Keystone XL: Pipeline politics and the future of Canada-U.S. relations -

Keystone XL: Pipeline politics and the future of Canada-U.S. relations

Why Obama’s Keystone decision is so critical—and dangerous—to Canada-U.S. relations

Pipeline Politics

Ken Cedeno/Corbis

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In Washington last week, Maclean’s and CPAC hosted a heated debate on the future of Canada-U.S. relations, and in particular on the Keystone XL pipeline—one of the most important American policy decisions affecting Canada in decades. CPAC’s Peter Van Dusen moderated the discussion, which featured Maclean’s Paul Wells and Luiza Ch. Savage; Canada’s ambassador to the U.S., Gary Doer; former deputy prime minister John Manley; Danielle Droitsch, a director at the Natural Resources Defense Council, an environmental organization; Maryscott “Scotty” Greenwood, an American trade expert; and David Pumphrey, senior fellow at the Center for Strategic and International Studies, a Washington think tank. Below are excerpts from the discussion. Paul Wells kicked things off.

Paul Wells: The President’s got a decision to make; and our American hosts might not be aware, but this decision about Keystone has really transfixed Canadian politics over the last year and a half. When Barack Obama became President not that long after Stephen Harper became Prime Minister there were high hopes—at least on the Canadian side—for a really healthy relationship. Their politics are not that similar but they’re from the same generation, they’re both pragmatists, they’re both outsiders, not capital lifers. Unfortunately, over the first two years of the presidency, it became clear they’re not at all alike and they don’t agree on anything. Obama’s decision to delay a final decision on Keystone until after last fall’s election—Harper kind of freaked out about that. Within several weeks he implemented a major pivot in Canadian trade policy away from the U.S. and toward China; he essentially dropped Keystone as a priority and there’s been a really frosty tone to Canada-U.S. relations ever since. There’s some possibility Obama can fix that by deciding to proceed with Keystone, but there’s also some possibility that it’s simply too late, that our government has moved on.

Luiza Ch. Savage: When I look at the future of Canada-U.S. relations, I see two separate planes going in opposite directions. The best analogy I can think of is a racy one: that they’re headed toward an open marriage. They started out with this great, big fat wedding, the FTA [1988’s Free Trade Agreement], then NAFTA [the North American Free Trade Agreement, in ’94]—trade doubled, it was a great honeymoon, really exciting. Now we’re at a point where they’re looking around for sexier partners. They’re looking at China and seeing this growing middle class, this huge appetite for energy, they’re looking at the rest of Asia, at Europe. They’re seeing attractive opportunities elsewhere.

Gary Doer: I don’t believe in an open relationship—I want to start right there! But I do believe it’s like a company: you gotta take care of your biggest and most important customer first. But you shouldn’t have just one customer. You shouldn’t go to just one car dealership. We’re always getting unilateral decisions from the U.S. But by increasing our trade to Asia, 20 per cent one year, 20 per cent the next year, 20 per cent the year after that, we’re actually stronger—when it comes to negotiation.

Danielle Droitsch: The U.S. is really focused right now on a conversation around climate; last year was the hottest on record. We lost 50 per cent of our corn crops, 60 per cent of our pasture land. We’ve seen some of the most extreme hurricanes—one, hurricane Sandy, cost 130 lives and over $80 billion. This has really prompted the President to look more closely at confronting climate change, and that’s having ramifications for Canada. Sometimes neighbours and friends need to have tough conversations. There are concerns that Canada right now isn’t a climate leader. And that this is an export pipeline—so there’s a lot of concern about whether or not it actually supports U.S. energy security.

John Manley: For the Prime Minister, there are two rules to managing the relationship with the U.S. No. 1: don’t get too close to the U.S. And No. 2: don’t get too far from the U.S. Prime Minister Chrétien successfully campaigned saying it wasn’t his ambition to go fishing with the president, because he saw that as something his predecessor did. I think in fact he preferred to go golfing with the president. But that was part of staying close to him.

Tactically, it’s quite an error for the environmental movement in the U.S. to be focused on a pipeline which, if it is refused, gives people the notion that, “Okay, we’re done,” when it fact it reduces demand in the U.S. for climate-change-causing substances by zero—not one iota. But it’s a lot easier to plug a pipeline coming in from Canada than talking about demand-side measures in the U.S.

David Pumphrey: That oil’s going to get developed—whether it’s developed now, or 10 years from now, it still concentrates greenhouse gases in the atmosphere. Right now, we’re taking Bakken oil [from North Dakota’s shale deposit] by rail to the Delaware River, transferring it to a boat and bringing it down to a [Gulf Coast] refinery. Similar things will happen in Alberta—[shipping by] rail to the West Coast, possibly the East Coast. So stopping Keystone will perhaps slow the development process of the oil sands, but there are many other ways that this will move to market.

Peter Van Dusen: The Prime Minister said a couple of years ago that approving the pipeline is really a no-brainer. How has it become such a headache?

Doer: Really, it’s just displacing oil from Venezuela. And that is an issue of fundamental national interest to the U.S. Two years ago, the State Department evaluated that Canadian oil was, by comparison to Venezuelan oil, two per cent higher in GHGs [greenhouse gases]. The latest reports have it at or below Venezuelan oil. So two years later, it’s even better as a product. The unintended consequences of blocking the pipeline will be continued sales from Venezuela to the U.S., and emissions going up with all the trucks and trains [then needed to transport oil].

Droitsch: The conventional wisdom that the oil will be developed anyway, we reject. We believe that, right now, Canada does not have that opportunity to get their oil out. The U.S. brings in more oil from Canada than any other foreign country, and it’s more and more carbon intensive.

Wells: Just a question. You said Canada is the largest foreign source of oil in American cars and vehicles. Which foreign source would you prefer?

Droitsch: We’re actually looking at driving down oil production. We don’t look at it as should we be getting oil from Saudi Arabia versus Canada.

Wells: How’s that going?

Droitsch: It’s going well. Actually, President Obama has been able to drive down oil demand by 10 per cent.

Manley: Well, that’s because the economy’s down!

Doer: In Canada and the United States.

Droitsch: Well, no, in part because, actually there are fuel-efficiency regulations—

Doer: And we negotiated that fuel-efficiency standard together.

Droitsch: Yes.

Doer: And I have to say, the President and the Prime Minister get very little credit from your membership and from environmentalists for taking that action, and I think that’s too bad.

Van Dusen: Scotty, what would be the effect on the Canada-U.S. relationship if the project is turned down?

“Scotty” Greenwood: Well, if Paul thinks it’s chilly now, you’d better get out a coat. I don’t think Canadians would be impressed—if it would do something to reduce greenhouse gas emissions in the United States maybe you could make the argument, but the facts really matter. In a free world and in a global market, the oil will get to other places where it will be refined somewhere that doesn’t have anywhere near the rigour we have, and where it’ll be burned in cars that don’t have anything close to the Canada-U.S. fuel efficiency standard.

Wells: For five years, Canadian policy on climate change has been pretty much to take whatever policy Obama can get through Congress. It was smart because, as it turned out, Obama hasn’t been able to get much through. But in the last several months the Canadian administration has hinted that they are no longer going to take American policy on climate change if American policy gets too serious. They have signalled that we are willing to grab the competitive advantage that comes from having a dirtier energy sector than the Americans if it comes to that. It’s a fascinating development.

Van Dusen: How significant a dent would it put in the relationship if President Obama says no to Keystone?

Manley: It’s going to be very important how it is explained and what the justification is. [It could be] found to be quite unacceptable to the Canadian government. And that will be a problem. It would be very unhelpful if this was more than just a bump in the road but actually became something that pushed us off the road.

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