EDMONTON — Political analysts say Premier Jason Kenney must rethink his traditional “fight back” approach and start building bridges to reconcile environmental concerns with oil and gas development.

“Attacks are not going to persuade anybody,” Lori Williams, a political scientist at Mount Royal University, said in an interview Thursday.

“You don’t set up a war room whose purpose from the get-go is to go after environmentalists. That’s a problem when you have an environmentalist in the White House.”

U.S. President Joe Biden, on his first day in office Wednesday, fulfilled a long-standing campaign promise to cancel the permit for the Keystone XL pipeline expansion.

The line would have taken more oil from Alberta through the United States to refineries and ports to help alleviate the current price discount on the province’s landlocked oil.

Biden had promised to cancel former president Donald Trump’s permit for the line on the grounds that product from Alberta’s oilsands does not mesh with broader goals to battle climate change.

Kenney called the decision an insult to Alberta and urged Prime Minister Justin Trudeau to deliver a breakthrough in talks or, if that fails, impose trade sanctions on the U.S.

Kenney’s comments also lauded Canada’s environmental record. Williams said those are valid arguments that Kenney needs to make a priority, married to policy initiatives as necessary, rather than throw them in as add-on talking points.

She suggested Kenney needs to pick a lane on the environment. Right now, she noted, he is promoting the federal climate plan as justification for Keystone while simultaneously challenging in court the plan’s consumer carbon tax.

Political scientist Jared Wesley said Kenney’s stance seems to be more about political damage control for a doomed project his government contributed $1.5 billion to last spring even though, at the time, it was a risky proposition.

“Kenney’s not the first premier to have one gear when it comes to intergovernmental relations,” said Wesley with the University of Alberta.

“The fight-back approach seems to be in (Kenney’s) political DNA. He doesn’t like being questioned and when his plans don’t turn out, the default position is to blame someone else.”

Kenney’s challenge is that bridge-building premiers run the risk of being perceived as weak, Wesley said, so Kenney may feel he needs to be bellicose and hard line given his popularity is being challenged on the far right.

Kenney beat the NDP in the 2019 election in part by promising to challenge what he said are shadowy global foes and environmentalists who seek to undermine Alberta’s oil industry. He set up a $30-million-a-year “war room” and struck a public inquiry into foreign funding of oil opponents. Both endeavours have been undermined by self-generated mistakes and controversies.

Kenney has blamed many of the province’s economic and oil woes on the Trudeau government’s policies. Yet the Liberal government in 2018 stepped in to buy the one pipeline that is proceeding – the Trans Mountain expansion from Alberta to the B.C. coast.

Wesley said Kenney blaming Trudeau has almost become a cliché and one that will hurt Alberta.

“The move (to blame Trudeau) has become so predictable that it’s laughable,” he said. “That’s not just among his opponents here in Alberta, but among people he’s supposed to be persuading nationally and internationally.”

Political scientist Duane Bratt, also of Mount Royal University, agrees.

“This is really setting the stage for the old playbook of ‘let’s blame Trudeau’ … and I’m not sure it’s going to work this time,” Bratt said.

“We’re seeing the collapse of the fight-back strategy in so many different realms. Not only has it not worked, it has cost Alberta taxpayers billions of dollars and a real hit to our reputation.”

This report by The Canadian Press was first published Jan. 22, 2021.

Dean Bennett, The Canadian Press

CALGARY — Western Canada’s oil producers will likely cope better with Joe Biden’s cancelling of the Keystone XL presidential permit than they did with the same move by ex-president Barack Obama in 2015, an industry analyst says.

But Phil Skolnick, a New York-based analyst for Eight Capital, agreed with other observers that the end of the pipeline will stifle investment and production growth for years in the Canadian oilpatch.

Shortly after being inaugurated on Wednesday, President Biden, who was Obama’s vice-president, fulfilled a campaign promise and again took away the pipeline permit that former president Donald Trump gave back to builder TC Energy Corp. in 2019.

The difference between now and five years ago is that producers have two promising alternative pipelines — the Line 3 replacement and the Trans Mountain expansion, together providing nearly one million barrels a day of export capacity — to pin their hopes on, said Skolnick.

And, he added, after more than five years of poor oil prices and a lack of access to capital markets to raise money, their expectations for growing their oil production have been greatly diminished.

“It was worse when it happened in 2015 .. that was bad back then because we didn’t have the big rail buildout and we really didn’t have Line 3, no one really knew about that,” said Skolnick.

“This is bad because (the government of) Alberta spent the money on it but, looking through the lens of the producers, not as big of a deal as some people might think.”

Incremental capacity additions to pipelines, technology that makes oil transport more efficient and crude-by-rail capacity that hit a record of 412,000 bpd last February mean the system will be “pipe neutral”  — with capacity matching demand — in the first half of this year, he said.

TC Energy approved spending US$8 billion in the spring of 2020 to complete Keystone XL after the Alberta government agreed to invest about US$1.1 billion (C$1.5 billion) as equity and guaranteed a US$4.2-billion project loan.

Alberta Premier Jason Kenney has said the province has about $1 billion at risk if the project is killed.

The 1,947-kilometre pipeline is designed to carry 830,000 barrels a day of crude oil from Hardisty, Alta., to Steele City, Neb., where it connects with the company’s existing facilities to reach the U.S. Gulf Coast refining centre.

The two other export pipelines will provide enough capacity to allow oil production to grow into the second half of this decade, said Richard Masson, an executive fellow and energy expert at the University of Calgary’s School of Public Policy.

But uncertainty about future capacity make it impossible for producers to make decisions about new multibillion-dollar oilsands projects, which could take five years or more to plan and build, despite growing demand for heavy oil from U.S. refiners seeing dwindling imports from Venezuela and Mexico.

“It puts a damper on investment expectations,” Masson said, noting that Canadian oil and gas capital spending fell from more than $80 billion in 2014 to about $24 billion last year, a factor in the economic slump gripping the Calgary and Alberta economies.

“For something to be started up after 2025, you really have to start working on it today.”

Excess space in the oil transport system is vital to provide optionality, energy security and stable pricing, said Canadian Energy Pipeline Association CEO Chris Bloomer, who agreed Keystone XL is needed to ensure future growth rather than short-term demand.

“We want to be somewhat long in takeaway capacity and access to markets rather than short, which creates (price) discounting,” he said.

On Wednesday, Kenney warned that Biden’s decision to cancel Keystone XL after construction had already started sets a “precedent” that could put existing pipelines at risk of “retroactive” shutdowns.

But neither Skolnick nor Masson agreed shutting operating pipelines is a likely scenario given the potential damage that could result for oil consumers in the U.S.

Bloomer said that’s not something his members are worried about.

“Existing operating pipelines? The economy would come to a grinding halt and there would be massive devastating economic impacts if that were to happen,” he said.

In early 2016, TC Energy (then called TransCanada) launched legal action against the U.S. seeking US$15 billion in damages under the North American Free Trade Agreement. The claim was withdrawn after Trump was elected.

In a report on Thursday, analysts with Tudor Pickering Holt and Co. said they expect the company to make a similar trade appeal this time, but with damages of US$17 billion to account for spending on the project since then.

The report also suggests TC Energy will likely look to recover some of its losses on the pipeline from the shippers who signed agreements to guarantee space on the line.

The company warned Wednesday it will likely post “substantive” mostly non-cash writedowns in its first-quarter financial results.

Earlier Thursday, TC Energy said it planned to eliminate more than 1,000 construction jobs related to its decision to halt work on Keystone XL. 

The company had previously warned that blocking the project would lead to thousands of job losses.

This report by The Canadian Press was first published Jan. 21, 2021.

Companies in this story: (TSX:TRP)

Dan Healing, The Canadian Press