After many years of contention and a suspension of operations, TC Energy confirmed on June 9, 2021, that it was terminating the development of its controversial Keystone XL Pipeline Project.
President Biden issued an executive order on January 20, 2021, that revoked a crucial presidential permit allowing for the pipeline’s construction across the Canada-US border, stating that “The Keystone XL pipeline disserves the US national interest” as “The United States and the world face a climate crisis.”
Though Canadian officials attempted to convince President Biden to reverse his decision, no change was made.
“Construction activities to advance the Project were suspended following the revocation of its Presidential Permit on January 20, 2021,” the company noted. “[TC Energy] will continue to coordinate with regulators, stakeholders and Indigenous groups to meet its environmental and regulatory commitments and ensure a safe termination of and exit from the Project.”
Originally proposed in 2008, the project would have passed through a significant portion of Indigenous land in the United States, with activists spending a number of years on high-profile protests.
Of course, the end of the project has disappointed many as well. “It’s unfortunate that political obstructionism led to the termination of the Keystone XL pipeline,” said American Petroleum Institute Vice President of Midstream and Industry Operations Robin Rorick. “This is a blow to US energy security and a blow to the thousands of good-paying union jobs this project would have supported.”
Impact on contractors is uncertain as governments try to recoup losses, but domestic fuel supply looks to remain unchanged
In the United States, the project’s cancellation may have a significant impact on large contractors.
In October 2020, TC Energy awarded over $1.6 billion in contracts to six major American contractors to build pipelines: Barnard Pipeline, Associated Pipeline, Michels, Precision Pipeline, Price Gregory International, and U.S. Pipeline.
Additionally, in June 2020, TC Energy awarded a contract to Michels to construct a significant portion of the Keystone pipeline in Alberta — for which the company would have been responsible for hiring approximately 1,000 workers per year over the two-year construction period.
There may be some financial ramifications that are not guaranteed to directly impact American contractors or suppliers as well. Notably, the government of Alberta is looking to recoup some value after it invested $1.1 billion (USD) into the pipeline’s construction.
The pipeline may be sold for parts as part of this — Jason Kenney, the premier of Alberta, Canada, said in January 2021 that “If the project ends, there would be assets that could be sold, such as enormous quantities of pipe…That would offset construction costs.”
Even amidst this uncertainty, it’s seen as incredibly unlikely that the pipeline’s cancellation will have an impact on the present United States fuel supply. As the National Resource Defense Council has noted, the majority of the oil carried by the pipeline would be exported overseas — and the project was not likely to be completed for a number of years.
In fact, Jaime Court — president of Consumer Watchdog — noted in a report that the project’s cancellation could even have a positive impact on consumer gas prices, saying that “(Canceling construction) gives more security to the Midwest refiners knowing that the portion of the pipeline that’s being used now to bring crude into the Midwest refineries can be used in the future.”
Amidst environmental benefits, full impact of the project’s cancellation on the construction industry remains uncertain
While environmentalists praise the abandonment of the project — which would carry oil that requires a high level of processing and emits high levels of greenhouse gas — proponents and critics disagree over the financial impact on the construction industry.
At the time of the project’s cancellation, Reuters spoke with James Stevenson — a spokesperson for the Canada Energy Regulator — who confirmed that only about 8% of the planned extension had been built by the time President Biden issued the executive order to rescind permission for the project.
Though funding for the estimated $8 billion project had largely been secured through 2022, different sources have touted vastly different numbers in terms of construction jobs that would be created by the pipeline’s development.
Proponents of the pipeline still claim that the pipeline would be a significant boon to the construction industry. At the time that President Biden revoked approval for the pipeline, Montana Attorney General Austin Knudsen claimed that “The pipeline would have enhanced America’s energy independence while bringing much needed jobs, tax revenue, and economic development to rural communities…across the country.”
A letter to then President-elect Biden from leaders of North America’s Building Trades Unions, National Association of Manufacturers, International Union of Operating Engineers, and the United Association claimed that “More than 2,000 Americans are already earning paychecks tied to the Keystone XL project—including 1,000 skilled workers who are members of the Labor community” and that “The new project will be 100% union built and will create 10,000 union jobs during construction.”
The letter emphasized the possibility of jobs created by the pipeline, claiming that “Members of IBEW and Plumbers and Pipefitters (UA) are building pump stations. Operating engineers, welders, pipefitters and laborers completed an international border crossing with our ally Canada. Steel mills have churned out line pipe, and manufacturers have fabricated fittings, electric motors and valves.”
The US Chamber of Commerce’s Global Energy Institute claimed in January 2021 that the project would support “13,000 Canadian and American workers in the building trades.” Global Energy Institute President Marty Durbin added at the time that ending development of the pipeline “will harm consumers and put thousands of Americans in the building trades out of work. Halting construction will also impede the safe and efficient transport of oil, and unfairly single out production from one of our closest and most important allies.”
However, a previous report by the Obama administration’s Department of State went against this, noting that the pipeline’s construction would result in “3,900 direct construction jobs if it was built over one year, or 1,950 if the work was spread over two years.” Once operational, TC Energy would have only required 35 permanent full-time jobs and 15 temporary full-time jobs in order to run the pipeline, making the rest of the job creation temporary.
It’s unclear what kind of impact the cancellation will have on the United States’ supply chain, as well. As the Trump administration sought to advance the pipeline’s construction with an executive order in January 2017, TC Energy didn’t commit to using US-made pipe on the Keystone XL project.
Though former President Trump stated at the time “I am very insistent that if we are going to build pipelines in the United States, the pipes should be made in the United States,” TC Energy remained noncommittal, with spokesperson Terry Cunha only saying that “We are aware that the Secretary of Commerce will come up with a plan…We will need time to review and analyze the plan when it is released to determine its impact to Keystone XL.”
Environmental concerns and legal challenges make US pipeline development projectshigh-risk for contractors
As the very high-profile Keystone XL project comes to a close, activists are looking for similar fates to befall other notable pipelines in the United States.
The similarly-notable and maligned Dakota Access pipeline is in a shaky spot — though a recent court decision was settled in the pipeline’s favor, appeals and executive actions pose a risk of stopping pipeline operations once again. The US Army Corps of Engineers is still working on a court-ordered environmental review of the pipeline as well, the results of which could halt operations.
Enbridge, Minnesota’s Line 3 pipeline has also seen significant recent protests, as hundreds of activists rallied on June 7, 2021, to protest the construction of the pipeline — which, according to developer Enbridge Energy, is already more than halfway complete.
A recent conflict over the Risberg Pipeline led to two pending legal cases in May 2021, as well, as Wood Group USA claims that it is owed more than $35 million by RH Energytrans stemming from more than 200 change orders on the pipeline — while RH Energytrans claims that Wood Group improperly filed mechanics liens, putting the two at a temporary legal stalemate.