KXL a Year Later: Missed Opportunities to Boost America

Mark Green
Posted January 20, 2022

On the anniversary of the Keystone XL pipeline’s cancellation by President Biden, it’s worth noting again the missed opportunities that resulted from rejecting an $8 billion piece of energy infrastructure.

American jobs

In October 2020, after then-President Trump approved the construction of Keystone XL (KXL), the pipeline’s builder awarded more than $1.6 billion in contracts to six major U.S. unions for construction. Losing KXL meant losing 10,000 well-paying jobs during the project’s construction, including more than 1,000 union jobs. Hard-working Americans, such as this laid-off pipeline worker, were directly impacted.

In the months since, energy costs have climbed along with inflation generally, and raising questions about energy policy choices such as the one to cancel the KXL pipeline. On the Lars Larson Show this week, Frank Macchiarola, API senior vice president for Policy, Economics and Regulatory Affairs, talked about the U.S. energy policy picture under the administration, including the KXL decision:

“We’re starting to see the effects of decisions like [the KXL cancellation], and you know, the American people are concerned about it. We have inflation that’s at a 40-year high, we have the highest price for oil that we've seen since 2014, and the American people are looking for solutions, and the administration is putting is placing a damping effect on those solutions.”

Overall, KXL was projected by the U.S. State Department to support more than 42,000 U.S. jobs, including construction jobs, and generate $2 billion in earnings for American workers. It’s an understatement to say U.S. organized labor leaders were displeased.

Richard Trumka, the late AFL-CIO president, said in an interview last April that eliminating good union jobs was a bad step for the economy. Terry O’Sullivan, general president of the Laborers’ International Union of North America, said that “killing good union jobs on day one with nothing to replace them, is not building back better” – referring to Biden’s economic plan. Sean McGarvey, North America’s Building Trades Unions president, said his union was “deeply disappointed” by the KXL cancellation.

U.S. economic growth

Planned to increase takeaway capacity from Canada’s oil sands region in Alberta, KXL would have delivered crude to U.S. Gulf Coast refiners configured to use that heavier grade of crude. It promised economic benefits all along the planned route through Montana, South Dakota and Nebraska, where it was to link up with existing pipelines. Construction had begun when the project was cancelled.

The State Department said construction would contribute about $3.4 billion to the U.S. economy and that property tax revenue during operations would be significant for counties along the route. The pipeline’s builder projected the project would generate tens of millions of dollars in property and income taxes through every year of operation.

Energy and security

KXL would have been able to transport up to 830,000 barrels of oil per day, strengthening America’s relationship with Canada, the No. 1 supplier of U.S. imported oil. Instead, that relationship suffered a blow that left a number of Canadian leaders fuming.

It’s a relationship that shouldn’t be taken for granted. An ICF study last year detailed the growing integration of the North American energy market, valuable trade benefits and U.S. security generated by close U.S.-Canada energy ties. Again, Canada is by far the most important source for oil imports into the U.S. – 3.6 million barrels per day in 2020, more than triple the size of imports from Saudi Arabia. Macchiarola, in an interview with InsideSources:

“This was a missed opportunity to increase North American energy security, lower costs for American consumers, and reduce dependence on foreign energy sources that are hostile to U.S. interests.”

The lesson from KXL is that vital energy infrastructure – which KXL surely would have been – should be evaluated on the merits. Infrastructure that generates jobs, economic growth and makes America safer should garner bipartisan support – not become a trophy in political skirmishing.

Americans count on affordable, reliable energy from natural gas and oil. KXL would have played an important role in helping secure that energy while helping the U.S. reduce its imports from unstable and sometimes unfriendly foreign suppliers.

When KXL was canceled, API President and CEO Mike Sommers said the administration’s decision would “hamper America’s economic recovery, undermine North American energy security and strain relations with one of America’s greatest allies.” As we say, opportunities lost.