Keystone XL pipeline: New book outlines hard-won lessons from Obama rejection

US, Canadian governments must enforce approvals of pipeline projects like Keystone XL – McConaghy

Keystone XL is back on the table and that’s good news for the Canadian oil sands industry, says Dennis McConaghy, author of a new book on the controversial pipeline project. And this time around he thinks proponent TransCanada is much better equipped to counter the inevitable opposition.

“The book was spawned out of my desire to ensure that there was a historically record from someone who had the perspective of being an insider to Trans Canada about how the project unfolded, how it was treated, how the entire US regulatory and political system treated it over the course of seven years, and how the project became a kind of proxy war for the environmental movement,” the former TransCanada senior executive, who retired in 2014, said while being interviewed by me during the Jan. 24 Energy News Webinar. 

Dysfunction — Canada after Keystone XL is unusual in today’s political climate because it’s written by an Alberta-based industry insider who thinks that former Prime Minister Stephen Harper’s failure to implement a Canadian carbon pricing regime largely killed the pipeline.

This point can’t be overstated. Support for NDP Premier Rachel Notley’s carbon tax is in the low 30s in public opinion polls. Energy leaders rail against how the carbon tax will make Alberta uncompetitive. And both Brian Jean of the Wildrose Party and Jason Kenney, soon likely to be the leader of the PC party, have said they will kill the controversial tax.

“My contention always was that Canada had to resort to carbon pricing as a way of saying to the world that we economically internalized the cost that’s implicit in carbon emissions,” McConaghy said.

“So, my challenge to conservative critics of carbon pricing is, ‘Do you really think you’re going to get federal approvals for these kinds of projects without carbon pricing?'”

McConaghy is also concerned about the Canadian regulatory approval process for energy infrastructure projects – not surprising, I suppose, given the seven years of frustration and delay TransCanada faced as President Barack Obama dithered in the face of substantial opposition from the American environmental movement and local opponents, such as some Nebraska landowners.

“Within [the book] there were various recommendations related to how our regulatory processes have to become more attuned to ensuring that public interest determinations come early in processes, not late, so that proponents aren’t risking literally hundreds of millions of dollars before finding out whether or not they can actually get regulatory and political approval for major infrastructure projects,” he said in the interview.

He has a point. Calgary-based Enbridge spent $500 million trying to get the Northern Gateway pipeline project approved, only to have the Trudeau government reject it in late Nov., largely in part because of ferocious political opposition in British Columbia.

TransCanada spent over $2.4 billion on Keystone XL before the project was rejected. The company filed a NAFTA challenge against the US government for $15 billion, arguing that it should be reimbursed for actual costs and lost profit due to Obama’s political decision to nix the pipeline.

The Liberals have begun “modernizing” the National Energy Board, the federal energy regulator, but it is too soon to know if McConaghy’s recommendation about confronting local and regional objections earlier in the approval process will be listened to.

Keystone XL opponents are expected to revive their protests, even though the Republican Trump Administration will be much less friendly than the Democratic Obama White House.

“A powerful alliance of Indigenous communities, ranchers, farmers, and climate activists stopped the Keystone and the Dakota Access pipelines the first time around, and the same alliances will come together to stop them again if Trump tries to raise them from the dead,” Greenpeace Executive Director Annie Leonard said in a press release.

When – not if – Keystone XL rises from the dead, Trump and Trudeau must be prepared to stand behind the process and approvals earned by the project, says McConaghy.

“I think a real challenge that we all have to be focused on is existing governments are going to have to enforce their approvals and that’s something that they should be speaking to and being unequivocal about,” he said. 

Click here to watch the full-length version of the interview with Dennis McConaghy.

McConaghy notes that Canadian Natural Resources Minister Jim Carr recently said that protesters are welcome to dissent, but they are not welcome to break the law, which will be upheld by police.

He expects that state and local governments in North Dakota, South Dakota, and Nebraska will do the same.

From the perspective of Alberta and Canada, the economic benefits of Keystone XL demand support. The pipeline will be the  most direct route to the prized market of the US Gulf Coast, where many of the refineries are configured for heavy oil and competitors – such as Venezuela, Mexico and Nigeria – are having trouble meeting demand because of domestic production problems.

“I think you’re going to see more capital spending in the wake of this decision, and that’ll be capital spending that’ll put Alberta engineers back to work and that’s a significant element to this economy,” he said. 

Dysfunction — Canada after Keystone XL is available online from Dundurn Publishers in paperback and eBook.