Canadian and American Energy Security Gone Wrong

by | Apr 17, 2022 |

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The Keystone XL Pipeline Project 

One of the heaviest blows to the delivery of more Canadian crude oil supply to the United States concerned the Keystone XL Pipeline Project. This project included a proposed 875-mile pipeline from Morgan, Montana to Steele City, Nebraska. It would have allowed delivery of up to 830,000 barrels per day of crude oil from western Canada and the Bakken Shale Formation in the United States to Steele City for onward delivery to refineries in the Gulf Coast area. The Keystone XL project, by itself, would have supplied more oil than was until recently imported from Russia.

TransCanada Keystone Pipeline, the sponsor, applied for a Presidential Permit for the pipeline to cross the Canada-United States border in September 2008. A final Environmental Impact Statement (EIS) was published in August 2011. Due to changes in the pipeline route required because of local environmental concerns and landowner issues, an updated EIS was filed in May 2012. Throughout the 12 years that the Keystone XL project was under review, various environmental groups launched well-funded campaigns to oppose the project, mainly because it would aid in transporting crude oil produced in the oil sands area to market. The final EIS, in its market analysis, found that:

The approval or denial of any one crude oil transport project, including the proposed Project, is unlikely to significantly impact the rate of extraction in the oil sands or the continued demand for heavy crude oil at refineries in the United States based on expected oil prices, oil-sands supply costs, transport costs, and supply-demand scenarios.”

The EIS also noted that the Keystone XL project would support approximately 42,100 jobs (direct, indirect, and induced) in the United States during the construction stage. 

The process of issuing a Presidential Permit became a game of political ping-pong. On November 3, 2015, U.S. Secretary of State John Kerry issued a determination that the project was not in the public interest. Kerry found that there was a “perception” among foreigners that the project would increase greenhouse-gas emissions and that, whether or not this perception was accurate, the decision would, therefore, “undercut the credibility and influence of the United States” in climate-change-related negotiations.

On November 6, 2015, the Obama Administration rejected the Keystone XL pipeline project, citing economic and environmental concerns. On January 24, 2017, in his first week in office, President Donald Trump signed a presidential memorandum to revive the Keystone XL pipeline. Following a series of court challenges, he issued a new and revised permit in March 2019. On January 20, 2021, President Joe Biden revoked the permit for the pipeline on his first day in office. On June 9, 2021, the Keystone XL project was abandoned by its developer.

The loss of the Keystone XL pipeline was due to the refusal of the Obama and Biden Administrations to confront the opposition to the pipeline from climate activist groups and their powerful allies in the US Democratic Party. At this stage, renewal of the project is possible but very unlikely given the threat of repeated court challenges and withdrawals of the Presidential Permit by a future Administration. In the current political and policy environments, the same uncertainties would confront any other new proposal for increased pipeline transport of crude oil from western Canada to US markets. 

The Climate Policy Context 

Stopping the construction of the Keystone XL project has had virtually no impact on the level of greenhouse gas emissions in North America and certainly not in the world. 

The public debate over climate policy and the constraints it should place on hydrocarbons production, consumption, and trade often takes place within the confines of repeated but erroneous claims that the science is settled.” This demonstrably false proposition ignores the related question of whether, even if the science were settled, the governments of the world could credibly be expected to reduce GHG emissions.

The history of international climate diplomacy since 1992 can be described as elaborate in-process and meager in results. The period from 1992 to 2015 was spent in repeated but failed efforts to impose collective and enforceable emissions reduction requirements. With very few exceptions, no country ever met the targets set. After 19 conferences of the Parties to the Framework Convention on Climate Change, the countries of the world gave up on collective target-setting and switched to efforts to promote country-specific measures aimed at the nebulous and arbitrary goal of restraining global temperature increases to less than two degrees Celsius by 2100. The agreement reached at the 2015 Paris Conference required countries only to submit voluntary emission reduction plans every five years. Neither China nor India, the two fastest-growing sources of GHG emissions, committed to making reductions by 2030.

This diplomatic activity has completely failed to alter the growth in global carbon dioxide emissions. They rose from 22.45 billion tonnes per year in 1990 to 35.8 billion tonnes in 2016, an increase of 59%. They continued to rise until the onset of the COVID-19 pandemic.

While the countries of the Organization for Economic Cooperation and Development (OECD), at enormous cost, have reduced their emissions, those of the non-OECD countries have risen by almost five billion tonnes per year and, in 2019, constituted 65% of global emissions.

The United States Energy Information Administration, in its 2019 International Energy Outlook report, projected the trends in global energy supply, demand, and emissions to 2050. Overall, the 2019 EIA Outlook projected world energy consumption to rise nearly 50% between 2018 and 2050, due almost entirely to strong economic growth, increased access to marketed energy, and rapid population growth in non-OECD countries. World energy-related CO2 emissions are projected to grow at an average rate of 0.6% per year between 2018 and 2050, with the rate of growth in the non-OECD countries at about 1% per year. In other words, the EIA projects global CO2 emissions to grow from about 34 billion tonnes in 2018 to 43 billion tonnes in 2050. US total emissions in 2021 were about 13.5% of the worlds total, at a time when the share of global emissions arising from Asia dwarf those from any western country.

The Russian Invasion of Ukraine has demonstrated that the fixation of European countries on reducing GHG emissions has left them dangerously dependent on insecure and unreliable energy sources from a country with unpalatable geopolitical ambitions. It will take Europe decades, not years, to restore a necessary level of energy security, assuming the Green-party dominated governments in several countries will allow them to try.

One can only wonder whether the lessons of the Russian aggression in Ukraine will be learned by the American and Canadian political elites and by their public. When the light bulb finally goes on, a great opportunity for renewed energy partnership awaits in North America.

Read Part One: Canadian and American Energy Security is an Answer to Global Threats

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Robert Lyman is an economist who spent 38 years working for the Canadian government.

Dr. Jay Lehr is a Senior Policy Analyst with the International Climate Science Coalition and former Science Director of The Heartland Institute.

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