The Obama administration’s decision to kill the Keystone XL pipeline met with disappointment and derision – though little surprise – in Calgary, the boomtown-turned-bust capital of Canada’s oil industry. It also induced some provincial angst as Alberta attempts to open new markets for a product that floats rough 50% of its economy.



“A lot of people feel that the industry is down and keeps getting kicked,” said Jonathan Denis, a former Alberta attorney general and assistant energy minister. “The impact is significant. What’s more significant is the difficulty we’re having getting pipelines to the west, getting [it to the east], getting anywhere else.”

The Keystone XL pipeline was supposed to ship bitumen from the oil sands of this western-Canadian province to the Gulf Coast, allowing producers to reach markets further afield and fetch higher prices for their product – which currently trades at a discount to the global price.

But it came to symbolize the challenges of climate change and was stigmatized as carrying oil from a source considered a “carbon bomb” by environmentalists – even as the industry tried to clean up its production and present it as progressive player in the energy sector.

“There’s been a big green bulls eye on the industry,” says Robert Skinner, executive fellow at the University of Calgary’s School of Public Policy. “What other country sits one of the biggest reserves of oil … and says, ‘We’re not going to develop this?”

Some in Alberta have accused the US administration of “hypocrisy”, as shale oil production sent US production soaring by four million barrels per day as Obama pondered approval of Keystone XL.

“Our best customer has become our biggest competitor,” says Trevor McLeod, policy analyst at the Canada West Foundation. “If the goal is to reduce GHG emissions, this is insignificant.”

McLeod added that the oil sands account for 0.15% of global greenhouse gas emissions.

Canada’s new prime minister, Justin Trudeau, expressed disappointment with the decision, but added: “The Canada-US relationship is much bigger than any one project and I look forward to a fresh start with President Obama to strengthen our remarkable ties in a spirit of friendship and cooperation.”

But Obama’s decision also spared Trudeau from a tricky political bind: he had supported the pipeline, and had close ties to Keystone.

“This lets him off the hook,” said Keith Brownsey, political science professor at Mount Royal University. “He no longer has to promote a pipeline from the oilsands. The environmentalists in his support base will not have to look the other way on Keystone.”

Other Canadian politicians echoed Trudeau’s comments, including Calgary mayor Naheed Nenshi – whose election in 2010 as the first Muslim mayor of major North American city was heralded as a sign that Alberta was abandoning its conservative image and corporate Calgary was becoming more progressive.

“I am very disappointed that one pipe, nearly a metre wide, is being asked to bear all the sins of the carbon economy,” Nenshi said in a statement.

Obama’s decision is not the end of Canada’s pipeline controversies: proposals are in the works to carry Alberta oil to new markets in eastern Canada and Asia via a proposed port in northern British Columbia. They are meeting resistance over environmental issue and First Nations’ concerns.

The new Alberta and Canadian governments promise to put a priority on environmental issues, with Alberta establishing a panel on carbon and Trudeau appointing a minister for climate change. It is something analysts say could win support for future projects.

“There an opportunity for (them) to play offense … and be aggressive on carbon,” MacLeod says. “Why not challenge the US to put a price on carbon that is at least as stringent as the one that’s been in place in Alberta for 10 years?”