With Keystone XL back on the shelf, oilpatch pressure mounts on Trudeau and Trans Mountain


The town of Oyen in southeastern Alberta has been enjoying a rare thing in the province these past few months: an economic boom. 

The community has been bustling with pipeline workers who arrived by the hundreds last summer to help build the Canadian leg of the Keystone XL pipeline.

Doug Dingman, who owns a grocery and liquor store in the community, said his business has been up 20 per cent with the crews in town and he thought they’d be around until next fall.

Those workers could soon start hitting the highway out of town as TC Energy announced a suspension in the project on Wednesday, after U.S. President Joe Biden pulled the permit for the proposed pipeline and rejoined the Paris climate accord as expected.

“I’m still pretty upset that he [Biden] is going to shut it down,” said Dingman, who worries about the ramifications for the oilpatch, the province and the economy.

But the situation also has him wondering about other important projects for the province’s oil and gas sector, including the Trans Mountain pipeline expansion.

Doug Dingman knows the ups and downs of the oilpatch. He was among the thousands of Albertans who lost their oilpatch jobs in the wake of the global crude price collapse a few years ago. He’s now the owner of the T&D Market Fresh Foods, just off Main Street in the town of Oyen. (Kyle Bakx/CBC)

The TMX project is owned by the federal government and is under construction, but some Albertans continue to worry it will never be completed.

“I really don’t think that’ll happen, either,” he said. “I think that B.C. is going to block it all.” 

All eyes on TMX

No doubt, the pressure from the oilpatch on the prime minister to complete Trans Mountain will intensify after this week.

Like many, Mark Salkeld was not surprised by the Biden decision, but is still left feeling “disappointment and frustration,” said the executive with Katch Kan, an Edmonton-based oilfield service company.

“We can’t be strangled by the U.S. We’ve got lots [of oil] moving there, no doubt about it, but there’s lots more yet to move,” he said, suggesting there will be renewed oilpatch interest in any export proposal whether it’s a pipeline, rail project, or some other alternative.

Many officials are hoping for improved relations between Canada and the United States under President Joe Biden, but his executive order cancelling the Keystone XL pipeline dealt some of those hopes an early blow — especially in Alberta. 2:02

The Trans Mountain expansion has faced a slew of its own setbacks, yet construction continues on the pipelines that will transport oil from Edmonton to the Vancouver area for export. Besides past legal and regulatory challenges, the construction was recently paused after a series of safety incidents.  

“I don’t think just because there’s no other country to deal with on that project that there aren’t going to be significant challenges,” said Connie Van der Byl, director of Mount Royal University’s institute for environmental sustainability in Calgary.

In fact, the demise of Keystone XL could invigorate opponents of Trans Mountain to try to stop that pipeline project too, she said.

“Overall, this is another signal to Alberta and those connected with oil and gas that it’s tough times. You have to have empathy for those in the industry,” said Van Der Byl, who worked for TC Energy as a business analyst in its natural gas division more than a decade ago.

Climate policy, demand uncertain

Alberta’s oil industry has wanted more export pipeline capacity for years in order to reduce the risk of expensive bottlenecks, like the ones that hit the sector in 2018. When export pipelines are full, there can be backlogs in the province, which drives down prices and forces more companies to move oil by rail. It’s the reason the Alberta government had a curtailment policy recently in place to limit the amount of oil production and maintain higher prices.

The existing Trans Mountain pipeline is operating at maximum capacity.

Pipe ready to be used for the construction of the Canadian leg of the Keystone XL in Alberta near the town of Oyen, in September 2020. (Kyle Bakx/CBC)

For many years, Keystone XL was seen as a necessity by the oilpatch, but assessing the impact of losing it now largely depends on where climate policies, world oil demand and Canadian oil production is headed.

For instance, the latest modelling by the Canada Energy Regulator shows a need for Keystone XL, the Trans Mountain expansion, and Enbridge’s Line 3 pipeline under its reference scenario, which assumes “a lack of future domestic and global climate policy action.”

However, under what the regulator calls its evolving scenario, Canada brings in new greenhouse-gas reducing measures to meet its stated climate targets. Canadian oil and gas production declines, and there could be ample export capacity with Enbridge’s Line 3 and the Trans Mountain expansion.

But that’s still assuming those projects can be built. Considering all the hurdles pipelines have faced in the last decade, that’s no guarantee. The risk is why the federal government decided to purchase Trans Mountain and why the Alberta government committed billions of dollars to TC Energy last year.

How many export pipelines Canada needs for the future is uncertain depending on several factors such as climate policy, production and global demand. (Canada Energy Regulator)

Stephanie Kainz is a senior associate with the intelligence team at Enverus, an energy data analytics firm in Calgary. She expressed doubts for months about the future of Keystone XL, but she feels confident about Trans Mountain getting built.

“On the heavy crude front, I think that Trans Mountain is crucial — it does provide that additional capacity,” she said.

The project continues to face determined opposition, including protests and blockades, from groups concerned about increased tanker traffic, oil spills, and climate change.

Kainz believes there’s broad support for the project, but she said the government and Trans Mountain need to work with stakeholders to assure community members that live along the pipeline system that the line “will be safe and that they’ll be safe.”

Plan B for KXL

For now, the Alberta government and TC Energy will consider their next moves, which could include pursuing legal action to recoup their investment, like the company briefly attempted in 2016, or beginning the liquidation process of pipe and other assets to help offset costs.

For TC Energy, there will be dissatisfaction, but it’s merely one of many projects the company is pursuing. Considering the firm operates throughout North America with a variety of businesses from oil and natural gas to electricity and nuclear, the company still has many growth opportunities.

As for Trans Mountain, the public spotlight has always shone bright on the multi-billion dollar expansion project. Still, with Keystone XL no longer in the picture, the focus on the federal government’s pipeline project will only sharpen — for those for and against.

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