On Friday Barack Obama refused to issue a presidential permit allowing TCPL’s Keystone XL pipeline to cross the border between Canada and the United States.
Obama rejected KXL because it wouldn’t meaningfully contribute to the economy, reduce gas prices or enhance America’s energy security. He described the urgent need to transition to a clean energy economy and while he didn’t say it, it’s easier to kill a project that doesn’t exist than one that does.
TCPL’s response to Obama’s decision was slightly (but not much) more nuanced than Steven Harper’s “no brainer” comment. CEO Russ Girling said: “Today, misplaced symbolism was chosen over merit and science—rhetoric won out over reason.”
Hal Kvisle, who was CEO when KXL was little more than a twinkle in an engineer’s eye, said Friday was a “sad day” because Obama’s decision killed access to the Gulf Coast and market access is an even bigger challenge to the industry than slumping oil prices.
Before we leap to the conclusion that Obama is in the grip of wild-eyed climate change zealots, let’s pause for a moment to reflect on how TCPL mismanaged the KXL file so badly that it was doomed from the start.
The seeds of failure
Neither Girling nor Kvisle mentioned TCPL’s bullheaded treatment of the landowners along KXL’s route.
Pipelines wrangle with landowners all the time, but it’s one thing to engage in tough negotiations with a few disgruntled landowners, it’s quite another to plunk a ruler on a map, draw a straight line through Montana, South Dakota and Nebraska and declare that that’s the pipeline route come hell or high water—especially when the route runs straight as an arrow over the Ogallala aquifer which supplies water to two million people in eight states and irrigates half of Nebraska.
Frustrated by TCPL’s recalcitrance, the landowners took their concerns about possible contamination of the aquifer to the governor of Nebraska. The governor sided with the landowners and asked Obama to refuse the permit. TCPL responded by meeting with four Nebraska senators—and refused to budge, saying it was simply impossible to reroute KXL to avoid the Ogallala aquifer.
A month later Nebraska granted itself the power to block the pipeline.
TCPL suddenly discovered that it wasn’t impossible to reroute KXL after all. All it would take was 30 to 40 miles of pipe and an additional pumping station to avoid siting 254 miles of pipeline over the aquifer.
But it was too late. By fighting the landowners every step of the way TCPL prolonged the permitting process. The anti-KXL movement gathered steam through 2011 and by 2012 KXL was bogged down in the US general election. It’s been bogged down in American politics ever since.
Had Kvisle and Girling responded to the landowners with more sensitivity KXL would have been built back in the day when the Alberta oilsands didn’t register in the US climate change debate.
But don’t expect Kvisle and Girling to acknowledge their mistakes. Executives don’t make a habit of telling their shareholders that the seeds of failure for a $5.2 billion project (that ballooned to $10 billion) were planted under their watch.
Politicians chime in
Prime Minister Trudeau was disappointed with Obama’s decision but said he respected the right of the United States to make it. “The Canada-U.S. relationship is much bigger than any one project and I look forward to a fresh start with President Obama to strengthen our remarkable ties in a spirit of friendship and co-operation.” Oh good, Canada has stopped bashing its biggest trading partner.
The Conservatives were less gracious.
Jason Kenney fired off six tweets in rapid succession, referring to Obama’s decision as ”insulting”, denigrating the Liberal government for caving in to the Americans and implying that Trudeau’s plan to impose “a de facto carbon tax” in order to get Obama’s approval had failed. If this is an example of the Conservatives softer “tone”, interim leader Rona Ambrose has her work cut out for her.
Where do we go from here?
Obama’s rejection of KXL is not cause for gloom and doom. Just the opposite. It gives Rachel Notley and Justin Trudeau the incentive to build a robust provincial/federal climate change policy that will enhance the credibility of Alberta’s energy sector in Canada and abroad.
And if we’re lucky, it will teach the energy industry that success doesn’t come from “educating” the public on the economic benefits of the oilsands. The public gets it. It comes from honestly addressing the public’s concerns about the environmental impacts of oilsands projects.
Both of these changes are critical because TCPL’s inept handling of KXL made Alberta’s oilsands the poster child for climate change. And no one is going to stuff that genie back in the bottle any time soon.
I guess that’s why we call them roughnecks. What we need now is enlightened leadership in government which is capable of engaging and persuading the energy sector to seek innovation and creative solutions for the challenges they (we) face.
Peter, that’s exactly what we need–enlightened leadership. I’m pleased that Notley is focusing on diversification and Trudeau saw fit to create the new department of Innovation, Science and Economic Development–a much broader portfolio than its predecessor the Dept of Industry.
Susan I am not at all surprised with this decision. It makes sense and we will thank him in the near future if not within a couple of months. If I was in his position I certainly would not allow any pipeline to go over the aquifer. Never mind what you mentioned about the land issues. We know how these companies treat local people when it comes to their rights. We are actually lucky that here we have some defences. In other countries it is appalling and in many ways criminal. This project does not make any economic sense either. It is too late. The US does not need the oil anymore, they have it. Exploring their own oil creates way more jobs than this pipeline. Of course fracking is another big problem but it is done by themselves and pollution is different when it is created at home.
Rachel Notley’s approach makes more sense. We have no choice anyway. The era of pollution no matter what is over and it is not soon enough. We have to start getting used to it and accepting our responsibilities and change for a better future. It is time Canada launches a serious program of retrofitting our homes. We can save astronomical amounts of energy and pollution. Furthermore the more efficient we become the better it is for everyone and the economy. We can learn a great deal in the process. We can develop new processes for insulation and energy production.
TCPL’s reaction is not surprising. They really live in a different world. Jason Kenney’s reaction is his normal. The man is a bully and I cannot wait to see the circus when the leadership process starts. Rona Ambrose according to the rules cannot run for the leadership but I have a feeling that we may have a surprise there. 🙂 She has already started changing the face of the Conservative party to one less hysterical, less fascist and more respectful. Gosh she is supporting the enquiry on the murdered aboriginal women!! 🙂 Progress.
I am surprised Justin Trudeau is disappointed with the cancellation of this project.
Carlos, I agree. Friends of mine who are more knowledgeable about oil demand in the US thank I am say exactly the same thing–Keystone XL is no longer necessary because the US has access to the oil it needs. I found Russ Girling’s response to Obama’s decision really over the top. I don’t know who he thinks he is, but surely even the smartest Canadian businessman is not qualified to lecture the President on the state of America’s economy and environment. I never could figure out why Justin Trudeau supported Keystone XL in the first place and I wouldn’t be surprised if secretly he’s as glad to see the death of this pipeline as we are. I was pleased to see the following sentence appear at the end of his official statement: “We know that Canadians want a government that they can trust to protect the environment and grow the economy. The Government of Canada will work hand-in-hand with provinces, territories and like-minded countries to combat climate change, adapt to its impacts, and create the clean jobs of tomorrow.” After 10 years of lip service, the Canadian government is finally turning its attention to the very serious issue of climate change.
I am not surprised with Russ Girling’s response. They do not understand that there is still an independent government despite their control. For how long I am not sure but we still have enough control to fight back.
These CEO live in a dream world. They make astronomical amounts of money, they buy elections and they get mad when we disagree with them and fight back. This situation is extremely dangerous and similar to military control of a society.
They also know how to manipulate public opinion very well. Recently Shell made a big deal about the loss of 2.5 billion dollars this year but they never talk about the profits. How much did Shell make in the last few years when oil was at 100 dollars a barrel? As soon as they have losses they want us to pay in the form of lower royalties!! PLEASE!
Carlos you make an excellent point about Shell complaining about the loss of $2.5 billion this year. Yes, that’s a lot of money, but it needs to be put into perspective. Shell was ranked #3 on the Forbes 500 last year. Its profits were $14.8 billion on revenues of $431.3 billion. It has $353.1 billion in assets. Its CEO, Ben van Beurden made $26 million last year. This spring Mr van Beurden and his board of directors were confident enough about their future to lay down $70 billion to buy the BG Group. It’s a little difficult to feel sorry for this global oil giant isn’t it.
I enjoyed reading your informed blog, Susan. I would also add that the law of eminent domain certainly failed as a persuasuve mechanism to expropriate framlands in the name of national security and didn’t sit well with farmers. If anything, it riled them up and aroused sympathy and support from their neighbours/activists. That some Canadians would come riding into town flexing their muslces and threatening locals with SLAPP suits to get their way was also insulting. Apparently CEOs have not figured out that they are not the almighty people they think they are. To date big money failed to win elections in Alberta and nationally. The CEOs along with their friends to the south, namely the Kochs among others, have yet to figure out that citizen resolve can be a powerful force.
Ted, you’re so right about CEOs failing to understand that citizen resolve is a powerful force. I was surprised by Russ Girling’s aggressive response to Obama’s decision, particularly Girling’s statement that TCPL and its shippers remain absolutely committed to building KXL. Girling may be bound and determined to continue the battle with Obama but I wonder whether TCPL’s board of directors or its shippers are prepared to sink millions of dollars into a project that’s taken seven years and burned through $2.8 billion to get nowhere.
Interesting to see Jeff Rubin’s article in the Globe and Mail this morning. Here’s my reaction to the cancellation: http://www.troymedia.com/2015/11/08/was-keystone-xl-rejection-such-a-big-mistake/
Phil, thanks for the link to your article in Troy Media. You’ve laid out a very balanced approach starting from the premise set out by Mark Carney (and reinforced by the Rubin article) that the world is transitioning to a post-fossil fuel era and arguing that it’s the job of both energy companies and governments to prepare for the transition. The transition to a post-fossil fuel era has the potential to be a gut wrenching as the industrial revolution, particularly in undiversified economies like Alberta. We must not waste any more time fooling around on the fringes. I think COP21 will provide the kick-start we desperately need.
Lost in all this is the fact that it was Valero, the US energy giant who first drew up this plan to ship Alberta bitumen via keystone down to its Texas terminals, send it to the Isle of Man in the English Channel ( taking advantage of special tax rates), refine there into diesel for sale in Europe. Without Valero Keystone would never gotten off the drawing board.
It’s been amusing to see Canadian politicians and lobbyists trooping off to DC all these years to argue Keystone’s case. Keystone was never been about “us.” We were just the place where the gd bitumen came from
I doubt American legislators were laying awake at night thinking, “Yeah I know allowing keystone to go through will stir up a crapstorm and I’ll probably loose my seat. But you know what? I think we should give those folks up in Alberta way a fair shake. And they just elected a socialist gov’t there. Keystone will go a long way to balancing their budget. Who am I to stand in the way of their dreams?”
Ronmac: “amusing” is a good word for it. I attended a speech given by Alison Redford in which she described her lobbying efforts with various underlings in the US administration. She triumphantly reported that she was convinced the government would approve Keystone because she could tell from the underlings’ “body language”. Good grief. I love your characterization of what might be going through an American politician’s head when he thinks about this issue…like you said, surely their first priority is to help Canadians achieve their dreams. 🙂
The only dream Americans care about is the ‘American Dream’. Everybody else’s can actually be destroyed if it is in the way of their dream. We all understand this very well. A lot of us have paid a big price to feed their dream.
Go east pipeline go east to the Atlantic provinces
It is certainly a much better alternative and keeps jobs in Canada, especially if the Eastern provinces would stop buying oil from Venezuela and other places. But this is not the time to prolong the inevitable. We have to invest in wind, solar, geothermic and in a very job intensive retrofitting industry. Is this going to be expensive? For sure but I am also sure that it will be way more expensive to deal with the consequences of continued investment on oil. We are innovative, we have education, we have natural resources and we are the most successful multicultural society on the planet. So why are we so darn timid? Because we keep voting on leaders like Stephen Harper that believes more in being aggressive, secretive, divisive and stuck on the yesteryear. Stability he said – you will vote for stability versus risk. What stability?
In my modest opinion we have to get in our minds that the booms and busts are only profitable for speculators. We can hold oil sands production at current levels, manage our revenues the best possible way, create a sales tax strictly for investment in renewable resources and a vigorous education on its development as well as other fields Alberta is slowly developing. We have to stop being stuck on the size of our houses and how many cars we own. Our success as a province and country will be meaningless without our pride on what we can accomplish and what we can offer other human beings that do not have the same luck we do. It is our responsibility to do much better than just donate tsunamis of money to anyone that walks in here and promises half a dozen well paid jobs. Investigate how much money is leaving this province everyday because we are listening to people that only want what we have. They could not careless about our well being or our objectives. They care about how much money they can take and what is the best propaganda to get it out. Shell is already crying for lower royalties because they lost 2.5 billion. Well tells us how many billions you took out in the preceding years. Please do I would like to know. By the way, not just what you declared but all of it.
Carlos well said!!! The time to push ahead on diversification and renewable energy is now. Oil companies will fight this tooth and nail but we have to stop being so timid. For decades Albertans were afraid to challenge the status quo: that if the government kept Big Oil happy everything would be rosy. You’d think the people would have noticed that our little provincial government (or the federal government for that matter) can’t influence global oil prices one iota. I think this last bust has shaken people’s irrational belief in that construct. Albertans are starting to think for themselves. They’re asking themselves what if there isn’t another boom, what if it’s a much smaller boom and the average oil price settles in at $60 bbl and stays there, where will we all work, where will our children work, do we really “need” all this stuff and what’s it really costing us in externalities? It’s time for Albertans and Canadians to start asking themselves the really important questions and then figuring out how to build a better world, one where corporations and their beholden governments aren’t calling the shots.
Exactly Brent. East to where the Irving refinery is waiting. Alberta’s oilsands production gets to tidewater and the east gets the benefit of more refinery jobs. It’s a win-win.
Yes, lets send the leaky death tunnel east. Why “freeze the bastards” in the dark when you can just kill ’em slow. Who gives a crap about the environment or potable water when there’s moolah to be made … for China.
They are just dumping 8 billion liters of raw sewage into the river so no big deal. On the other coast and in 2015 Victoria dumps raw sewage in the ocean every single day. We can spend billions in Afghanistan and Syria and new F35 and whatever else but there is no money AT ALL for real needs. We can spend billions building schools in Afghanistan but God forbid building them in our own reserves.
What is more astonishing is that people discuss these issues and we always come to one conclusion – That is the way it is anyway.
Cdncurmudgeon: I support the approach of our Environment Minister, Shannon Phillips when it comes to pipelines. She says the NDP government is “going to build economic diversification on the back of a strong energy industry.” The government is looking at pipelines, the coal industry, our GHG targets, and a shift to renewables. It’s a complex problem–raising environmental standards and properly pricing carbon while at the same time not wiping out the industry before a transition plan for workers is in place. Even the Greens said they weren’t proposing Alberta turn off the switch.
Susan, I can’t imagine the circumstances in which we will ever see another oil pipeline built across provincial or national jurisdictions. I think this is the beginning of the end for the status quo petro-corps.
I could not agree more PR. Wait until the now oil dominated governments start phasing out the subsidies. They are slowly gaining the public support to do it and it is a question of time until that subsidy Empire starts crumbling big time. In Canada the conversation is getting louder 🙂 I am hoping it gets so loud that it becomes inevitable. Then people will realize how cheap it is to have wind and solar and all the other that have no subsidies and have no chance to make it fast enough in our oil controlled market. So much for the free market and its invisible hand – what a pile of garbage that is. Hopefully at the same time CSIS will not be targeting the eco-terrorists like they do now.
Political Ranger: I sense the same thing…the public has had it with rampant expansion. They don’t accept the argument that “it’s all about the economy, stupid” and they’re not willing to trade the planet for short term economic gains. The big challenge isn’t how to develop a successful transition plan (there are enough smart people around to help us do that), it’s how to transition when the petro-corps are doing everything they can to twart us.
Yeah … I hate being twarted 🙂
These are the people that were looking after Alberta Environment
Amazing – do we have a clean up in this country?
Carlos, you make a good point. If oil companies were not heavily subsidized by the government, both in the form of royalty relief and support for things like carbon sequestration and storage (the Alberta government committed $1.2 billion to two projects which have not so far been all that successful) the public would have a chance to make a true apples to apples comparison with renewables. My friends in the renewables industries tell me that a renewable project needs to be of a certain scale before it can be economic so the small renewable projects that are in existence today may not be the right benchmark. But we really have to get at it soon.
Yes, wasn’t that an interesting announcement about our ex-environment minister heading up the coal lobby. Perfect!
Excellent analysis Susan – and thank you for bringing this aspect of the pipeline decision to light. Keep up the great work!
Thank you Susan. Much appreciated!