Senior Fellow with the Atlantic Council and founding director of International Market Analysis, a Washington, D.C. resident global risk advisory boutique. I advise law firms and corporations and once helped bring a famous Russian oligarch out of Putin’s prison. I am also a Senior Fellow at the International Tax and Investment Center (ITIC), where I lead their Energy, Growth and Safety (EGS) program.
For 22 years I was the Heritage Foundation’s leading Russia / Eurasia and international energy expert. My consulting focus is on political risks, national security and energy policy, especially in Russia / Europe / Eurasia and the Middle East. The firm’s interventions include international security, economics, law, politics, terrorism, and crime and corruption. In addition to advising both the public and private sectors, I regularly testify before the US Congress and appear on Bloomberg, CNN, FOX, BBC, Al Jazeera, and other television networks. In my free time I enjoy skiing, sailing, classical music and my two cats.
USA lose, Russia and China win with Keystone XL closure