Both Alberta Premier Danielle Smith and U.S. President-elect Donald Trump want to revive the long-dead cross-border Keystone XL pipeline project, but is that feasible?
A major challenge in resuscitating the project will be ginning up enough political will and corporate determination to wade through the legal and regulatory requirements to begin construction, not to mention tackling the growing anti-fossil fuel advocacy across the continent.
The timing of the purchase announcement, just a week after the U.S. election, indicates that the pipe was going to be sold off regardless of whether or not pro-energy Republicans came to power with a mandate to reduce regulatory burden on fossil fuel projects.
Risks
Issuing a pipeline permit is easy—navigating the labyrinthian legal process that follows is the hard part. If the Trump administration issues yet another Keystone XL permit next year, the legal battle could be initiated once more with another round of lawsuits from environmental groups.With lengthy delays comes the additional possibility that the project may be cancelled before construction begins, if Trump’s last term is followed by a Democratic administration that is less supportive of large fossil fuel projects.
Since Keystone XL is a project on both Canadian and American soil, reviving it would require political will on both sides of the border. The federal government in Canada had been supportive of the project, but the main proponent was Alberta. Premier Smith’s government would probably not have to contend with the same legal hurdles as the Trump administration. It would, however, have to make the potentially difficult decision of whether to back the project with taxpayer funds as former Alberta Premier Jason Kenney’s government did.
‘De-risking the Project’
The precedent set by the Kenney government’s investment in Keystone XL and subsequent loss, as well as the cost overruns and delays after Ottawa’s purchase of the Trans Mountain pipeline, puts Smith in a difficult situation in regard to embarking on a similarly high-risk investment.Smith said on Nov. 25 that her government is looking to get more Alberta oil and gas to the United States in ways that would carry less risk than investing directly in a cross-border project.
“Maybe de-risking the project involves having an American partner, an American pipeline company, partner with our companies here,” she told reporters during an event at the Leduc No. 1 oil discovery site south of Edmonton.
“We just don’t think the best way of doing it is putting government dollars into it, but we think there are other things we can do to change the risk profile.”
Two major factors would need to come together to get the Keystone XL project started up again: renewed corporate enthusiasm and sufficient political will on the part of the United States and Alberta governments to tolerate the risk of another failed attempt.
Even if these factors come together, the project would need to successfully run the legal gauntlet of environmental challenges and then complete construction before a potential future fossil fuel-skeptical Democratic administration comes to power.
Despite the many challenges, the reinvigorated enthusiasm around Keystone XL could signal a period of renewed cooperation between Alberta and the United States stemming from a shared worldview on the energy industry.