The card Canada never played to get Keystone XL approved
Stephen Harper might have convinced Obama to allow the pipeline if he put a price on carbon, says author
Some diehards in the Alberta oilpatch won't give credit to Liberal Prime Minister Justin Trudeau and Alberta NDP premier Rachel Notley for giving them the top gift on their Christmas wish list — approval of a new oil export pipeline. But according to a new book, those unlikely oilpatch allies did what former Prime Minister Stephen Harper wouldn't do to get Keystone XL constructed.
With a Donald Trump victory south of the border, Keystone XL may still be built one day, however its lengthy delays and rejection by Barack Obama have already cost millions, if not billions, in lost revenues for Canadian producers, led to the regulatory fast-tracking of pipelines in Canada and ratcheted up the pressure in Canada's already contentious pipeline debate.
Could all of this been avoided? Maybe, if Canada had played one important card, the only one it had left, but refused to use — a price on carbon.
- What Alberta's new carbon tax will mean for these 6 households — and yours
- Alberta Environment Minister defends carbon tax as a made-in-Alberta solution
Obama's take on climate change
After Obama's speech at Georgetown University in June of 2013, McConaghy realized the writing was on the wall for Keystone XL, even though the project was never mentioned. The speech focused solely on climate change and took aim at fossil fuels.
- Barack Obama rejects Keystone XL pipeline citing 'national interest'
- Keystone XL rejection leads TransCanada to sue Obama administration
KXL's environmental hurdle
"TransCanada tried to work with those two entities to see if any Canadian carbon policy changes could be made," said McConaghy.
Neither Harper nor CAPP had any appetite for a carbon tax, so the decision was made to stay the course. Oil industry players are often hypocrites when it comes to climate change, says McConaghy, because they broadly acknowledge the risks of climate change, but rarely endorse credible policy to deal with the problem.
Harper famously called the project a "no brainer," suggesting the merits of the project were good enough for the pipeline to be approved. There was no need for Canada to do anything else.
- ANALYSIS: TransCanada an underdog, but has strong case against Washington
- Justin Trudeau 'disappointed' with U.S. rejection of Keystone XL
The big 'what if?'
To this day, McConaghy wonders whether that decision sealed the pipeline's doom under Obama. A national carbon tax should have been introduced years ago, he says, and it could have saved the project.
"Carbon pricing, in a world that is trying to be serious about dealing with the issue, it was the only alternative for Canada," he says. "That should have been pursued more publicly and with greater conviction as the last card Canada had to play."
[A carbon tax] should have been pursued more publicly and with greater conviction as the last card Canada had to play- Dennis McConaghy , former TransCanada executive
Without a carbon tax in Canada, McConaghy says Obama was not going to approve the pipeline.
"Had Canada actually done that, it might have actually allowed Obama to say within his own country, 'here's the rationalization I have for this approval. They are doing what we ideally would have liked to have done,'" he says.
Oilpatch opinion shifts too late
In an ironic twist, when Keystone XL was ultimately rejected a few years later, calls for a carbon tax in Canada began immediately by some political and oilpatch leaders. The appetite for such a policy shift was much stronger. At that time, both former TransCanada CEO Hal Kvisle and the CEO of Royal Dutch Shell Ben van Beurden called for a hefty price on carbon.
- Canada shouldn't lose resolve for a carbon tax, says Shell exec
- Oil and gas companies among 60 groups urging Liberals to stick with carbon price plan
McConaghy has faced "enormous" pushback to his book and received criticism from some of his former colleagues, who don't believe a carbon tax would have done anything to convince Obama about Keystone XL. Others, such as former U.S. ambassador to Canada David Wilkins, say there is no point in second-guessing since the decision had nothing to do with Canada, it was all about politics.
The negotiations between Harper and Obama have a parallel in more recent talks among Trudeau, Notley and B.C. premier Christy Clark over the proposed expansion of the Trans Mountain pipeline, although with a different result.
Hello, Donald Trump
McConaghy's book is a postmortem of the Keystone XL pipeline, but the recent presidential election is resuscitating the project. Trump is believed to be a proponent and he's appointing several oil industry supporters to his administration.
TransCanada recently made some changes to the project description on its website, so paragraphs written in the past-tense are now in the present. The section explaining the rejection of Keystone XL by Obama is completely removed. It's a hint the project is alive.
McConaghy thinks so too.
"[The Trump administration] will find a way to get it revived," he says.
Even if the long-awaited project is ultimately constructed, McConaghy will still wonder whether it could have been built years ago if only Canada had introduced a carbon tax much sooner. Harper was a strong supporter of the oilpatch, but the book raises the question about whether TransCanada needed a prime minister that would put all the cards on the table, if needed, to convince Obama.
In 2017, Alberta, Ontario, Quebec and British Columbia will have have a price on carbon. The federal carbon tax is expected in 2018.
McConaghy's book will be released Jan. 21.