President Joe Biden’s cancellation of the Keystone XL project has put Justin Trudeau in a no-win situation. He has no good options to retaliate. But a failure to fight back could fracture the unity of his own country.
Biden revoked the permit for TC Energy Corp.’s oil pipeline via executive order hours after his inauguration on Wednesday. The cross-border project would have transported more than 800,000 barrels a day from the western province of Alberta to Nebraska, and from there to U.S. refineries.
Trudeau immediately came under pressure from Alberta Premier Jason Kenney, who called on the prime minister to consider trade sanctions against the U.S. It’s unclear Trudeau will be willing to go that far. In a statement Wednesday evening, the prime minister said: “We are disappointed but acknowledge the President’s decision to fulfill his election campaign promise on Keystone XL.”
The confrontation scrambles Trudeau’s plans for a full reset in Canada’s relationship with the U.S. — by far its most important foreign ally — after four years of bruising trade battles with Donald Trump. In western Canada, a failure to push back on Biden will only sow greater mistrust over Trudeau’s handling of the nation’s vast oil riches.
Keystone XL is a charged political symbol and an economically-vital project in the country’s west, worth billions of dollars a year in additional oil revenue. Building it would have opened the way for new energy development in Alberta, where the unemployment rate is 11%, and helped the region sell its heavy crude at higher prices.
In the 2015 election campaign that brought Trudeau to power, he argued that stronger climate policy would help win approval for Keystone. It hasn’t worked out that way, and Biden’s move is likely to fuel further anger against the federal government in the west.
“This is a gut-punch for the Canadian and Alberta economies. Sadly, it is an insult directed at the United States’ most important ally and trading partner on day one of a new administration,” Kenney said at a news conference Wednesday.
Part of Trudeau’s political dilemma stems from his attempt to reconcile his image as a progressive politician with his role as the leader of an economy with huge energy and mineral resources.
While enacting new environmental policies, including a carbon tax, the prime minister has also tried to help Canada’s oil and gas sector in other ways, including the C$4.5 billion ($3.6 billion) purchase of the Trans Mountain pipeline in 2018.
That move was intended to keep alive a plan to expand the conduit that runs from Alberta to Canada’s west coast. But it alienated some voters in left-leaning districts that Trudeau’s Liberal Party needs to win in order to regain a parliamentary majority in the next election.