Canada open to conversation on KXL, but not until tariff threat is dropped, Wilkinson says

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Natural Resources Minister Jonathan Wilkinson says Canada is open to having a conversation about reviving the Keystone XL pipeline project, but not before the threat of sweeping United States tariffs on Canadian goods is dropped.

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He said U.S. President Donald Trump’s call for the immediate revival of the cross-border pipeline project earlier this week was “difficult to understand” while his government is simultaneously threatening a 10 per cent tariff on Canadian energy.

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“Those are pretty hugely inconsistent,” he said on Thursday. “At the end of the day, there may be a conversation about KXL, but it can’t be until the Americans actually decide that they’re going to down tools with respect to tariffs.”

Wilkinson pointed out that the 830,000-barrel-per-day pipeline faltered due to regulatory issues in the U.S., not from anything that was raised on the Canadian side of the border.

After more than a decade of efforts and billions spent on the partially built pipeline, former proponent TC Energy Corp. (then TransCanada Corp.) officially abandoned the proposal in 2021 after then president Joe Biden revoked its permits. The company has since spun off its oil pipeline business into South Bow Corp.

Trump said the company behind the abandoned proposal, or another pipeline company, should come back to the U.S. and “get it built — NOW!” in a post on social media Monday.

“We’re certainly open to talking about KXL, but it would need a proponent, which it doesn’t have right now, and it would need regulatory certainty in the United States,” Wilkinson said.

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Ottawa believes it has answered Trump’s border security concerns, enacting measures that seem to have been met with approval after he delayed implementing tariffs on Canadian goods until March 4.

But a decision on whether to go ahead with tariffs against Canada is still likely to go down to the wire, Wilkinson said.

“President Trump sort of thrives on misdirection and in creating uncertainty,” he said. “At the end of the day, we will only find out if we have been successful in convincing the president on the day.”

Wilkinson has been pitching U.S. officials for weeks on a partnership to develop a half-dozen energy and critical minerals projects aimed at boosting investment on both sides of the border while achieving Trump’s stated aims of keeping energy prices low for Americans and enhancing national security.

The most significant oil-related proposal is Enbridge Inc.’s previously announced plan to increase capacity on its Mainline system carrying Canadian crude to the U.S. Midwest, Wilkinson said.

And in a statement Friday, Enbridge said as many as several hundred thousand barrels per day of additional capacity could be brought onstream as early as 2027 or 2028. The additional egress could come a number of ways, including debottlenecking and adding horsepower to boost flows, the company said, adding that further details will be announced next week.

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On a call last Friday with his American counterpart, U.S. Energy Secretary Chris Wright, Wilkinson said he also discussed investment in growing Canada’s uranium production in Saskatchewan and expanding conversion facilities in Ontario.

“North America actually could have a full nuclear fuel cycle that would eliminate the dependence the United States presently has on Russia for enriched uranium,” he said.

Ottawa’s list of potential projects to expedite includes proposals to boost Canadian mining and exports of germanium and gallium to displace supply threatened by China’s export ban to the U.S.

“It would create jobs and opportunity in Canada and it would move this conversation from a lose-lose to a win-win,” Wilkinson said.

Even if tariffs don’t materialize, Canada is now in a situation where it will be important to look at reducing the amount of trade it does with the U.S., Wilkinson said, such as actively seeking out customers in countries such as Japan, South Korea, Australia and Europe.

For instance, Canada’s trade in natural gas is poised to explode, Wilkinson said, pointing to liquefied natural gas export projects currently being built in British Columbia, including the first phases of LNG Canada, Woodfibre LNG and Cedar LNG.

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“We’re very close to decisions being made about LNG Canada Two,” he said. “If all four of those projects go ahead, that volume of gas is about half of what we presently send to the United States. That’s a significant step forward in terms of trade diversification.”

Canada could also pursue a modest boost to crude oil flows on the Trans Mountain pipeline, but Wilkinson warned about the risk of “overreacting” to Trump’s threats when it comes to projects aimed at expanding crude oil production.

Despite comments earlier this month calling for discussion of a new west-to-east oil pipeline, he questioned the need for another new pipeline project under the current circumstances.

“I’m not sure what a new pipeline would do for you,” he said. “(It) starts with there actually being a business case. And I don’t think you’re likely to see proponents lining up to build a pipeline unless they’re sure that they can fill it.”

He said a new pipeline to tidewater may not be necessary while Canadian crude continues to be in high demand south of the border thanks to the configuration of refineries in the Midwest and Gulf Coast optimized to process Canada’s heavy barrels. Furthermore, he pointed to the International Energy Agency’s prediction that global oil demand will peak in the next five years.

In a rejoinder to recent calls for a paring back of regulatory hurdles for major projects and the repeal of federal legislation such as the Impact Assessment Act, Wilkinson defended his government’s approach to major infrastructure projects like pipelines.

“At the end of the day, trying to somehow run roughshod over Indigenous concerns and environmental concerns will only lose you the ability to get social licence for any of these projects,” he said.

mpotkins@postmedia.com

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