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Keystone approval spells headache for Canada's Trudeau

Saturday, March 25, 2017 - 10:19

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Prime Minister Justin Trudeau was quick to welcome Washington's approval Friday of a major new pipeline from Canada into the United States, but observers say it creates political headaches for his administration.

[OTTAWA] Prime Minister Justin Trudeau was quick to welcome Washington's approval Friday of a major new pipeline from Canada into the United States, but observers say it creates political headaches for his administration.

Mr Trudeau has sought to strike a balance between two competing policies - supporting Canada's oil and gas sector, which is the sixth largest in the world, and slashing global-warming greenhouse gases.

In approving the Keystone XL pipeline - which would move oil from landlocked Alberta, Canada to US Gulf Coast refineries - US President Donald Trump reversed his predecessor Barack Obama's decision to block it two years ago.

The project had first been proposed in 2008.

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In doing so, Mr Trump has reignited a nearly decade-long feud between environmental activists and the energy industry, leaving Mr Trudeau squeezed in the middle.

"I think Trump's decision hurts the Trudeau government," Matthew Hoffmann, co-director of the Munk School's Environmental Governance Lab in Toronto told AFP.

"I think they would have been happy to let Keystone die because of the US and not have to pay the political costs for its approval."

Mr Trudeau's centrist Liberal government remains high in the polls, but critics have highlighted his conflicting climate and economic policies to try to pry open cracks in his armor.

On the one hand he has spoken enthusiastically about the need to stem global warming, but he also recently approved two new domestic pipelines.

It's an awkward position that Mr Trudeau has "desperately clung to", said energy specialist Pierre Olivier Pineau of HEC school in Montreal.

The approval of the Keystone pipeline, the first and most favored of projects touted by the industry, will however help to shore up his support on the center-right.

And it will help a political ally - a fledgling progressive government in Alberta led by Rachel Notley. Her New Democrats swept to power for the first time ever in 2015 after four decades of conservative rule.

- Oil sector is gushing - The Canadian oil and gas sector is naturally pleased about the decision.

Alberta's oil has long been discounted US$5-US$10 below market values because there had been no way to get it to tidewater, leaving the United States as its sole buyer.

Keystone is expected to carry 830,000 barrels of oil per day, allowing Canada to significantly boost energy exports and demand a better price.

This would bring higher oil royalties and tax revenues at a crucial time when Ottawa is struggling with a large deficit, said Jean Thomas Bernard, an economics professor at the University of Ottawa.

The oil sector had been Canada's top economic driver for years but was hit hard by the oil slump and 2016 wildfires.

"Mr Trudeau would like the oil sector to return to a high level of activity," Mr Bernard said, in order to refill government coffers.

But there will be pushback from the left, which makes up an estimated 60 per cent of Canadian voters. They typically split between the Liberals and a third-ranked socialist party.

"On the left the environmental movement has never bought this notion that we're going to trade progressive climate policies for pipelines," Mr Hoffman said.

"The fact that the US had blocked Keystone allowed Trudeau to sidestep that debate, to some extent," he said.

"Now it's going to raise significant protests on the left and from the environmental movement."

Mr Trudeau has pledged under the Paris agreement on climate change to eliminate 219 megatonnes of greenhouse gas emissions by 2030 - a 30 per cent reduction from 2005 levels.

Keystone's approval "throws a wrench into his climate commitment", as it is expected to facilitate more oil sand development, Mr Hoffman said.

The oil sands are Canada's top single source of CO2 emissions, and its fastest growing. The oil and gas sector is projected to produce 233 megatonnes by 2030, according to a recent Senate report.

In January, Mr Trudeau was strongly rebuked by Albertans and oil sector executives for suggesting that the oil sands should be "phased out". In order to blunt criticisms, Mr Trudeau may ramp up climate actions to counter the increased emissions.

Additionally, according to Mr Bernard, the green light for Keystone may ease pressure on Mr Trudeau to approve any more domestic pipelines, including the hotly contested Energy East line from Alberta to the Atlantic Coast.

AFP

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