The sponsor of the Keystone XL crude oil pipeline has canceled the project after Canadian officials failed to persuade President Joe Biden to reverse his cancelation of the presidential border crossing permit by executive order. Calgary-based TC Energy will work with government agencies “to ensure a safe termination of and exit from” the partially built line, which was to transport oil from fields in western Canada and the Bakken basin in North Dakota to Steele City, Nebraska, connecting to other pipelines that feed oil refineries on the U.S. Gulf Coast. Construction on the 1,200-mile pipeline began last year and would have moved up to 830,000 barrels of oil daily. Biden’s executive order cost 1,000 immediate job losses and an estimated 11,000 future job losses. Alberta, Canada had invested over $1 billion in the project last year, kick-starting construction.
Biden’s cancelation of the border permit for Keystone XL has also helped to increase gasoline prices by 30 percent since his taking office, along with his other anti-oil actions, including pausing federal oil leases and suspending oil leases in the Arctic National Wildlife Refuge. All of these supply-limiting actions send signals to markets that begin to factor in their impacts.
Active Lawsuit against Biden’s Permit Cancelation
Attorneys general from 21 U.S. states have sued to overturn Biden’s cancelation of the pipeline, indicating that Biden bypassed Congress’ authority to regulate foreign and interstate commerce. Biden’s action deprives states and local governments of millions of dollars in revenues including hundreds of millions of dollars for small businesses and major tax revenue increases for local schools and public safety. Rural areas in the country would have been able to invest in new schools, new roads, and other public works projects that will bring about a higher standard of living. The project would also bring new opportunities for direct Indigenous employment and subcontracting in pipeline construction.
U.S. Pipelines are Efficient, Safe and Numerous
America is crisscrossed with over 2.6 million miles of energy pipelines, which is enough to get to the moon and back more than five times. Transport of oil by pipeline is substantially safer than transport by rail or truck—the alternatives to Keystone XL. Pipelines carry about 70 percent of the ton-miles of crude oil and petroleum products in the United States, while water transport, trucking, and railroads carry 23 percent, four percent, and three percent, respectively. The data on adverse incidents—explosions or fires, spills of five gallons or more, fatalities, personal injuries requiring hospitalization, or all-inclusive property damage exceeding $50,000–show that pipeline incidents per ton-mile are about a quarter of those for rail transport, and about three percent of those for truck transport. According to the Federal Motor Carrier Safety Administration, in 2018, large trucks were involved in 4,862 fatal crashes, 112,000 crashes that resulted in injury, and 414,000 crashes that resulted in property damage. Modern pipelines constructed at depth do not compete with other moving objects as do surface transportation modes and are inherently safer.
Canadian Oil Will Still Be Produced and Shipped to the U.S.
Without Keystone XL, Canadian oil sands will still be produced, but transported by rail or truck that emit more greenhouse gas emissions than the pipeline, are less efficient and cost more to move the oil, which will be refined in northern or eastern U.S. refineries. Lighter oil from U.S. hydraulic fracturing operations will be sent to the Gulf Coast refineries despite the fact that those facilities are optimized for heavier crudes. So, the net effect of stopping Keystone XL will be an inefficient allocation of crude oil geographically. Without the pipeline, railroad capacity will grow, overall safety will decline, emissions will be higher and economic costs will be higher since rail and truck shipments are more expensive than pipeline shipments. Pipelines are safer for humans and the environment than alternative forms of transport, as Biden’s Secretary of Energy Granholm has noted. Carnegie Mellon University found that trains cost twice as much in air pollution and greenhouse gas emissions as do pipelines, and 8 times as much in accidents and spills.
Other Countries Will Grab Canada’s Oil
Other countries will capitalize on Canada’s heavy oil since it will still be produced and shipped through non-U.S. ports and pipeline projects. Two other export pipeline projects, the Canadian government-owned Trans Mountain Expansion and Enbridge Inc. Line 3 replacement, are proceeding. The expansion of the Trans Mountain pipeline was 25 percent complete in the first quarter of this year. Trans Mountain reached peak pipeline construction in June, 2021, with thousands of people working at hundreds of sites across Alberta and British Columbia. Mechanical completion of the project is set for the end of 2022, with commercial operations commencing shortly thereafter. The expansion will increase the pipeline’s capacity from the current 300,000 barrels per day to 890,000 barrel per day at an estimated cost of C$12.6 billion ($10.35 billion U.S.).
China will benefit from the Keystone cancelation. China will likely surpass the United States as the world’s largest refiner this year and will become a great market for Canada’s oil via the Trans Mountain pipeline. The United States will become reliant on OPEC again for oil supplies that the United States could have obtained from neighboring Canada, which will be a national security concern and one that has the United States active in Middle East geopolitics. The energy independence achieved under President Trump will disappear. According to the Energy Information Administration, petroleum imports are again exceeding exports.
Moreover, the contribution of the pipeline to global warming is infinitesimal. The total greenhouse gas emissions from transporting 830,000 barrels per day of Canadian oil by pipeline would be about 150 million metric tons per year, or about 0.3 percent of the world total. Applying the EPA climate model using the least favorable set of assumptions results in a global temperature effect of about four ten-thousandths of a degree Celsius by 2100.
Because of Biden’s executive order canceling the cross-border permit on the Keystone XL pipeline, the pipeline owner has canceled the project. Biden’s decision to end the pipeline directly impacts jobs and American livelihoods, but those are not his major priority—eliminating greenhouse gases are. On June 9, 2021, he told U.S. military personnel that “This is not a joke. You know what the Joint Chiefs told us the greatest physical threat facing America was? Global Warming.” Despite voters not wanting to pay for Biden’s climate agenda, he is proceeding with it regardless and making Americans pay indirectly through increasing energy prices. It is not clear whether all is lost, however, regarding the Keystone pipeline. Since Biden’s order, 21 Attorneys General have launched lawsuits against Biden to reinstate the pipeline. Time will tell whether Biden’s views will prevail.