The Keystone XL pipeline has become a hallmark of political and environmental contention, a project whose journey encapsulates the shifting dynamics of energy policy, economic necessity, and climate awareness over the past two decades. First proposed by Calgary-based TC Energy in 2008, Keystone XL was envisioned as a 1,897-kilometer pipeline capable of transporting up to 830,000 barrels of heavy crude oil daily from Alberta, Canada, to refineries in the U.S. Gulf Coast. From its inception, the project promised significant economic benefits, energy security enhancements, and a safer alternative to rail and truck transportation. Yet, as it stands today, the pipeline is more a political chess piece than a logistical solution, its future mired in complexity and its necessity questioned in an evolving energy landscape given the pressure surrounding greener energy solutions.
The initial appeal of Keystone XL was straightforward. By connecting the vast Canadian oil sands to U.S. refineries, it offered a reliable source of crude oil from a politically stable neighbor. Proponents argued that the pipeline would reduce U.S. dependence on imports from more volatile regions, bolster North American energy independence, and create tens of thousands of jobs during its construction. The U.S. Department of Energy in 2022 estimated the project could generate between $3.4 billion and $9.6 billion in economic impact, along with creating up to 59,000 temporary jobs during its construction phase. Additionally, pipelines like Keystone XL are widely regarded as safer and more environmentally efficient than alternative methods of crude transportation, such as rail or truck.
Despite these benefits, Keystone XL quickly became a lightning rod for opposition. Environmentalists pointed to the high carbon intensity of Canadian oil sands, which emit significantly more greenhouse gases during extraction and processing than conventional crude. Indigenous communities and landowners raised concerns about water contamination, land rights, and the potential for spills, particularly in ecologically sensitive areas like Nebraska’s Sandhills region. As a result, legal challenges and public protests turned the pipeline into a symbol of the broader fight against fossil fuels.
President Obama rejected Keystone XL in 2015, arguing that it would contribute to climate change and undercut U.S. efforts to lead on global environmental issues. When Donald Trump took office in 2017, one of his first acts was to revive the pipeline, citing its potential to create jobs and improve energy security. However, by 2021, President Biden swiftly canceled the pipeline again, fulfilling a campaign promise to prioritize climate action. In the years since, the political and market dynamics surrounding Keystone XL have only grown more complicated.
As Donald Trump prepares to return to the White House, speculation has reignited over whether he will attempt to resurrect the project. Trump has consistently championed Keystone XL as a key element of his energy agenda, framing it as a symbol of American strength and self-reliance. However, reviving the pipeline today would be a far more complex endeavor than during his first term. For one, TC Energy has already dismantled portions of the partially constructed pipeline and divested its oil pipeline business into a separate entity, South Bow Energy. Much of the necessary infrastructure, including easements and land agreements, has been sold or dissolved. This means that any effort to restart the project would effectively need to begin from scratch, requiring new permitting processes, regulatory approvals, and negotiations with landowners.
Adding to the challenge is Trump’s proposed 25% tariff on Canadian imports, which could undermine the economic rationale for the pipeline. Canada remains the largest supplier of crude oil to the U.S., and a tariff of this magnitude would strain the very cross-border energy relationship Keystone XL was designed to strengthen. Alberta Premier Danielle Smith has expressed interest in increasing oil exports to the U.S. but has emphasized the need for American partnerships to de-risk future projects. With global oil markets evolving and new pipelines being developed within Canada, the urgency for Keystone XL specifically has diminished.
Market conditions have also shifted significantly since the pipeline was first proposed. The rise of electric vehicles (EVs) and growing commitments to renewable energy are reshaping long-term demand for oil. According to the International Energy Agency’s 2024 Global EV Outlook, one in nine cars sold in the U.S. today is electric, a number expected to rise to nearly one in five by 2030. This trend has already impacted gasoline consumption, which peaked in the U.S. in 2016 and has since declined by over 6%, despite population growth. As the transportation sector continues to transition, the projected demand for heavy Canadian crude has leveled off, raising questions about the long-term necessity of new infrastructure like Keystone XL.
Source: EV Magazine – Regional market shares and growth factors
The political climate surrounding Keystone XL remains fraught. Any attempt to revive the project would undoubtedly face fierce resistance from environmental groups, indigenous organizations, and local communities, all of whom have successfully mounted legal challenges in the past. Moreover, the international arbitration tribunal’s recent dismissal of TC Energy’s $15 billion damage claim against the U.S. government underscores the legal and financial risks of pursuing such projects. Even if Trump were to fast-track approvals, the project could become entangled in court battles and face potential cancellation under a future administration.
Economically, the project’s viability is no longer as clear-cut as it once seemed. While heavy Canadian crude is well-suited for refining into diesel—a product in short supply globally—existing pipelines and rail networks have proven capable of meeting current demand. The Energy Information Administration reports that minor pipeline upgrades and flow reversals have enabled the efficient transport of additional oil, rendering new infrastructure less urgent. At the same time, financial markets have grown increasingly wary of investing in long-term fossil fuel projects, preferring to focus on renewable energy and decarbonization initiatives. The story of Keystone XL is a reflection of the broader tensions in modern energy policy. On one hand, there is a clear need for reliable, efficient infrastructure to support economic growth and energy security. On the other hand, the global push to combat climate change demands a shift away from fossil fuels and a reevaluation of legacy projects like Keystone XL. As Trump considers his options, he must weigh these competing priorities against the logistical, legal, and political hurdles that have only grown since the pipeline’s last cancellation.
In the end, Keystone XL may remain more of a political symbol than a practical solution. While its supporters see it as a path to jobs and energy independence, its detractors view it as a relic of an outdated energy paradigm. Whatever the outcome, the debate over Keystone XL underscores the complexities of balancing economic, environmental, and geopolitical considerations in a rapidly changing world.
