The saga of the Keystone XL project’s tortuous journey through the U.S. public review process is by now well known. Despite repeated findings by the U.S. Department of State’s assessments that the project would result in “no substantive change in global GHG emissions [and] was unlikely to have a substantial impact on the rate of development in the [Canadian] oil sands”¹, in November 2015 President Barack Obama denied a permit for the project, stating that approval would have undercut America’s role as “a global leader when it comes to taking serious action to fight climate change.”² While Keystone XL has since been permitted by President Donald Trump, the lessons to be learned from its earlier rejection should not be overlooked in Canada, where other pipeline projects are equally as controversial – and particularly as the federal government considers the report of the Expert Panel on National Energy Board Modernization.³ A vigorous debate is certain to continue.

Dennis McConaghy’s DYSFUNCTION: Canada after Keystone XL should be embraced by all interested parties as an invaluable contribution to this debate.⁴ This is a unique chronicle from ‘inside the tent’. Prior to his retirement, McConaghy was a senior executive at TransCanada and was directly involved in conceiving and executing Keystone XL from the time of the project’s early formation in the mid-2000s.

This involvement will no doubt lead opponents of Keystone XL to dismiss his conclusions as self-serving, but that would be a serious mistake. Much of the controversy surrounding the project (and, indeed, its rejection by President Obama) revolved around the extent to which it would contribute to greenhouse gas emissions and affect climate change. Climate change is also at the core of much of the opposition to other pipeline projects. McConaghy, however, is no climate change denier:

“To be clear, I believe that greenhouse gas emissions from human activity increase the risk of climate change. It is a risk that must be dealt with.”⁵

Indeed, he explicitly supports a carbon tax and argues that the fate of Keystone XL at President Obama’s hands may well have been different if the government of Prime Minister Stephen Harper had not been so adamantly opposed to such a tax.

McConaghy’s conclusion, therefore, warrants respectful consideration. Keystone XL’s cancellation “was a solely symbolic act, without real consequence for seriously dealing with the risk of climate change.”

McConaghy’s frustration is palpable from his observation that the ultimate rejection of the project by President Obama (when he ‘finally made a decision’) meant that an “agonizing and disingenuous charade was over.” This is not mere hyperbole – McConaghy records instances throughout the process when TransCanada was misled into thinking its agreement to additional conditions and environmental assessments would ultimately lead to approval. In retrospect, it became apparent that the U.S. administration was intent on delaying having to make a final decision, rather than upholding the integrity of the regulatory process. At the time of the final rejection of the project in November 2015, Secretary of State John Kerry stated that the decision “could not be made solely on the numbers.”⁶ McConaghy comments that this was doubtless a “truthful reflection” of the President’s and the Secretary’s mindset, leading him to conclude that “[d]ue process and technocratic assessment counted for nothing.”

There are obvious differences between the regulatory review processes in the U.S. and Canada. McConaghy’s account of the Keystone XL experience is nevertheless relevant here, where the politicization of energy projects continues to grow. In 2012, the role of the National Energy Board was fundamentally changed from that of decision-maker to advisory, with direct decision-making being transferred to the federal cabinet. The potential for politics to outweigh independent analysis was thereby increased significantly. The experience of the Keystone XL project graphically demonstrates the consequences of embarking on that path.

McConaghy’s assessment is not encouraging:

“The most disheartening thought that grips me in the aftermath of Keystone XL’s lengthy demise is just how little Canada has learned…Proponents of major hydrocarbon infrastructure in this country endure a lengthy, potentially disingenuous decision process, with outcomes that may not relate to the actual regulatory assessment of benefits and mitigated environmental risk.”⁷

Hopefully, debate and action on the report of the Expert Panel on National Energy Board Modernization will lead to improvements.

But perhaps the wider significance of Dysfunction lies behind the sub-title: Canada after Keystone XL. In Part Two, McConaghy reviews “Canada’s Other Pipelines: Northern Gateway, TransMountain, and Energy East” against the background of the Keystone XL experience. His review leads him to pose this question:

“Does Canada really share the fundamental conviction that developing its hydrocarbon resources is in their public interest? Since KXL’s demise, Canada has shown itself profoundly equivocal to that proposition.”⁸

Indeed, this is the question that is central to the controversial debate around these and future energy infrastructure projects in Canada.

Dysfunction is an important contribution to the debate. It should be read widely by politicians, policy-makers regulators, industry and concerned citizens.

* Rowland J. Harrison, Q.C. is a Calgary energy regulation consultant and Co-Managing Editor of Energy Regulation Quarterly.

1. US, Department of State, Draft Supplemental Environmental Impact Statement (Washington DC: Department of State, March 2013).
2. Barack Obama, “Statement by the President on the Keystone XL Pipeline”, The White House, Washington DC (6 November 2015).
3. The Panel’s Report was to be submitted to the federal government on May 15, 2017, online: <http://www.neb-modernization.ca/participate>. The Report will be reviewed in a future edition of Energy Regulation Quarterly.
4. Dennis McConaghy, Dysfunction: Canada after Keystone XL (Toronto: Dundurn Press, 2017).
5. Ibid at p 11.
6. John Kerry, Press Statement “Keystone XL Pipeline Permit Determination” (6 November 2015).
7. Supra note 4 at p 194.
8. Ibid at p 137.