Since 2010, the Keystone Pipeline System has transported oil from tar sands in Alberta to the United States, specifically Illinois, Texas and Oklahoma. The pipeline is critical to both countries’ economies, with Canada having the world’s largest proven oil reserves of 168 billion barrels, and multiple expansions have been proposed and accepted over the years. The most infamous proposal, resulting in political standoffs, is the Keystone XL expansion, which would connect existing Phase I pipelines in Hardisty, Alberta and Steele City, Nebraska by “a shorter route and a large-diameter pipe” of 1,930 kilometers in length. The Keystone XL would be able to transport 830,000 barrels per day from the Canadian oil reserves in Alberta and would cost an estimated $10B to complete.

Despite years of communication and planned construction, on January 20, 2021, newly-elected US President Joe Biden cancelled the Keystone XL cross-border permit. This policy decision has created tension within and between both countries,  with a range of domestic actors supporting the cancellation, while others criticize the decision due to economic concerns.

The Native American Rights Fund applauds the Biden administration's cancellation of the pipeline that his predecessor, former President Donald Trump, approved. Environmental and ethical reasons have been a driving force behind the cancellation, as the initial Keystone permit violated Indigenous treaty rights and land sovereignty in order to limit high production and transportation costs. Additionally, while some Indigenous groups support the pipeline, others assert that concerns about constitutional rights, health, and sexual violence far outweigh potential economic interests in the pipeline. TC Energy, the owner of the pipeline, has sought to alleviate some of these concerns by providing Aboriginal businesses a voice in the construction of the pipeline and facilities that run alongside it. However, these concessions do not address the problem of treaty violation, where the Keystone XL permit violates land treaties signed by The Rosebud Sioux Tribe and the Fort Belknap Indian Community with the Canadian government. These tribal groups have poured large amounts of resources into defending their treaty rights and call for TC Energy to abide by tribal laws, which they agreed to do in their permit application. The Fort Belknap Indian Community president Andrew Werk Jr. has recently stated that the construction of the Keystone pipeline has caused water sources to become contaminated with dirty tar sand crude and ancestral homelands have become construction plots for oil transportation. In addition, climate activists have applauded the decision by President Biden due to the negative impacts on the environment that the pipeline would have had. A gallon of gasoline made from tar sands, as opposed to other conventional oil, produces 15% more carbon emissions. Furthermore, habitat destruction and contaminated water would have put at least 12 endangered species in harm's way by the proposed pipeline. The pipeline would also have undermined global investments in clean energy by US-Canada governments and corporations, setting back the goals of alleviating global warming. Climate activists argue for keeping Canadian tar sands reserves in the ground, a goal that has been expedited by President Biden’s cancellation of the pipeline.

However, Alvin Francis, the chief of Nekaneet Cree First Nation in Saskatchewan, states that as the unemployment rate is over 50% in his community, the pipeline is key to their survival. While he argues for the safest possible pipeline to be put in place, for Francis and many other Canadians, the pipeline is a way to survive in an already struggling economy. With the cancellation, some Indigenous groups will suffer long-term unemployment in oil sands projects alongside non-Indigenous Canadians, as there are many Indigenous groups employed via TC Energy contracts in Western Canada. Dale Swampy, the president of the National Coalition of Chiefs, affirms that Albertan Indigenous groups are closely aligned with activities in the oil and gas industry, where the cancellation may severely worsen economic circumstances by resulting in a huge drop in employment opportunities. Biden’s cancellation means that Natural Law Energy, a representative of five First Nations in Alberta and Saskatchewan and soon a representative to American Indigenous groups, would not be able to fund their equity investment of $1B. This has been a blow to Canadian Indigenous groups, but alternative investments by Natural Law Energy and TC Energy are being proposed to extend funds to renewable energy projects in the same region.

Economic concerns due to the cancellation have been raised in both the United States and Canada. Since Albertan oil production was estimated to double by 2030 had the project continued, as it had under former President Trump, there has been a heavy backlash from constituents in Alberta and Saskatchewan due to projected losses in the job market and economic revenue. The current Keystone pipeline system sends 550,000 barrels of oil per day to the US. This has allowed the US to benefit from local oil reserves rather than maintaining a continued reliance on Middle Eastern oil supplies. The system has also allowed Canada to increase demand for their own domestic oil market, contributing $110 billion to Canada’s GDP and creating more than 500,000 jobs in 2019. Alberta’s job market is heavily aligned with the current pipeline, with more than 1,000 construction job losses in January 2021 alone. With Alberta having the highest unemployment rate among Canadian provinces, the CEO of the Calgary Chamber of Commerce, Murray Sigler, sees the cancellation as having an immediate negative impact on jobs, consumer confidence, and the Calgary economy as a whole. However, the Canadian national economy is also at risk of suffering over the cancellation, as the US consumes 98% of Canada’s crude oil exports, and there has been a 13% loss in oil production due to COVID-19. The cancellation also hinders access that Canadian companies have to US refining markets, which could cripple Canada’s tar sands oil reserves, unconventional petroleum deposit regions in Alberta, and Canada's oil industry. Prime Minister Justin Trudeau is therefore in a tricky political dilemma, as he needs to advocate for the Canadian oil industry, due to its critical role in the Canadian national economy. 

High tariffs on steel and aluminum products by the United States and adversarial political rhetoric affected US-Canada relations under Former President Trump. However, President Biden seeks to revive US-Canada relations, and his first foreign phone call with Trudeau was a starting point to further communication over policy. Due to Canadians’ divided opinions regarding the Keystone pipeline cancellation, Trudeau has been caught between a rock and a hard place in addressing Biden’s cancellation of the Keystone pipeline. In his call with President Biden, Trudeau states that the Liberal government was disappointed with the cancellation of the pipeline, signaling a desire to appease the Canadian oil industry and cross-border ties. Trudeau’s acceptance of the pipeline cancellation will ensure that environmental standards and Indigenous rights are respected, two key parts of the Liberal Party’s political agenda. However, as Canada is the world’s fourth-largest oil producer, and with COVID causing large losses in revenue, the Canadian provincial and national economies face tough losses with the cancellations. With $2 billion in products being transferred daily across the border, maintaining US-Canada relations is critical in enhancing international ties, but oil revenue losses will be devastating for the Canadian economy.

Albertan politicians have proposed to call on the US to compensate Canada for costs already endured in the building of the pipeline, with an estimated $1.5 billion invested by the Albertan government alone. This would help compensate for job and investment losses that have occurred with the cancellation. The Albertan premier, Jason Kenney, has called on the federal government to issue trade sanctions on United States agricultural products should Washington not review its decision. However, this tactic has been reprimanded by economists, such as Trevor Tombe of the University of Calgary, who asserts that sanctions will not revoke the cancellation decision, but instead backfire onto other Albertan energy projects. More efficient ways to counteract the losses in jobs and revenue could be drawn from Alberta and Saskatchewan’s growing need to diversify their own economies. This would prevent further reliance on the United States for oil demand, help to alleviate jobs being tied to one sector of investment, and provide long-term employment for those who have suffered from the cancellation.

Canada has a lot to lose with this cancellation due to the large amounts of Canadian oil involved and the many jobs that relied on the pipeline. However, environmental and Indigenous victories can be seen as a silver-lining to the cancellation of this controversial project. The cancellation may be the start of an American shift toward greener energy and could indicate that environmental concerns will be a key function of President Biden’s policy agenda moving forward. Moreover, an American shift toward greener energy may force the Canadian economy to adapt and diversify away from oil and gas towards more sustainable sources of energy that could help alleviate a future reliance on US demand for Canadian oil. A diversified economy could provide Western Canadian provinces with an opportunity to invest in sustainability-oriented projects that could revitalize the energy sector and create more opportunities in local economies. Canada can benefit from a silver-lining with Biden’s cancellation of the Keystone pipeline, but in order to do so, hopeful investing should be directed towards alternative markets, instead of clinging to the oil industry.