Is Trump really planning to revive Keystone XL? And is there even life left in that pipeline plan?

There’s lately been a lot of talk in Washington about resurrecting the Keystone XL pipeline, the 1,897-kilometre pipeline that was designed to take oil from northern Alberta to the U.S. Midwest.

The project was first proposed by Calgary-based TC Energy in 2008. It was scrapped under the Obama administration, then revived by Donald Trump during his first term in the Oval Office. Then it was killed again by President Joe Biden on his first day in office in January 2021 — after Alberta had already invested more than a billion dollars in the project. 

Now, Trump is headed back to the White House and reportedly plans to restart the project, generating plenty of excitement on both sides of the border. After the U.S. election, Alberta’s premier reportedly reached out to TC Energy to see if Keystone XL could be revived or if there were other ways to increase the province’s oil and gas pipeline export volumes to the U.S. 

But experts warn there are sizable hurdles ahead, along with the new complication of Trump’s threat to impose a 25 per cent tariff on Canadian imports. If the tariff plan proceeds, it would pummel the Canadian energy industry, whose No. 1 export market is the U.S. 

But even without the tariff issue, bringing back Keystone XL would be challenging, said Dennis McConaghy, a former TC Energy executive who was involved in the pipeline’s original plans. 

“It’s nonsensical to be advocating revival of XL while hanging these tariffs over Canada,” he added. 

Political enthusiasm not matched by industry

The failed pipeline has become a powerful symbol in U.S. domestic politics and the debate about climate change, sometimes divorced from the reality of oil production. 

In 2021, Biden’s cancellation of Keystone XL was regularly touted by Republicans as the reason for surging gas prices. This was despite the fact that prices had jumped before the pipeline was ever expected to be complete, and that it would carry barely two per cent of the oil Americans consume per day.

Speaking on a podcast about a week before the election, Trump’s pick for commerce secretary, Howard Glutnick, framed the Keystone XL pipeline — and the failure to build it — as a matter of energy security.

“All of our states and all of our people need domestic power [yet] we refuse to build pipelines to get our own energy to ourselves,” said Glutnick. 

“Instead of calling it the ‘Keystone pipeline,’ they should have called it the ‘national-security-deliver-gas-and-oil-across-the-United-States-of-America,'” he said.

Rumours that the pipeline might be resurrected have been cheered by politicians like Steve Daines, a Republican senator in Montana. 

“Sen. Daines supports any action that will increase domestic energy production, including reviving the wrong-headed decision by President Biden to kill the Keystone XL pipeline,” spokesperson Matt Lloyd said in a statement to CBC News. 

But the decision to restart the project ultimately rests with the companies involved, said former energy executive McConaghy.

And while the Keystone XL pipeline has always been seen as a “commercially elegant” solution — it’s the most efficient way to get Canadian oil to refineries on the Gulf Coast, he said — it’s not clear if oilpatch executives are willing to invest more time and money into it. 

It’s telling that the pipeline was barely mentioned at a North American energy conference in Washington held three days after the election.

Major players in the sector and U.S. policy-makers, including several former and possibly future Trump appointees, were assembled at the conservative Hudson Institute think-tank. Keystone XL only came up in passing, in response to an audience question about what Trump’s election meant for it.

The head of Canada’s oil lobby, replying from the stage, answered that new pipeline capacity would help — but not likely through Keystone XL.

“It would probably be challenging to get capital markets excited about that,” Lisa Baiton, president of the Canadian Association of Petroleum Producers, told conference attendees. 

South Bow Energy, the TC Energy spin-off that handles its oil pipeline business, didn’t directly answer a question from CBC News about whether it would consider restarting the project. Spokesperson Katie Stavinoha instead provided a non-specific statement about corporate strategy, which includes “exploring opportunities to grow our business and contribute to energy security and reliability in the markets we serve.”

Layers of risk

Part of the risk is that pipelines take a long time to build. And as history has shown, that long timeline leaves room for political decision-makers ration to revoke approvals given by the previous administration. Even if Trump were to approve the Keystone XL pipeline, there’s still a risk the next president after him could cancel it.

Plus, Reuters has reported any company looking to build the project would need to start from scratch because things like easements have been returned to landowners.

“If we couldn’t get done in the first Trump term — with all the ducks lined up in a row that we could have — why would this be any different when everything seems like we’re starting from a worse position?” said commodity analyst Rory Johnston.

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James Coleman, a law professor at the University of Minnesota, said a revamped Keystone XL project could also become tied up in court battles with environmental organizations that are likely to make some of the same legal challenges they have in the past. 

“Different courts have taken different approaches on those claims, so they might not be as successful this time, or maybe they’ll have the same success,” said Coleman. 

There are also questions about the degree to which industry still needs the extra capacity to export oil out of Canada that the Keystone XL pipeline would provide. 

Asked about the project last week during a news conference, Alberta Premier Danielle Smith said she’s interested in exporting oil and gas to the U.S. but wouldn’t put more public dollars behind the Keystone XL project. 

“We’re looking to make connections with the United States, to see their appetite for assisting in helping to get more product going into the United States,” Smith told reporters Monday at an event in Leduc County, Alta.

“Maybe de-risking the project involves having an American partner, an American pipeline company, partner with our companies here,” she added.

“We just don’t think the best way of doing it is putting government dollars into it, but we think there are other things we can do to change the risk profile.”

Still, any speculation about Keystone XL appears to be a moot point until there’s certainty about what Trump’s proposed tariffs could mean for the energy sector.

According to Reuters, there are no plans at the moment to exempt crude oil from that plan. 

“If he wanted the Keystone XL, this is the very worst thing he could’ve done to get it,” said Heather Exner-Pirot, an adviser on energy and security to the Business Council of Canada.