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Keystone Pipeline Cancelled: A Watershed Moment for Fossil Fuels in Canada?

by Eric Morrison Americas Jul 2nd 202112 mins
Keystone Pipeline Cancelled: A Watershed Moment for Fossil Fuels in Canada?

Before being cancelled in January, the Keystone XL Pipeline was a source of great controversy among environmentalists. Why are its effects on the future of Canadian fossil fuels so complex? For the proponents of the pipeline, the focus is generally on economics – but we cannot look at economics in isolation from society, politics, history or the environment and hope to get a comprehensive understanding of the topic at hand. With the pipeline out of the picture, what is the state of fossil fuels in Canada now?

What is the Keystone XL Pipeline and why is it so controversial?

The Keystone Export Limited (Keystone XL or KXL) pipeline, transporting bitumen (asphalt) from Alberta to Nebraska, has seen a renewed relevance in the wake of President Biden’s executive order revoking of TC Energy Corp’s cross-border building permit, which halted the construction of the controversial pipeline. Biden’s move brought the decades-long controversy back to the forefront of Canadian policymakers and corporate agendas.

You might also like: The Future of Hydroelectric Power: A Regional Analysis

canada pipeline fossil fuels

The 1947-kilometer KXL pipeline was intended to transport oil and bitumen from Alberta to Nebraska. From Nebraska, these fossil fuels would be transported via existing pipelines to refineries in Texas, and then exported globally. Source: BBC.

The Canadian energy firm TransCanada Corp. (as of 2019: TC Energy Corp.) and American hydrocarbon giant ConocoPhillips proposed the KXL project in 2008. After buying ConocoPhillips’ stake in 2009, TC Energy Corp. gained approval for KXL from the Canadian National Energy Board in 2010. Pressure was placed on multiple American governmental agencies to approve the project so construction could begin. Despite this, the pipeline experienced constant roadblocks, ranging from social action and logistical issues to lawsuits, which meant that TC Energy Corp.’s initiatives remained stationary until the pipeline was rejected in 2015 by the Obama administration. 

Donald Trump’s election subsequently brought the KXL project back to life with his 2017 executive order which approved the pipeline and mandated use of American steel in its production. Due, in part, to the Albertan provincial government’s investment of $1.5 billion and guaranteed additional $6 billion (through 2021), construction went ahead in 2020. 

On the one hand, the Canadian government and the fossil fuel industry saw the pipeline as a rejuvenation project which would stimulate provincial and national economic growth and provide energy security for North America. On the other are concerns from Indigenous groups, ranchers and farmers, in addition to environmental advocacy groups and think tanks, regarding environmental damage. These concerns are due to both the environmental safety record of Keystone and the repercussions of continued dependence on fossil fuels.

 Scott Moe, the Premier of Saskatchewan, a Canadian province with a stake in the pipeline, told the Canadian Broadcasting Corporation (CBC) that Biden’s blocking of the KXL project was “concerning and surprising,” and raised questions about the future of Canada-US relations. The KXL pipeline was estimated to create 42 000 jobs between Canada and the US over the course of its construction, which policymakers and private-sector backers of the pipeline frame as necessary to the health of the Canadian economy. According to Moe, the KXL pipeline is a “sustainable” and “net-zero emissions” project. Paul Lefebvre, a Canadian Member of Parliament (MP) and the Parliamentary Secretary for the Ministry of Natural Resources (MNR), supports this claim and argues that strict Canadian regulations create “the cleanest fuels in the world.” 

These 42 000 jobs are classified as temporary employment, however, with an average duration of only one to two years. The number of permanent jobs the pipeline would create was estimated at merely 35, and based solely in the United States. Another problem with Moe’s claim lies in the definition and calculation of net-zero provided by the Canadian government. According to the Pembina Institute, a Canadian clean-energy think tank, the calculation of net-zero emissions omits the majority of emissions related to a project over its lifetime, while still accounting for avoided emissions. Avoided emissions are counted by speculating on the quantity of emissions saved by replacing an old facility with a new, eco-friendly one. The Pembina Institute concluded that the calculations result in skewed data and are therefore flawed. In addition, it seems that these calculations favour the development and construction of new projects, with the aim to boost growth, so it is not a stretch that the Pembina Institute claims that there are loopholes within these regulations for corporations to exploit.

Similarly, Lefebvre’s allusion to clean energy is in reference to the Canadian Clean Fuel Standard. This regulation was proposed in 2016 under the Environmental Protection Act, 1999. The Clean Fuel Standard provides regulation and targets for emissions and creates a marketplace for trading carbon emissions. However, it has yet to be signed into law, let alone come into force. The KXL was proposed long before the Clean Fuel Standard, and while this regulation is arguably a step in the right direction, it is also seen as an attempt by the Canadian federal government to reconcile their contradictory aims of convincing the Biden administration to approve the pipeline while taking steps towards the implementation of green energy facilities.

Another point of contention in the KXL debate is energy security. Energy security is a component of a holistic national security programme, since it allows a country to “fuel its economy and power its defence without challenge from hostile actors,” according to Andrew Holland of the American Security Project. The governments of Canada and the US have been discussing the necessity of gaining energy security for North America for decades. TC Energy Corp. has promoted the KXL pipeline as a necessary means of helping Canada and the US achieve this goal, appealing to the interests of the geopolitical realists within both administrations. 

By doing this, TC Energy Corp. and its supporting policymakers have situated the KXL pipeline within a broader debate around national security, providing proponents of the pipeline with strong rhetorical tools to use against their opposition. For example, people speaking in favour of the pipeline use arguments that evoke strong (and dangerous) nationalistic sentiments within certain sectors of their Western audience to counter arguments based on environmental and humanitarian concerns. The video linked here exemplifies this with the TC Energy Corp. representative portraying Canada as a “friendly, neighbourly country” to the US that shares “American values” in stark contrast to the Middle East, where “conflict oil” comes from. 

Using the power of emotion as a call to action is used by both sides of this controversy, however. Rather than using what are essentially dog whistles to garner support and ultimately provide their shareholders with profit, those protesting against the pipeline use rhetoric reflecting the emotional, cultural, ecological and economic importance of asserting Indigenous rights over their land within the context of Canadian and American settler colonialism, Indigenous cultural preservation, land rights of ranchers and farmers, the loss of biodiversity resulting from spills, and contamination of food supplies for humans and livestock.

canada pipeline fossil fuels

Map showing the locations of Indigenous Reserves within Canada as of 2012. Source: Canadian Government.

native american land in the us

Map showing the locations of Indigenous reservations in the United States as of 2008 (at the beginning of the Obama administration). This does not include Alaska and Hawaii, which have one and zero reservations, respectively. Source: BBC via US government sources.

The above maps show the aforementioned legacy of settler colonialism. This cannot be ignored, but historically (and currently) largely is, especially in regard to the KXL pipeline project. It reflects the fact that a large part of the story is lacking serious consideration from the political and commercial forces that wield decision-making power in Canada. This legacy is especially apparent when consulting the interactive map of historical indigenous territories found below:

Link: https://native-land.ca/ 

Many claims against the pipeline arise from Indigenous communities across North America. These claims largely originate from the deep connection that many Indigenous cultures have with the environment. Increasing knowledge and awareness of Indigenous cultural beliefs is extremely important, and if Canada is truly committed to making amends, it should be mandatory for corporations and governments to take them into consideration when creating projects and drafting policy that directly threaten Indigenous communities and the environment. 

The concerns about the pipeline’s effects on the environment are shared by ranchers, farmers and environmental activists. Keystone-owned pipelines have a less-than-stellar safety record. There have been 21 oil spills between 2010 and 2019, sowing doubt on the ability of the company to adhere to safety and environmental regulations. This also coincides with the period of time that TC Energy Corp. was in negotiations with the US government, trying to win approval for the pipeline by accepting environmental regulations.

Two of these spills, in South Dakota in 2017 and North Dakota in 2019, involved 1.54 million litres 1.44 million litres respectively. These have resulted in the mass contamination of land, water resources and diverse ecosystems. Spills from tar sands (bitumen) being transported throughout the Keystone pipeline infrastructure to refineries in the United States are extremely difficult to detect. Although the bitumen is diluted in order to facilitate its transport through the pipelines, the weight of the bitumen causes it to sink when it comes in contact with water, rather than float like other forms of oil. As noted by the Natural Resources Defence Council (NRDC), many provinces and states have neither the infrastructure nor the technology to adequately deal with bitumen spills. 

The construction of the KXL pipeline, in particular, would further damage the environment. According to the NRDC, an American nonprofit organisation, a study published in 2020, which was sanctioned by scientists working with TC Energy Corp., showed that “the anti-corrosion coating on the pipes for the project is defective after being stored outside and exposed to the elements for the past decade”. 

Spills would also affect farmers and ranchers who live on the land that the KXL pipeline was slated to run through by passing through aquifers that are used to irrigate crops in an overwhelmingly agricultural area. This renders the land unusable, meaning the farmers and ranchers face decreased productivity, while also decreasing the amount of food they are able to sell on the domestic and international market.

Fossil Fuels and the Canadian Economy

Despite the numerous problems with KXL, the issue extends far beyond the pipeline itself; the controversy surrounding the KXL pipeline is a useful microcosmic example for the whole Canadian fossil fuel industry. 

Canada has the world’s third-largest oil reserves and is the world’s fourth-largest oil exporter. In 2019, 98% of these exports were to the US. In 2016, the heavily subsidised fossil fuel sector accounted for 5.4% of Canada’s GDP. The heavy subsidisation of one of Canada’s largest exports illustrates the underlying necessity of maintaining a competitive advantage – at the expense of the environment and social services that could be funded with the taxpayer money used for these subsidies. The importance of the fossil fuel sector to the Canadian economy therefore cannot be understated, and is at the root of the uneven power relations in environmental and fossil fuel debates. 

fossil fuels subsidies

Canada spent around US$2.7 billion (CA$3.6 billion; over 1.5% of its GDP) on subsidies to the fossil fuel sector in 2016. Source: Green Market Oracle (via International Monetary Fund (IMF))

A theory of economic development called the Staples Thesis was developed by Canadian economists to explain Canada’s development. One of its main claims was that the export of raw materials (staple goods) shaped the trajectory of Canadian economic development. This development was argued to be regionally dependent (on the type of raw materials they had access to) and shaped the country’s social and political development. 

According to the Staples Thesis, the socio-political culture of Western Canada has been shaped by the fossil fuel industry. This means that, to the people, employment in the fossil fuel industry is much more than a means to make money, it is seen as a way of life. This explains why corporations as well as federal and provincial levels of government can use nationalist rhetoric to appeal to workers who have experienced unstable employment as a result of the uncertainty surrounding the KXL pipeline.

According to Alberta Premier Jason Kenney, the KXL pipeline was slated to provide Alberta with $30 billion in revenue over 20 years, which was seen as a worthwhile return on an investment of $1.5 billion (and another $6 billion promised) in taxpayer money. In addition, Kenney argued that the completion of the KXL pipeline would provide $40 million per day to the Canadian economy.

Due to the fact that existing Keystone infrastructure brings $100 billion worth of energy to the United States every year, Kenney remained hopeful that economic pressure and threats to the United States would help further the interests of the Canadian fossil fuel sector. 

This argument reveals the federal and provincial government’s inherently contradictory interests. In other words, they need to pursue economic growth and maintain support within their respective electorates while also promoting sustainability and eco-friendly policy in order to maintain their international and domestic image. 

Regardless of how fossil fuels are extracted, transported, and consumed within Canada, marketising and commodifying pollution via emissions trading, such as outlined in the Clean Fuel Standard, is an insufficient solution to continued dependence on fossil fuels. According to Daniel Tanuro, an ecological correspondent, on an international scale, “Carbon trading is a source of windfall profits for polluting sectors. They invest little or none of that profit in low carbon technologies, and instead try to slow or delay the implementation of climate policy.” 

Attracting investors to fossil fuel-related projects like KXL is not what the global community needs, as that will only encourage growth in an environmentally-damaging industry. Pursuing projects like the KXL pipeline promote short-term economic gains but contribute heavily to pollution which will hasten the effects of climate change. 

KXL’s Latest Cancellation: Temporary Setback or a Wake-Up Call?

It is unlikely that the latest cancellation of the KXL pipeline under the Biden administration means the end for future Keystone projects. The KXL project was rejected under Obama, yet the Trump administration approved it. In other words, Biden’s cancellation of the pipeline reversed Trump’s decision to go ahead with it, which was itself reversing Obama’s decision to cancel it. This uncertainty, while creating a risky environment for investors, also means that there is support within communities and governments for fossil fuel infrastructure.  

Moving forward, there has been speculation that TC Energy Corp. may file lawsuits against the Biden administration in pro-oil states like Texas or West Virginia. Due to the aforementioned investments, subsidies and geopolitical considerations, it seems unlikely that TC Energy Corp. (with the backing of Canadian federal and provincial governments) would take Biden’s cancellation as the final word. The struggle against KXL, and the fossil fuel industry at large, for environmental protection and social justice hasn’t been won yet.

Despite formally cancelling the KXL pipeline, the response from Canadian federal and provincial governments and the private sector shows that the support for the pro-business status quo remains strong despite rhetoric that Canada is looking towards a green, sustainable future. 

co2 per country

Canadian emission trends by sector. Source: Pembina Institute.

In fact, Alberta Premier Jason Kenney argued in favour of economic sanctions and the use of “all legal avenues available” against the US in response to the cancellation of KXL. Pressure has also been applied on Biden from the Canadian Ambassador to the United States, Kirsten Hillman, to approve the pipeline.

Saskatchewan Premier Scott Moe argued that demand for oil and fossil fuels remains strong in North America, and if it is not supplied by North American energy companies, then it will be purchased internationally from OPEC nations. Like the linked video from TC Energy Corp., Scott Moe mentions OPEC (conjuring up memories of the 1973 OPEC oil shocks caused by OPEC placing embargoes on Western countries in retaliation for supporting Israel in the 1973 Arab-Israeli War), and specifically Venezuela, to strategically evoke a nationalistic response. However, Moe’s assertion of the retained demand for fossil fuel consumption takes for granted the automobile culture deeply ingrained in North America.

This was perpetuated in large part by marketing campaigns from the automobile industry and other sectors necessary for automobiles to function, such as petrochemicals, finance and insurance, marketing and advertising, as well as urban planning and construction, in order to sell more cars and increase economic growth. An essay titled The Political Economy of Car Dependence: A Systems of Provision Approach, published in 2020 by the journal of Energy Research & Social Science, sheds light on the political economic factors that hold us back from transitioning from automobiles to more eco-friendly modes of transport.

Biden’s cancellation of the KXL pipeline therefore does not appear to be a wake-up call for Canadian policymakers and corporations, but rather as another challenge to overcome. Systemic change is therefore needed. Instead of allowing power politics to have its way and have KXL’s final cancellation be simply a temporary setback for TC Energy Corp., it is imperative that the KXL controversy be used by progressive groups as the starting point of a shift towards a genuinely eco-friendly energy sector. 

The watershed moment that the Canadian economy desperately needs does not seem to be a priority for Canadian public and corporate leadership. The eco-friendly policy that Canada is suggesting is likely insufficient for genuine change, which means that organised collective action in the form of grassroots advocacy groups and think tanks who can push for stricter eco-friendly international norms and policy through legal channels are increasingly necessary. 

Featured image by: Flickr 

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