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.