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The Keystone Rejection Test of Trudeau's Equilibrium Law on Climate and Energy

The Keystone Rejection Test of Trudeau’s Equilibrium Law on Climate and Energy

Ottawa – One of the first actions President Biden took upon taking office was to revoke the Keystone XL pipeline permit, the controversial project to transport crude oil from Canadian oil sands to the United States.

But Prime Minister Justin Trudeau and the elected officials in Alberta, the Canadian province where the pipeline originates, are not giving up so quickly.

The approximately 1,200-mile-long Keystone XL was intended to transport crude oil from Canada to Nebraska, where it would be connected to an existing network to deliver crude oil to refineries in the Gulf of Mexico.

By canceling the pipeline, Biden took some of his first steps toward reversing the legacy of the Trump administration, which has revived the project after President Barack Obama rejected it in 2015.

Mr. Trudeau has long supported the pipeline as part of his efforts to balance his priority of combating climate change with support for the Canadian energy industry in Alberta and in other western provinces.

Even before Mr. Biden’s announcement, the Prime Minister of Alberta sent a statement saying he would object to it, and pledging to take legal action.

“This is more than just Keystone XL,” said Prime Minister Jason Kenny, who has often been a harsh conservative critic of Mr. Trudeau’s liberal government. “This is about the relationship between Canada and the United States, and this is about tens of thousands of jobs here, and this is about billions of dollars in revenue for governments to pay for things like health care.”

Canada exports about 80 percent of its oil to the United States, most of which comes from oil sands, which, along with the energy industry, are essential to Alberta’s economy. Even during the current oil price slump, the sector provides about 140,000 jobs, and before the oil price crash, revenues from the oil and gas industry made up about 20 percent of Alberta’s budget.

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The oil industry has pushed for pipeline development in the hope that a direct route to the Gulf of Mexico, as refineries are equipped to process heavy, low-quality oil from oil sands in Canada’s interior, will eliminate shipping bottlenecks and lower prices. Andrew Leitch, an energy and environmental economist at the University of Alberta in Edmonton, said.

But the pipeline project has been fiercely opposed by environmentalists. American farmers and ranchersAnd also indigenous groups in the United States who were afraid to change and May harm their land.

“President Biden’s decision to reject Keystone XL on its first day was a sign of a new era,” said Anthony Swift, Project Director for Canada at the Natural Resources Defense Council in Washington, an environmental group that has long criticized the oil sands.

“New fossil fuel development projects will be put under some kind of climate test that assesses whether these projects are in line with our international climate goals,” said Mr. Swift.

The pipeline has also been targeted by US environmentalists as part of their effort to shut down the oil sands, which they say is a particularly dirty energy source. But even with Keystone’s demise, that effort appears to have been foiled.

There are several pipelines between the two countries, in addition to the railways through which Canada sends oil to US refineries. Two other Canadian pipelines serving the United States are currently being expanded, making it likely that production will continue in the oil sands.

However, Mr. Leitch said, the question is whether these other pipelines are also targets of the new US administration: Is Mr. Biden “saying we don’t want cross-border pipelines, or we don’t want that particular pipeline?”

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One of the pipelines currently being expanded is located in the Midwestern United States. The last oil sands link to a port in British Columbia that can serve refineries on the Pacific coast of the United States by ship and which also has a pipeline to Washington state. Both were targeted by the protests.

Another pipeline – running from western Canada through the Midwest of the United States – Michigan has proposed revoking its permit for environmental reasons, a move that could choke much of the pipeline route.

Biden’s announcement to cancel Keystone XL fulfilled a promise he had made repeatedly during his election campaign as part of his climate change agenda, although the president has not announced any future plans for other Canada-US pipelines.

In a statement released on Wednesday before Mr. Biden took action, TC Energy, the company that owns Keystone, said it was disappointed with Mr. Biden’s choice and that it would suspend work on the pipeline while it considers its options.

The company said the cancellation “would result in thousands of layoffs of union workers and negatively impact leading industry commitments to use of new renewable energy as well as historic equity partnerships with indigenous communities.”

Chris Blumer, President and CEO of the Canadian Energy Pipeline Association, said the demise of Keystone XL had more to do with opposition to oil sands than the project itself.

β€œIt seems that no matter what the industry does, there is no basis for compromise or compromise,” he said from Calgary. “The appetite among environmentalists to shut things down is insatiable.”

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The likelihood of either Mr Kenny or TC Energy winning against Biden through litigation is slim, said Christine Van de Bizenbus, a law professor at the University of Calgary in Alberta.

She said challenges in US courts or through investor judgments for trade agreements could take years to resolve, are likely to fail, and, in the end, will not regain the necessary presidential clearance for the pipeline.

And a Canadian victory in court would not eliminate the other obstacles to the Keystone project – legal challenges from environmental groups, regulatory barriers within states, and an unfavorable economic climate that scared investors and hampered construction.

β€œI really wonder the wisdom of continuing to pursue this,” she said. “It would be the fastest to build a pipeline in Canada.”