Keystone XL: TransCanada plays chicken with the White House

About a month ago, TransCanada led a group of Calgary business journalists on a tour of its pipeline control centre, the locked-down room where the company monitors its pipeline network. It's filled with huge screens, ergonomic desks and highly trained staff who are watching each pump station and section of pipe.

On the far side of the room sits a lonely group of empty desks, watched over by blank screens. It's reserved for monitoring the Keystone XL pipeline on the day that oil starts flowing through it.

• TransCanada asks U.S. to pause on Keystone XL decision
• Keystone XL: The gap between 'no' and 'inevitable'
• Hillary Clinton says no to Keystone XL: Does it matter?

In a briefing before the tour, TransCanada's vice-president of oil pipeline operations, Erik Tatarchuk, was asked about the proposed pipeline.

The journalist started the question something like this: "If Keystone XL is approved..."

Tatarchuk interrupted. "When, not if," he said cheerfully.

There was some awkward laughter; this was after Hillary Clinton had turned against the project, wasn't it a touch over-confident to still be taking the "no-brainer stance" on Keystone XL.

But those three words capture what TransCanada is likely thinking right now. First, that the pipeline is still inevitable, and second, that it's playing the long game.

Pipeline politics

On Tuesday morning, TransCanada said in a conference call with analysts and media that its request to the U.S. State Department to pause the permitting process of Keystone XL was not political. It's not a particularly convincing argument, given that everything about the pipeline project is political.

"It's the best defensive move the company has at this point to stave off a likely denial of the permit," said Joseph McMonigle, an energy strategist with Potomac Research in Washington, D.C.

Link many analysts, McMonigle expected U.S. President Barack Obama to deny the permit for Keystone XL before the Paris Climate talks that begin on Nov. 30, but the jury is now out on that question.

Dragging the world to Paris

Obama has said that he is heading to Paris "dragging the whole world behind him." Which may be overstating things, since he is struggling at home to shift power generation away from coal. The Environmental Protection Agency's Clean Power Plan is facing lawsuits from two dozen states. 

Until Monday, Keystone XL seemed like something Obama still had control of. He could say no.

"He's trying to make a splash at Paris, and his other legacy is tied up in courts, said Christopher Sands, an analyst with the Hudson Institute.

"Saying no to Keystone could be a hugely symbolic gesture, and no one could take that away."

The State Department said that it is considering TransCanada's request and in the meantime is still considering the application. Sands doesn't expect the State Department to push pause on the process.

"They're committed to the process whether its paused by the applicant or not," said Sands. "Their main client is the White House, and the White House asked them to do it and I think they'll carry it through."

If the State Department does submit its recommendation, that's not necessarily a bad thing. Previous recommendations from the department have been largely positive, making the case that blocking the pipeline will not have a meaningful effect on oilsands development, since the oil will find ways to the market regardless.

Once Obama has the recommendation in place, the ball is in his court, and Sands doesn't think he will pull the trigger before Paris. 

"I think they're frustrated. They thought they controlled the process and this is the Canadians pulling a fast one," said Sands.

"It makes it harder for him, without seeming really political and petulant, to say 'I'm going to deny the pipeline permit.'"

After Paris

​That is TransCanada's best hope, because after December, the optics around Canada and climate are going to start to improve.

Canada's approach to the Paris climate change talks is clearly different from what it was six months ago. We will be sending a full delegation, led by the prime minister, with all the premiers invited as well. Alberta will bring a concrete plan. It's expected that at the end of the talks Canada will have signed on to a meaningful agreement.

But that is mostly optics. There won't be any meaningful change for some time, but it is still an olive branch for Canada to extend to the new U.S. administration in 2017, if it happens to be Democratic. Needless to say, a Republican administration won't need that olive branch.

While Hillary Clinton has come out in opposition to Keystone XL, the day after she announced that decision, Clinton called for a North American climate change strategy, something Canada is more likely to deliver now than it was even a month ago. And as Sands points out, Clinton has changed her mind before.

That is all a best-case scenario for TransCanada. A pause before Paris, some time for Canada to rehabilitate its climate change credibility, and a fresh start with a new administration.

If it all goes as planned, maybe Keystone XL does become a when and not an if.