Biden’s Keystone XL Decision Signals Troubling ‘New Normal’ For U.S. Pipelines

In a statement reminiscent of Barack Obama’s famous admonition that West Virginia coal miners losing their jobs should “learn to code,” Transportation Secretary nominee Pete Buttigieg flatly stated during his confirmation hearing this week that union workers who have been or expected to be employed on the Keystone XL Pipeline project should simply get other jobs, saying “…we’re very eager to see those workers continue to be employed in good paying union jobs, even if they might be different ones.”

Thus does the future cabinet member reflect the Biden/Harris administration’s indifferent attitude towards the domestic oil and gas industry in general and this key, $8 billion energy infrastructure project specifically. News of the cancellation of this cross-border permit was by and large treated as sort of a business-as-usual matter, but it is in fact an extraordinary, even radical act of executive fiat that has few peacetime precedents in American history.

The Keystone XL project represents an overall $8 billion investment by TC Energy, the company which owns and operates the Keystone Pipeline System that moves large volumes of crude oil throughout the middle section of the United States and southern Canada. Several hundred miles of the planned 1,200 mile Keystone XL expansion have already been constructed and placed into the ground, including, ironically, the section of the line that crosses the U.S./Canadian border. Upwards of $3 billion of that overall $8 billion investment have already been committed and now represent a sunk cost at the whim of a new President, a very dangerous precedent for any administration to set.

President Biden’s rash decision also puts thousands of union jobs at risk, representing $2.2 billion in lost wages. Keystone XL already employs about 2,000 workers, including members of the International Brotherhood of Electrical Workers, the United Association of Journeymen and Apprentices, the Teamsters and other major unions. All told, the plan for full construction of Keystone XL would employ as many as 10,000 union workers through its completion.

Barring a successful challenge to Biden’s order, all of those jobs are gone, noted without regret by Buttigeig and his advice that the workers simply seek other employment.

Gone also will be the $1.7 billion TC energy plans to invest in real, actual new clean energy capacity between now and 2030 to provide all of the power the Keystone XL would consume, along with the thousands of direct jobs that investment would produce. According to a TC Energy fact sheet, Indigenous communities along the pipeline’s corridor will also be hard hit: “Indigenous communities lose hundreds of millions of dollars, including more than $1 billion in intergenerational opportunities for equity ownership in KXL that will help them fight poverty and build schools, hospitals, and other essential services.”

Some, like Anthony Shaw, CEO and founder of Progeneration Energy, view the Biden decision as part of a new status quo in the U.S. In an email to me on Friday, Mr. Shaw said that “The Keystone project highlights a major change in the way we assess the viability of energy projects and final investment decisions. We used to operate under the guise that if nails had made it into the ground, a project was likely to be finished. That is simply not the case anymore, and no project is ‘too far along’ to be at risk of cancellation. Energy companies are going to have to take a deeper look at the viability of projects moving forward.” 

Among those who are no doubt pleased with Biden’s decision to cancel a pipeline that would bring hundreds of thousands of barrels of heavy Canadian crude into the United States to be refined would be nations in the Middle East, along with Venezuela and Mexico, whose own heavy oil production will be purchased by U.S. refiners to fill the void. Canadian Prime Minister Justin Trudeau, however, was not pleased at all, raising the matter in a call he conducted with President Biden on Friday. The White House statement about the call said Biden acknowledged “Trudeau’s disappointment regarding the decision to rescind the permit for the Keystone XL pipeline, and reaffirmed his commitment to maintain an active bilateral dialogue and to further deepen cooperation with Canada.“ That, plus $2.15 will get PM Trudeau a cup of coffee at Starbucks
SBUX
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If Mr. Shaw’s vision for the future is correct, it is indeed a troubling one for the pipeline business. Certainty and consistency in the legal and regulatory arenas has been among the key factors that have made the United States such a comparatively attractive province to attract major energy investments. Biden’s fiat decision to simply strand billions of dollars of already-deployed investments in Keystone XL erodes that certainty. Green energy advocates who are celebrating this decision related to Keystone XL would be well-advised to consider that the precedent it sets could easily be applied to major solar and wind investments by future presidents.