Alberta premier calls Biden's XL cancellation a 'gut punch' for U.S.-Canada trade relationship

(Jason Franson/The Canadian Press, Carolyn Kaster/The Associated Press)

Alberta Premier Jason Kenney said U.S. President Joe Biden's decision to revoke the permit for Calgary-based TC Energy's Keystone XL pipeline was a "gut punch," characterizing it as a direct attack on the trade relationship between the two countries.

"Sadly, [this is] an insult directed at the United States's most important ally and trading partner," Kenney said during a press conference held Wednesday.

Kenney said he was calling on Prime Minister Justin Trudeau to sit down with the new administration, suggesting that the federal government impose trade and economic sanctions should those efforts be refused.

As a part of the broader climate order, the Biden administration wrote that the Keystone XL pipeline "disserves the U.S. national interest," citing challenges surrounding climate and the pursuit of a clean energy economy.

In the order, the administration indicated that its analysis concluded that approval of Keystone XL would "undermine U.S. climate leadership" by undercutting the influence of the country on other nations to take climate action.

"Leaving the Keystone XL pipeline permit in place would not be consistent with my Administration's economic and climate imperatives," the order reads.

WATCH | Alberta Premier Jason Kenney reacts to Keystone decision:

Prior to Kenney's comments, both Trudeau and Canadian Ambassador to the United States Kirsten Hillman indicated that while disappointed with the decision, they were resigned to live with it.

The 1,897-kilometre pipeline, first announced in 2005, would have carried 830,000 barrels of crude a day from the oilsands in Alberta to Nebraska. It would then have connected with the original Keystone pipeline that runs to U.S. Gulf Coast refineries.

Biden's revoking of the permit was part of a series of executive orders aimed at tackling climate change that also included re-entering the Paris climate accord.

The Alberta government agreed last year to invest about $1.5 billion as equity in the project, plus billions more in loan guarantees. As a result, the Canadian leg of the project has been under construction for several months with about 1,000 workers in southeast Alberta.

Trudeau pledges support for energy workers

In a statement, Trudeau said he had spoken directly with Biden about the project in November, and Hillman along with others in the government had made Canada's case to high-level officials in the administration.

Trudeau said his government did welcome the new administration's moves to rejoin the Paris Agreement and the World Health Organization, and to temporarily suspend oil and natural gas leasing in the Arctic National Wildlife Refuge.

Kenney said that if the federal government doesn't approach Keystone XL discussions on the same level it did aluminum and steel tariffs, then the province would be forced to "go further in our fight for a fair deal in the federation."

The comment appeared to be a reference to Alberta's so-called fair deal panel, a series of measures being studied by the province that would help the province better assert its standing within Confederation.

In a statement, Alberta Opposition leader Rachel Notley called the cancellation of Keystone a "difficult day" for Alberta workers but criticized the provincial government's approach to the project.

"This decision is made far worse by the premier's reckless gamble of at least $1.5 billion on a project that most people understood was at great risk and over which he had no authority," Notley said.

TC Energy says it's considering its options

Conservative Party Leader Erin O'Toole called the cancellation of the pipeline "devastating."

"We need to get as many people back to work, in every part of Canada, in every sector, as quickly as possible. The loss of this important project only makes that harder," O'Toole said in a statement.

"Justin Trudeau should have done more to stand up for our world-class energy sector and the men and women who depend on it to provide for their families."

In a statement released Wednesday morning, TC Energy said it was disappointed in the move and warned it would lead to the layoffs of thousands of unionized workers.

"TC Energy will review the decision, assess its implications and consider its options," the statement reads. "However, as a result of the expected revocation of the presidential permit, advancement of the project will be suspended."

The company said the decision would "overturn an unprecedented, comprehensive regulatory process that lasted more than a decade."

The company struck a deal with four labour unions to build the pipeline and has an agreement in place with five Indigenous tribes to take a roughly $785-million ownership stake.

Contractors association 'disappointed'

The Progressive Contractors Association of Canada said in a news release it is disappointed that Biden is "putting politics before reason."

"We're disappointed that the new president has lost sight of the huge economic and strategic advantages of this project," said PCAC president Paul de Jong.

The association, whose member companies employ thousands of Alberta and B.C. construction workers, said the pipeline would have generated as many as 60,000 direct and indirect jobs in Canada and the United States.

Canadian producers, who have struggled for years from low prices partly related to sometimes-congested pipelines, have long supported Keystone XL.

In a statement, Suncor Energy said it backed expanding market access to the U.S. through pipelines such as KXL, which, it said, would provide responsibly sourced oil to U.S. refineries for the benefit of U.S. consumers.

But a Canada Energy Regulator report in November said western Canadian crude exports are expected to remain below total pipeline capacity over the next 30 years if KXL and two other projects proceed, prompting environmental groups to question the need for all three.

Biden signalled plan for months

For months, Biden had said he intended to cancel the project if elected.

Hillman said she was disappointed but that Canada would accept the decision.

"We respect that that's the decision he's made," she said. "He had made a commitment during his campaign, and he lived up to that commitment, and I think we have to accept that and move forward."

WATCH | Canadian Ambassador to the U.S. Kirsten Hillman reacts to Keystone decision:

Greg Anderson, a political scientist at the University of Alberta, says Canadians tend to look at narrow trade conflicts as a sort of barometer for the larger relationship with the U.S. but added "that just isn't the case."

He also says the province faces bigger challenges than the loss of one pipeline.

"I think a lot of Albertans were hoping that maybe this could just kind of slide by and the pipeline would get built," said Anderson.

"But the Keystone pipeline is not the Alberta economy. You know, it's not going to save Alberta or solve Alberta's problems. It might have helped on the margins, but Alberta has bigger fish to fry."

The pipeline has become emblematic of the tensions between economic development and curbing the fossil fuel emissions that are causing climate change.

The Obama administration rejected it in 2015, prompting TC Energy in 2016 to launch a lawsuit and a multibillion-dollar North American Free Trade Agreement claim against the U.S. government.

The company changed course after Donald Trump revived it once he became president four years ago and gave it strong support. Construction has already started in the United States.

TC Energy could now take similar action in order to prevent walking away from Keystone XL empty-handed after a dozen years of setbacks, billions of dollars spent and thousands of pages of filings.