OPINION | We've mourned the Keystone XL pipeline, now it's time to move on

Keystone XL won't save Alberta oil jobs, and losing it won't kill jobs that weren't dying anyway, says former energy analyst Samir Kayande.

'A special place in the pantheon of failures belongs to our governments,' consultant says

Work on the Canadian leg of the Keystone XL pipeline began last summer after the Alberta government invested $1.5 billion in the project. In this photo from September 2020, pipe is ready to be used near the town of Oyen, Alta. (Kyle Bakx/CBC)

This column is an opinion from Samir Kayande, a consultant with 25 years experience in the energy sector.

I'm so profoundly, bone-deeply tired of Keystone XL.

It's the annoying drunk uncle at Thanksgiving dinner; the extremely annoying parents of your toddler's best friend. I prefer them both to even five more minutes of talking about KXL.

But here we are. Perhaps, for now at least, this dead pipeline will do me the favour of remaining dead for a while. KXL won't save Alberta oil jobs, and losing it won't kill jobs that weren't dying anyway. Our own careers are not helped by imbuing the pipeline with even more meaning than it already has.

Look, I know there are jobs at risk. People's livelihoods. Lifetimes of expertise, lives spent on the road away from families. It's because I care about people that straight talk makes sense. As an analyst and a consultant and 25-year oil industry veteran, it's what I do.

Keystone XL exists purely on a metaphorical plane, as a platonic ideal of a pipeline. How people feel about it depends on their politics, their view of climate change, relationship with Big Oil, Indigenous rights and reconciliation, the source of their paycheques, and the meta feeling about how they feel about the source of their paycheques. (For oil and gas people, that meta feeling is either pride or shame. Sometimes both simultaneously).

U.S. President Joe Biden cancelled a key permit for the Keystone XL pipeline on his first day in office last month. Some of the pipe from the project may ultimately be sold to help TC Energy and Alberta recoup costs. (Alex Panetta/The Canadian Press)

When KXL was proposed in 2005, before the shale boom, nobody expected U.S. oil production to grow. On the other hand, in Alberta, the new steam-assisted gravity drainage (SAGD) process offered immense promise as a resource that could scale up to multi-million barrels of daily oilsands production, a true once-in-a-lifetime opportunity.

The world has changed

Building pipelines to connect that resource to the world's largest heavy oil refining hub in the U.S. Gulf Coast was an essential component to getting all the new SAGD oil to market. Hence Keystone, Keystone XL, and a multitude of Enbridge projects. At the time, building long-haul pipeline infrastructure was a brutally complex job but doable and rewarding.

And then the world changed. Oil-short America figured out how to release crude oil from shale source rocks, a huge technological shift. The oilsands resource was not as extensive as originally envisioned, with failure after failure by non-household names such as Laricina, Grizzly, Athabasca and Sunshine. Higher-than-anticipated costs by Exxon, Canadian Natural Resources Ltd., Suncor and Shell meant even the blue chips weren't immune. 

The combination of higher costs and less resource would have been manageable had debt-fueled U.S. shale growth not collapsed oil prices. The Canada Energy Regulator (CER) now forecasts ample pipeline transportation capacity, as long as Line 3 and Trans Mountain expansions enter operation, and it's not because building pipelines suddenly got easy. It's because the growth slowed.

In the Canadian Energy Regulator’s reference case, which assumes climate policy as of 2020, Keystone XL is required after 2030. The evolving case, in which climate policy strengthens, never requires KXL. (Canada Energy Regulator)

And, oh yeah, the environmental movement figured out that pipelines are a great pinch point through which they could attack hydrocarbon production.

Maybe the CER and I are wrong, and the growth will come back. Higher oil prices help. Future restrictions on drilling in the U.S. will raise prices (all else equal) as will the coming pipeline capacity excess. Of course, cost cuts have been and will be part of the equation. 

"Cost cuts" mean fewer people, paid less. For people employed in the industry, that's not bullish. Even if growth returns, the good jobs won't.

Much ink has been spilled on who is responsible for the mess we, as Albertans, find ourselves in. Canadian oil producers misread the business risk of rising shale production. They discredited the energy behind the movement to reduce carbon emissions. Regulators made lazy permitting decisions that could be easily challenged. Courts read in new laws and regulations. The 2016 election of Donald Trump supercharged the opposition with cash and attention.

A failure of vision and strategy

A special place in the pantheon of failures belongs to our governments. These failures were both a function of vision and strategy. They have implications for what we who work(ed) in the industry need to manage in our careers and our lives.

Vision failure is easy. We had decades to prepare for climate change's bite and did not. 

The strategic failures are more complex. Strategy, broadly, is how to achieve a vision: the interaction between a business's goals and its environment. To fail strategically is to misread the terrain, mistake strengths and weaknesses, miss opportunities, and succumb to threats. Failing at both vision (going after the wrong thing) and strategy (going after the thing in the wrong way) is truly masterful.

Keystone XL has long been a political and environmental lightning rod. In this photo from 2015, a group of activists gather to celebrate the Obama administration's rejection of the Keystone XL pipeline outside the White House. (Jonathan Ernst/Reuters)

It's an art to know when to run with the wind and when to hold fast. For example, it was maybe possible in the 2000s to give a little, embrace carbon pricing, negotiate a peace. By the time the provincial government was willing to negotiate such a deal in 2015, the window had moved. Even an economy-wide carbon tax and cap on oilsands production wasn't enough to placate an increasingly confident opposition.

A cautionary tale

It's similar to the experience of a commodity trader who sees her investment position falling apart: does she hold on or give up? The answer is unique to every situation. Rarely is the answer to fight hard, all the time, every time. Such a trader would give up her job to someone more capable.

There's a metaphor and a lesson here for those working in Alberta. We have the example of coal jobs as a cautionary tale. A vital element of personal career success is working in a growing industry. That doesn't describe oil and gas anymore. It's one reason I'm trying hard to leave the sector.

So, to my friends who ask me, I say that I don't think it's getting better.

The axe man, just behind our view, is inexorably nearing.

I can view my career with a strategic context, similar to a business or a province. To know when to run with the wind is an art, but when giant pots of money are unveiled — in renewables, in software-as-a-service, in any industry except oil and gas, as it turns out — I will follow that money to where it leads.

I'm not a good person. I'm just trying to make a living. Hopefully that living means, finally, leaving Keystone XL in my past.

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Samir Kayande is a consultant with 25 years of energy experience, from natural gas to nuclear power. He recently led the midstream liquids practice at a Calgary-based SaaS (software as a service) firm.