Keystone XL Pipeline Revisited

The trade issues of steel, aluminum, and energy dominated recent discussions between Canada and the U.S. in Washington D. C.  And while Prime Minister Mark Carney did not come away with a deal or promise of tariff relief from President Trump, it seems that Carney dangled a carrot in private discussions.  Carney expressed interest in reviving work on the Keystone XL pipeline, and Trump was reportedly receptive to advancing that project.

The Administration has a 10% tariff on all Canadian oil and gas imports. Describing the two countries’ relationship, Carney stressed how Canada is not just a huge goods and services trade partner, but also is the United States’ largest foreign investor.

“We are the largest foreign investor in the United States," he noted.  "Half a trillion dollars in the last five years, alone. Probably a trillion dollars in the next five years if we get the agreement we expect to get.”

It’s reported that the Keystone project was raised by Carney involving energy cooperation but was put in the context of getting relief for steel and aluminum tariffs.  Yet, on his return to Ottawa, when asked about the Keystone XL issue, the prime minister would only say that the delegation had ‘discussions on a wide range’ of issues.

Both Sides Are Trying To Land Deals

After the meeting, Canada-U.S. Trade Representative Dominique Le Blanc told reporters in Washington D.C. that their discussions largely revolved around steel, aluminum, and energy.

“The focus, both in the Oval Office and then again in the lunch in the Cabinet Room, was on the trading relationship," Le Blanc said.  "It concluded with the President and the Prime Minister directing us to quickly land deals that will bring greater certainty. The principal areas would be steel, aluminum, and energy. These sectors are amongst the ones that have faced the most significant challenges.”

Prime Minister Carney knows that President Trump has always wanted a direct pipeline from Alberta’s oil fields to the U.S. Midwest. And back in February, Trump posted on social media that he hoped the Keystone XL project could be revived. 

The Pipeline Is Still Well Into The Future

The former head of Alberta’s Petroleum Marketing Commission believes that bouncing the Keystone project off Trump could be helpful for hard-hit Canadian steel and aluminum sectors. But in reality, a large pipeline project takes years to complete. However, Richard Masson said that existing railway tankers could act as a moving pipeline - at least in the short term.

“It’s helpful. Canada has been a reliable supplier for the U.S., and they’ve become very dependent upon us, especially in the Midwest," he said.  "I don’t know if anybody’s serious about it. Building a pipeline takes a long time. You can move a lot of oil by rail. And that would be what I would expect to see, near term.”

The on-again, off-again Keystone XL project has a long history, first proposed under George W. Bush, but squashed by Barack Obama. Donald Trump revived the issue in his first term, but Keystone was canceled again by Joe Biden.

So, while nothing was discussed publicly, it’s hoped that some progress was made on steel and aluminum, currently under 50% import duties, the highest of all tariffed sectors.

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