Trump’s Keystone XL push could be just the leverage Canada needs

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United States President Donald Trump is calling for the immediate revival of the Keystone XL pipeline, a cross-border project that cost the Canadian oilpatch billions when it was cancelled in 2021 by the former administration and is still the subject of an ongoing $1.3-billion lawsuit by the Alberta government.

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This is the second time Trump has invited KXL’s backers to resurrect the 830,000-barrel-per-day pipeline following a rejection by a previous president.

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Upon taking office in 2017, he issued a memorandum inviting TC Energy Corp. (then TransCanada) to resubmit its permit application after former president Barack Obama rejected the project. TC responded with a new application within two days.

This time, however, the company’s response to the president’s entreaty was entirely different.

“We’ve moved on from the Keystone XL project,” South Bow Corp., TC’s oil pipeline spinoff, said in a statement on Tuesday. “We continue to engage with customers to develop options to increase Canadian oil supplies to meet growing demand.”

There are also serious doubts in the Canadian oilpatch about the possibility that another company would be willing to step up to build without significant assurances from the U.S. government.

“It is a crazy thing to say he wants the pipeline built right away when the U.S. has cancelled it twice and there’s billions lost along the way,” former Alberta Petroleum Marketing Commission chief executive Richard Masson said. “I can’t imagine anybody stepping up to do that without some kind of explicit contractual guarantee from the U.S. government that if it goes sideways again, they would pay for the whole shot.”

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Trump’s renewed call for KXL comes on the heels of his administration’s proposed tariffs on Canadian products, including a 10 per cent levy on energy exports, and his repeated claims that the U.S. doesn’t need Canada’s exports.

It also comes as Alberta continues to pursue its suit against the U.S. through a legacy claim under the old North America Free Trade Agreement (NAFTA). The suit alleges the U.S. breached its free trade obligations in cancelling the project in 2021 and prioritized “political theatre” over fundamental procedural fairness.

Alberta’s case still faces a question about jurisdiction, but a preliminary hearing before a World Bank tribunal is scheduled for September, though its success may be a long shot since TC Energy’s own claim seeking US$15 billion in damages was thrown out by the same tribunal last July.

The tribunal sided with the U.S. in concluding that legacy provisions related to NAFTA only permitted claims based on breaches that occurred while the free trade agreement was in force. Joe Biden revoked KXL’s permits after NAFTA was replaced by the new United States-Mexico-Canada-Agreement.

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Trump on Monday said KXL was “viciously jettisoned” by his predecessor, and the company should come back and “get it built – NOW!,” adding that his administration would be “very different” by offering “easy approvals” and an “almost immediate start.”

“We want the Keystone XL Pipeline built!” he said in comments on Truth Social, seemingly contradicting claims he has repeatedly made since the election that the U.S. doesn’t need Canada’s oil and gas.

Despite the cold response from KXL’s former proponents, there have been some echoes of support for resurrecting the project, which would substantially expand crude flows between Hardisty, Alta., and refineries along the Gulf Coast.

Alberta Premier Danielle Smith said in a post on X on Tuesday that she agreed with Trump, nudging the president to “scrap these inflationary tariff ideas” in order to focus on getting shovels in the ground.

Former Alberta premier Jason Kenney, whose government pledged to invest US$5.3 billion in the project, said Trump’s comments underscore a point of leverage that Canada could use to extract an agreement to drop tariffs on Canadian products, though it would almost certainly require the government to backstop KXL.

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“A Canadian government could go to Donald Trump and say, ‘Hey, we agree with you, we’d like to sell you more oil, we’re prepared to make it happen, but you’ve got to commit to us that Canadian energy exports and other exports are not going to be tariffed,’” he said.

“We need leverage to deal with Trump. He is indicating one area where we have unused leverage and we should take ‘yes’ for an answer.”

• Email: mpotkins@postmedia.com

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