Prime Minister Mark Carney’s government sees the Keystone XL proposal as a lever to make a deal with U.S. President Donald Trump.Blair Gable/Reuters
Reviving Keystone XL is, in the eyes of former Alberta premier Jason Kenney, a brilliant “judo” move.
Prime Minister Mark Carney’s suggestion that the Keystone XL pipeline project could be revived could end up tying Canada more closely to the United States, rather than diversifying trade.
But the idea turns U.S. President Donald Trump’s own talk about Canada on its head, Mr. Kenney argues, perhaps making him realize there is something he wants from this country – something that could be leverage for Canada in trade talks.
“Trump has said endlessly he doesn’t need anything from Canada, including our energy,” Mr. Kenney said in an interview.
“I think Canada has been looking for a way for Trump to understand that the U.S. needs Canada, and this is a pretty powerful way to do that – which is to give him something that he wants that is a win for us and a win for him.”
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Indeed, Mr. Trump has repeatedly expressed a desire to see Keystone XL built. It could provide heavy oil for U.S. refineries, and bolster U.S. energy security.
There’s a hitch, though, and Mr. Kenney understands it as keenly as anyone.
As premier, Mr. Kenney put Albertans’ public money into Keystone XL, but the project was quashed in 2021 when Joe Biden became president and revoked its permit – leaving Alberta with a $1.3-billion loss.
If construction begins again, the next president could kill it in just over three years. Why would any company take that risk?
That’s why Mr. Kenney says governments will probably have to get involved – Canada’s or Alberta’s – backing the pipeline project to get it done, fast.
Former Alberta premier Jason Kenney put public money into Keystone XL, but the project was quashed in 2021.Dave Chidley/The Canadian Press
Perhaps the pipeline could be built as a joint venture between the U.S. and Canadian governments, or the Alberta government too. That could see the public on the hook for $5-billion to $10-billion. And perhaps, if the U.S. government was involved, there could be some insurance against that risk.
But all of that – a publicly backed project to build a new oil pipeline to the U.S. – seems a long way from the consensus that emerged in the first months of Mr. Trump’s trade war. It would not diversify oil exports away from the U.S.
It means a different kind of political risk for Mr. Carney, too: He would have to go from saying he is willing to approve an oil pipeline – as long as it is accompanied by a carbon-capture project to reduce greenhouse-gas emissions – to organizing a rushed national project to build one.
But Mr. Kenney argues that Keystone XL is now the most viable path to an oil pipeline – if it also serves as a bargaining chip with Mr. Trump.
Alberta Premier Danielle Smith proposes a different pipeline to British Columbia’s northern coast, to export oil to Asia. But B.C.’s government is against that, and against lifting the tanker ban off the northern coast.
There is Indigenous opposition to the idea – and it is worth remembering that while Stephen Harper’s Conservative government tentatively approved the previous Northern Gateway pipeline proposal, it was later quashed by the courts for a failure to properly consult and accommodate First Nations.
Mr. Kenney argues it could be easier and faster to build Keystone XL from Alberta to Nebraska. Hundreds of kilometres of pipeline have already been built on the Canadian side of the border and lessons learned about the U.S. route could avoid delays now. Mr. Trump could speed approvals south of the border. If construction is advanced by 2028, the next U.S. president is unlikely to kill it, Mr. Kenney said.
A government-to-government agreement to build the pipeline might even include some way for the U.S. to cover Canadian losses if a future president cancels it.
Mr. Carney’s government clearly sees the Keystone XL proposal as a lever to make a deal with Mr. Trump. Natural Resources Minister Tim Hodgson made that pretty clear in an appearance before the Senate last Thursday, when asked why the government would approve a pipeline that does nothing to diversify exports away from the U.S.
“We are in a mercantilist world where it’s a card game. We need to play our cards,” he said. “We have a number of cards they want. We have things we need to get.”
That’s a whole new pipeline game, one that didn’t seem to be on the table a week ago. The question is whether Mr. Carney is willing to gamble to play the Keystone card.