Vol. 26, No.8 Week of February 21, 2021
Providing coverage of Alaska and northern Canada's oil and gas industry

Keystone XL gains new life as 14 states urge Biden to reconsider

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Gary Park

for Petroleum News

However long their odds, the backers of Keystone XL have regained hope that their project can rise from its smoldering ashes.

Leaders of an estimated 14 U.S. states are lobbying President Joe Biden to reverse his executive order to halt work on the US$14.4 billion pipeline, arguing Americans “will suffer serious, detrimental consequences” as a result of the president actions within hours of being sworn in.

Meanwhile, various governors and attorneys general, along with federal and state Republican and Democrat lawmakers, and union leaders are mounting a campaign to save KXL.

U.S. Sen. Joe Manchin, a Democrat from West Virginia, who is chairman of the Senate Energy and Natural Resources Committee, sent a letter to Biden on Feb. 10 urging him to “take into account the potential impacts of any further action to safety, jobs and energy security.”

“It is of the utmost importance that the United States maintain energy security through strategic relationships with our allies rather than increasing reliance on OPEC nations and Russia. This includes the development of infrastructure, like Keystone XL and Mountain Valley pipelines, to get this energy to market in the safest and most responsible way,” he wrote.

Montana Attorney General Austin Knudsen and the AGs from the 13 other states made the same pitch to Biden, while reinforcing their case with threats to launch lawsuits.

Knudsen warned Biden that his executive order “will result in devastating damage to many of our states and local communities,” including states outside the KXL route, Knudsen wrote.

He told Biden that states are reviewing their legal options “to protect our residents and sovereign interests” against the president’s order that would “impose crippling economic injuries on the states, communities, families and workers across the country.”

Sen. John Thune, a Republican from South Dakota, said scuttling KXL was nothing more than “a nod to the far-left environmental wing of the Democratic Party,” which has persuaded Biden to issue a new moratorium on oil and gas leasing on federal lands, “even though we are a long way from significantly reducing or eliminating our need for oil and natural gas.”

Reluctance to revisit

But there are early signs that neither Biden nor Canadian Prime Minister Justin Trudeau want to revisit the issue.

John Podesta, President Bill Clinton’s White house chief of staff and a former adviser to President Barack Obama, said the pipeline is dead and not coming back to life.

He told a panel discussion on Feb. 12 that included Gerald Butts, former principal secretary to Trudeau, that it’s time for Canada to get over the demise of KXL. Butts agreed that Biden isn’t about to change his mind.

Canada’s Trade Minister Mary Ng told Bloomberg that Trudeau has rejected calls that he take a more combative stance on KXL and prefers to take a conciliatory approach to cross-border relations to avoid endangering two-way trade worth about US$725 billion a year.

“I don’t think that getting into a trade war with the U.S. (over KXL) is in the best interests of Canadian workers or the energy sector,” she said.

Alberta talks compensation

Separately, Alberta Premier Jason Kenney said his province will seek compensation for Biden’s veto of KXL by employing remaining provisions of the North American Free Trade Agreement, which remain in force until July 2023 when the new United States-Mexico-Canada free trade deal takes full force.

“We are going to use every legal tool at our disposal to protect our interests” against what he views as a “clear violation of the investor protection provisions” in NAFTA.

A spokesman for Alberta Energy Minister Sonya Savage told reporters the Kenney government is continuing discussions with U.S. political leaders but would not indicate how much compensation Alberta might seek if KXL is finally scuttled.

Savage has estimated Alberta might claim up to C$1.5 billion for the ownership stake it acquired in KXL, including C$400 million in loan guarantees it has already committed.

Other legal steps

Other legal steps are under review by oil companies that locked in shipping contracts with KXL owner TC Energy.

Suncor Energy, Canadian Natural Resources, Cenovus Energy, Imperial Oil and Athabasca Oil are believed to have secured their positions on KXL through contingency payments running to hundreds of millions of dollars.

Those payments included US$142 million by Suncor, US$100 million by Cenovus and US$48 million by Athabasca.

U.S. legal experts are also exploring another avenue, according to Scott Miller, a senior adviser at the Center for Strategic and International Studies in Washington, D.C.

He told the Financial Post that a recent U.S. Supreme Court ruling on the Deferred Action for Childhood Arrivals, DACA, found that former President Donald Trump contravened the Administrative Procedure Act in signing an executive order canceling DACA.

Pointing to similarities between DACA and KXL, Miller said “Keystone XL was not just a policy decision to allow a pipeline to cross a border. What came with it were a whole bunch of permits. The policy change (by Biden) had the effect of revoking those permits without due process.”


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