On the day he was inaugurated, U.S. President Joe Biden scrapped the Keystone XL pipeline via an executive order. The pipeline was intended to carry crude oil from Alberta to the Gulf Coast of the United States, the world’s largest market for heavy crude. This project has been proposed, approved, and cancelled twice now since 2008. In March of last year, Alberta’s United Conservative Party (UCP) government bet $1.5 billion on a stake in the project and put up $6 billion in mysterious loan guarantees, the details of which are not open to the public. Billions of public dollars will now vanish into thin air with the cancellation of the pipeline.
This is just the latest in a series of disasters for Premier Jason Kenney and the UCP government, including the explosive travel scandal, a growing uproar over coal projects in the Rocky Mountains, and teachers up in arms over provincial pension changes. When Kenney went “all in” on Keystone, he insisted that “it is a solid bet that will produce a handsome return for Albertans.” Events have shown that it was not a solid bet at all, but in fact a reckless gamble.
After it was confirmed that the permit for Keystone had been revoked by President Biden, Premier Kenney, visibly flustered, held a press conference where he described the news as a “gut punch” and “an insult directed at the United States’s most important ally and trading partner.”
In the runup to inauguration day, Kenney had made overtures to Biden in the media, pleading his case to allow the project to move forward, arguing that cancelling the pipeline “would kill jobs on both sides of the border, weaken the critically important Canada-U.S. relationship, and undermine U.S. national security by making the United States more dependent on OPEC oil imports in the future.”
In the same statement, Kenney vowed that the Alberta government would use “all legal avenues” to protect its interest in the project. Despite Kenney’s threats of legal action, the desperate pleas, and weak economic arguments, President Biden remained unconvinced and went ahead with the cancelation.
Biden was not the only politician in Kenney’s sights; he saved a fair bit of rhetoric for all the usual suspects. One of the major reasons for the decline of the Alberta oil industry is that oil production in the province comes with some of the highest production and labour costs in the world. Coupled with low prices and enforced discount pricing on international markets and high refining costs, Alberta oil is simply not competitive. The UCP is well aware of this fact, but rather than admit it and act accordingly, they would rather blame anyone else they can.
The federal government is a favourite target of the UCP, and an easy one at that. Blaming Ottawa allows them to distract from the real reasons for the crisis in the Alberta oil industry and whip up sentiments of Western alienation to maintain support for their attempts to save a dying industry. Prime Minister Justin Trudeau and the federal Liberal government were heavily criticised, as usual, by Kenney for not fighting hard enough for Keystone, despite the fact that they have backed Keystone from the beginning. Kenney described Trudeau’s statements on Keystone as “doing nothing more than expressing disappointment”. This is coincidentally exactly what Kenney was doing at the time, although in a much more animated manner. Naturally, Alberta’s New Democratic Party (ANDP) were not spared either, as Kenney attempted to blame the woes of the oil industry on them. For the UCP in Alberta, if the federal government cannot be easily blamed, then it must have been the NDP’s fault.
The cancellation of the Keystone XL pipeline did not come out of left field. One of Kenney’s complaints was that the permits were revoked “without consultation”. This is rich coming from him considering that Jason Kenney and his government have been cutting and slashing healthcare, education, disability programs, and environmental protections for two years now without consulting anyone.
In any case, Biden had pledged to cancel Keystone long ago. It was one of his promised election campaign policies. Furthermore, Biden was second-in-command to President Barack Obama who cancelled the pipeline the first time around. At the end of the day, Biden and the Democrats are the preferred representatives of the U.S. ruling class, and they will act in the interests of that class—interests which do not include this pipeline.
Although Biden and Obama may seem to have an “environmentalist agenda”, the reality is the complete opposite. Biden has been outspoken about his support for fracking for example, and Obama and Biden implemented policies that allowed the American oil industry to develop into the largest in the world.
Obama did not cancel Keystone for environmental reasons, nor did Biden. The Obama regime brutally repressed the Indigenous opposition to the Dakota Access Pipeline, for example. Obama canceled Keystone because the benefits did not outweigh the drawbacks from the perspective of the American ruling class.
Keystone was facing a growing opposition which began to dissolve Obama’s progressive credibility. Keystone faced significant opposition in nearly every single jurisdiction it was supposed to pass through. It met opposition from environmental groups, ranchers and farmers, and Indigenous groups. This opposition was already mobilizing under Trump, as Keystone got tied up in the courts late in 2020.
There were also many in government and corporate circles who were not convinced of the economic benefits of the pipeline. While Keystone would benefit the owners of refineries in the Gulf Coast, it would hurt refineries in the Midwest, and bring more competition for the American oil industry as a whole.
The proponents of the pipeline in both Canada and the United States argued that the pipeline project would benefit the United States as it would be a boost to the U.S. economy, provide American jobs, and lower gas prices. However, a more sober economic analysis showed that while several thousand temporary jobs would be created indirectly and directly during the construction of the pipeline, once completed it would only create 35 permanent jobs with an additional 15 temporary contract workers—this in an economy with around 150 million workers.
President Obama and now President Biden represent that wing of the American ruling class that can see no real benefit of the pipeline for the U.S. economy—and they are not wrong in their assessment. This wing of the Democrats may be prepared to pay some lip service to climate change action, but this really has nothing to do with the cancellation of the pipeline. From the perspective of this wing of the ruling class, the Keystone XL pipeline would not make a meaningful contribution to the U.S. economy or offer meaningful job creation.
Furthermore, the entire point of the pipeline was to allow Canadian crude oil to pass through the United States to be sold on international markets. Most of this oil was not intended for the U.S. market. As Obama pointed out: “Understand what this project is: It is providing the ability of Canada to pump their oil, send it through our land, down to the Gulf, where it will be sold everywhere else. It doesn’t have an impact on U.S. gas prices.”
While the Canadian and American economies are largely integrated, this doesn’t mean that the Canadian and American ruling classes are not competitors and that they cannot have divergent interests. From the perspective of the American ruling class, the building of the Keystone XL pipeline was really only beneficial to the Canadian ruling class and the Alberta oil barons in particular. The American bourgeoisie must have asked themselves—why would we go to all this effort and spend all this money to build infrastructure through our country that only benefits our competitor? From the perspective of capitalism, building a pipeline to help your competition does not make any sense.
Jason Kenney is now demanding the federal government fight for Keystone “on the same level it did aluminum and steel tariffs,” i.e. Kenney wants the federal government to impose tariffs on American imports in retaliation for the cancellation of Keystone. What Kenney doesn’t seem to understand is that Canada attempting to deal economic blows to the United States is comparable to a mouse picking a fight with a cat. The Canadian ruling class knows that it stands to lose a lot more than their American counterparts in such a dispute.
It is one thing for the Canadian government to respond tit-for-tat with increased tariffs when Trump increased aluminum and steel tariffs. In fact, those tariffs revealed just how integrated the two economies really are when increased U.S. tariffs on Canadian aluminum and steel led to an immediate increase in prices in the United States, even before the Canadian government retaliated. While a potentially stupid move from the perspective of the Canadian bourgeoisie, the Canadian retaliation (which was never implemented as the U.S. government eventually cancelled the tariff hikes), was at least commensurate to the policies implemented by the Trump administration. However, the Canadian government imposing punitive tariffs on the United States in retaliation for the cancellation of the Keystone XL pipeline would not be seen as commensurate, and would in fact be economic suicide for the Canadian ruling class. This is for the simple fact that American trade with Canada is much more important for the Canadian bourgeoisie than Canadian trade is for the American ruling class. The American ruling class uses the Canadian economy as a convenient subsidiary, but the Canadian ruling class is almost entirely dependent on the U.S. economy.
When asked if he had any regrets about the $7.5 billion investment in the pipeline, which has already lost $1 billion at the very least already, Kenney replied, “No, absolutely not. I think any responsible Alberta government would have made that decision.”
People do not usually praise themselves for being responsible after losing a fortune on a foolish bet—nevermind losing a fortune in public funds. The massive gambling losses Kenney has incurred with Keystone, their corporate tax cuts, and other handouts to the oil barons will have to be paid for, one way or another. The question as always will be: who pays? With the UCP in the driver’s seat and acting as the executive committee for the oil corporations, it will be the people of Alberta who pay to cover the losses incurred as a result of the Keystone fiasco. This will mean more layoffs, more privatizations, and more austerity. It will mean attacks on public sector workers, on nurses, teachers and civil servants. It will mean the continued crumbling of infrastructure, and the closure of schools and hospitals.
The Keystone XL blunder is another demonstration of the UCP’s approach to governing Alberta: privatize the profits and socialize losses. In this case, it is literally written into the contracts for the loan guarantees. The fight for Keystone XL is being fought under the banner of “all Albertans”, but it will only further grind down Albertan workers for the sake of funneling money into the pockets of the capitalists. The UCP government is the government of the oil barons and corporations and governs directly in their interests. The trade unions, the working class and youth of Alberta must continue to fight back against the UCP’s austerity agenda and fight for a government that rules in the interests of people over profits.