In September 2019 Jason Kenney began negotiating with TC Energy to invest $7.5 billion in cash and loan guarantees in the Keystone XL pipeline.
In March 2020 Kenney announced negotiations were complete and the government had signed an agreement which he said had been rigorously vetted by the government and outside experts to ensure the success of KXL while also minimizing the risk to Alberta taxpayers.
This week the Joe Biden campaign announced Biden would rescind the KXL pipeline permit if he were elected president in November 2020.
The political risk became very real, but Kenney was unperturbed.
He said “we entered into this, eyes wide open, recognizing that there was of course a political risk”. His energy minister, Sonya Savage, said “rather than speculating about the outcome of the US election, we will spend our time continuing to meet with our US allies and speak to Alberta’s role in supporting North American energy independence and security.”
Well of course there is no point in speculating about the outcome of the US election, Jason Kenney ran those odds in the fall of 2019 and concluded it was a safe bet Trump would win when he plunked $7.5 billion of taxpayers’ money on a single spin of the roulette wheel.
Now he’s responding to Biden’s campaign promise as he always does when one of his harebrained decisions threatens to blow up in his face: he’s filling the air waves with bafflegab and is lining up people (Obama, Trudeau, Gerry Butts) to blame if his bet goes sideways.
Kenney told Albertans their $7.5 billion is safe because:
- He’s organizing allies, ie pro-pipeline American governors and American unionized workers who are building KXL. What does he expect them to do, convince voters to vote for Trump, not Biden?
- He might lodge a complaint with an international trade body. Like what with whom? The investor-state dispute settlement (ISDS) provisions in NAFTA 2.0 were scaled back and Canadian investors can no longer commence direct arbitration proceedings against the US government. Instead they can try to convince the Canadian government to make a claim against the US government (good luck with that) or bring a claim in a domestic (US) court and argue what? That a presidential order that gives the president “unreviewable authority” is in fact “reviewable” by the courts at the behest of Alberta?
- He’ll use whatever legal means are available to protect Alberta’s fiscal and economic interests. Assuming the American courts are prepared to review the president’s “unreviewable authority”, litigation takes years to work its way through the judicial system, TC Energy’s obligation to repay Kenney’s $1.5 billion equity investment is not triggered until after construction is completed. The $1.5 billion will be tied up for decades.
- He wants to get as much of KXL built as possible and he can’t imagine a U.S. president would require thousands of miles of pipe be pulled out of the ground eight or nine months from now. Two issues here: (1) the pace of construction is decided by TC Energy, not Jason Kenney (we’re still dealing with Covid-19, remember) and (2) the president’s “unreviewable authority” over pipelines crossing the Canada/US border applies to existing pipelines as well as new ones, so there’s nothing stopping Biden from requiring TC Energy to pull the pipe out of the ground.
- He fully expects “any United States’ president, regardless of party or platform, to tread very carefully before undermining the single most important bilateral economic project in which a Canadian company and a Canadian government are investing massively to create jobs in the United States as well as in Canada.” Yes, throwing around words like “bilateral” and “Canadian government” creates the impression that this is bigger than it is, but there is nothing “bilateral” about a private sector pipeline company seeking regulatory approval from the US government to cross the Canada/US border. The only difference between KXL and other cross border pipelines like the Enbridge mainline, TC Energy Keystone, and Spectra Express is the other three managed to go it alone. Alberta’s $7.5 billion investment does not magically transform KXL into a bilateral blah blah blah that no president would dare to impede.
- He said the $6 billion in loan guarantees won’t be triggered until the 2021 construction season. If Biden is elected, he won’t be sworn in until January 2021. What happens if Biden doesn’t revoke the permit right away (Trump didn’t get around to issuing the original permit until March 2017), does Kenney have the power to force TC Energy to delay the 2021 construction season?
Eyes Wide Shut
Joe Biden entered the presidential race on April 25, 2019 almost a full year before Kenney announced his government’s investment in KXL. Kenney can say whatever he likes about the wisdom (or lack thereof) of Biden rescinding the presidential permit, but one thing he can’t say is that Biden’s position comes as a surprise.
No one forced the man who holds the pen to sign away $7.5 billion in cash and loan guarantees on a project fraught with political risk over which he has no control or influence.
Kenney placed a heavy bet on the success of the Trump campaign team. In six months’ time we’ll find out whether it’s Kenney or Biden who gets to put KXL on their “promises made, promises delivered” list.
That may feel like eyes wide open to Mr Kenney, but it feels like eyes wide shut and fingers crossed to the rest of us.