GROUNDHOG DAY: Trump pushes for Keystone XL revival despite tariffs and lingering legal battles

Once bitten, twice shy. 

Or in the case of the defunct Keystone XL pipeline, three times is a charm after US president Donald Trump on Monday reignited calls to pull it back from the grave despite the project’s developer having abandoned it and mounting trade tensions with Canada over potential oil tariffs.

“The company building the Keystone XL Pipeline that was viciously jettisoned by the incompetent Biden Administration should come back to America, and get it built – NOW!” Trump declared on his social media platform.

He went on to assure that his administration would fast-track approvals, stating, “Easy approvals, almost immediate start! If not them, perhaps another Pipeline Company. We want the Keystone XL Pipeline built!”

Trump’s renewed push for the pipeline comes amid his threats to impose a 10% tariff on Canadian crude, a move that has sent shockwaves through the oil industry and worsened relations. 

It also comes amid a desperate cry to build new pipelines to both of Canada’s east and western shores, precisely to circumvent the whims of its fickle politicians on both sides of the US’ political divide.

Despite his claims of wanting to bolster North American energy security, Keystone XL remains very much a pipe dream.

That’s at least partly because Trump himself has previously insisted that the US can rely on its own oil production without imports from its northern neighbour, even though two thirds of its crude imports — some 4.2 million barrels per day (bpd) — come from Alberta. 

“We don't need their oil and gas. We have more than anybody,” he infamously told the World Economic Forum in Davos on Jan. 23, days before imposing the sweeping tariffs.

On Monday, he vowed to reimpose oil and gas tariffs starting next Tuesday with no exceptions. That means uncertainty continues to loom over Canadian producers, including Calgary-based Cenovus Energy and others who rely on US markets.

The Keystone XL pipeline was first proposed in 2008 as an extension of the existing Keystone network, designed to carry 830,000 bpd from Alberta to Nebraska. 

It quickly became a political battleground, with environmentalists and indigenous groups opposing it. Former president Barack Obama rejected the project in 2015 and Joe Biden cancelled the cross-border permit via executive order on his first day in office in January 2021, effectively killing the project.

Portions of the pipeline route have already been dismantled and key permits have expired, making any resurrection an uphill battle, even if it were technically and feasibly possible.

Despite its demise — or because of it — the Alberta government continues to seek compensation for its losses. In February 2022, the Alberta Petroleum Marketing Commission (APMC) filed a notice of intent to pursue damages under the legacy provisions of NAFTA, now part of the Canada–United States–Mexico Agreement (CUSMA). 

Under the previous government of Jason Kenney, Alberta had sunk CDN$1.5 billion in equity and provided a $6 billion loan guarantee to support the project, only to see it scrapped. The claim seeks to recover these funds and hold the US accountable for its abrupt cancellation of the presidential permit. 

Likewise, TransCanada (TC Energy) sued the US government for USD$15 billion in damages but the claim was dismissed by a World Bank tribunal in July 2024. 

Some view Keystone XL’s revival as a potential bargaining chip in negotiations over Trump’s threatened tariffs, including Alberta Premier Danielle Smith.

On Twitter ("X") Tuesday, Smith urged Trump to ditch the tariff talk and get "shovels in the ground."

"Let’s also scrap these inflationary tariff ideas and focus on getting shovels in the ground right away!" she Tweeted.

But for now, the pipeline remains a relic of a past era — one that even its original developer has abandoned.

Many in Alberta’s oil sector are more concerned with securing a stable trade relationship with the US than revisiting a long-defeated pipeline battle, especially under threat of tariffs. 

In the wake of Biden’s decision, Keystone XL’s developer, TC Energy (formerly TransCanada), formally terminated the project in June 2021. Last year, the company further distanced itself by spinning off its liquids pipeline division into a new entity, South Bow Corp., which began operations on Oct. 1, 2024.

On Monday it continued to insist that it has no interest or inclination to revive it.

“We have moved on from the Keystone XL project,” South Bow spokeswoman Katie Stavinoha said in a statement Monday. “We continue to engage with customers to develop options to increase Canadian oil supplies to meet growing US demand.”