Canadian Manufacturing

Obama rejects Keystone XL pipeline

Project rejected because it's not in the U.S. national interest; TransCanada president Russ Girling said "rhetoric won out over reason"

WASHINGTON—The seven-year saga of the Keystone XL pipeline ended Nov. 6 with U.S. President Barack Obama rejecting a project that had become the biggest irritant in Canada-U.S. relations, amid its improbable escalation from an isolated land dispute into a major cross-border environmental battle.

The pipeline became the fault line in the American battle over climate change as the green movement pressed the president to turn down a permit that would have allowed Calgary-based TransCanada Corp. to ship bitumen from Alberta’s oilsands to U.S. Gulf Coast refineries.

After years of suspense and a change in government in Canada, Obama called the new prime minister to break the news: the project is being rejected because it’s not in the U.S. national interest.

According to public statements from both leaders, Prime Minister Justin Trudeau expressed disappointment but vowed not to let the development poison relations between the countries.

Trudeau has promised a more constructive tone on climate change and on the broader relationship than his predecessor Stephen Harper, who cancelled the last North American leaders’ summit in frustration over the pipeline issue.

“We are disappointed by the decision but respect the right of the United States to make the decision,” Trudeau said in a statement.

“The Canada-U.S. relationship is much bigger than any one project and I look forward to a fresh start with President Obama to strengthen our remarkable ties in a spirit of friendship and co-operation.”

The death of the project has a staggering array of consequences: on people living near the route, on businesses linked to the oil industry, and on a now-jubilant climate-change movement.

But critics argue that Obama’s logic is built on sand.

His own State Department has repeatedly concluded that this project would be better for the environment than high-emitting trains. Train transportation of oil is skyrocketing. And Canadian oil exports have continued to rise, even as oilsands opponents worked to block pipelines—first Keystone, and now others within Canada.

Keystone would have handled nearly one-quarter of all the Canadian oil exports to the United States, which would have created thousands of temporary jobs and longer-term resource revenues for American counties along the route.

Sources recently indicated that TransCanada Corp. was weighing a possible NAFTA lawsuit as it braced for a rejection, with storage yards stacked with mountains of unused pipe in a project that has cost the Calgary company billions. Its share price had plummeted 40 per cent since last year with falling oil prices, and dropped another five per cent after the announcement.

The company said Nov. 6 that it was reviewing its options, including filing a new permit. The project will likely become a 2016 U.S. presidential election issue, with Republicans all aligned in favour of it.

“Today, misplaced symbolism was chosen over merit and science—rhetoric won out over reason,” TransCanada president Russ Girling said in a statement.

“TransCanada is reviewing the decision and its rationale. We believe KXL is in the best interest of the United States and Canada.”

Unfortunately for them, the man in the Oval Office disagreed.

Obama began his remarks in the White House by dismissing the rhetoric of both sides in the debate—he said the project would neither have been a huge economic boost, nor a climate disaster.

But the green movement won out, for several reasons. The Obama administration had to determine whether the project satisfied the national interest and it concluded:

  • The job-creation benefits would be minuscule _ a few thousand, given the 13.5 million created in the U.S. economy since the 2008 recession and the national five-per-cent unemployment rate.
  • The pipeline would not lower gas prices, Obama said: “In fact, gas prices have already been falling steadily.”
  • It would not mean more energy security for the U.S., he said. Obama noted the huge spike in American oil production, which he said had already secured the energy supply.

Then he put the issue in the broader context of climate change. With the world gradually transitioning toward cleaner energy, Obama said, some potential projects will have to go unfulfilled.

“America is now a global leader when it comes to taking serious action to fight climate change,” Obama said. “And frankly, approving this project would have undercut that global leadership. And that’s the biggest risk we face—not acting.”

He continued: “Today, we’re continuing to lead by example. Because ultimately, if we’re going to prevent large parts of this Earth from becoming not only inhospitable but uninhabitable in our lifetimes, we’re going to have to keep some fossil fuels in the ground rather than burn them and release more dangerous pollution into the sky.”

Obama certainly didn’t sound like a pipeline opponent a few years ago.

He’d even appeared at a TransCanada pipe yard for an election-year speech in 2012 where he promised to get the southern leg of Keystone XL opened as quickly as possible. Oil began flowing two years into that southern portion, between the U.S. midwest and Gulf Coast refineries.

But Obama’s tone hardened. He even vetoed a bill passed by Congress this year that would have forced him to approve the northern leg.

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