One of the hallmarks of a properly functioning market is a reasonable expectation that the rules for participation will remain fixed enough to allow for proper evaluation of risk and reward. Two separate pipeline projects—Keystone XL and Nord Stream 2—are straining US credibility in this regard.
TC Energy has been developing the Keystone XL crude oil pipeline since July 2008. The US Department of State (DoS) released a favorable draft environmental impact statement (EIS) in April 2010 and a still-favorable final EIS in August 2011.
In late 2011, concerns emerged regarding the pipeline’s route through Nebraska and DoS said a new route needed to be found. TC Energy agreed to find one and the US Congress passed a bill requiring President Barack Obama to decide on the project’s fate within 60 days. Obama rejected it on the basis that 60 days wasn’t sufficient time in which to evaluate the pipeline’s new route but said the company could reapply.
TC Energy found a route which met with Nebraska’s approval and submitted a new application to DoS, which noted in January 2014 that Keystone XL would have fewer emissions than transporting the same crude by rail. Two years and a 67% increase in project costs later, with approval still pending, TC Energy sued the US government claiming violations of the North American Free Trade Agreement.
President Donald Trump issued a permit for the project in 2019, even while litigation against it remained pending in federal courts. Joe Biden revoked that permit when he became President. Now 21 states have sued Pres. Biden and his administration to overturn his decision revoking the cross-border permit, claiming he had no legal authority to make the decision.
No, Keystone XL was never fully approved by the US. But TC Energy conducted itself in good faith trying to secure approval, and what it got in return was its flagship project being used in domestic political shell games by the country it saw as a partner.
Now Nord Stream
Nord Stream 2 is a pipeline that would bring natural gas from Russia to Europe via a largely subsea route across the Baltic. Proposed in 2011, the line (like Keystone XL) was conceived as an expansion to an existing system, in this case doubling the capacity of the already operating Nord Stream pipeline. By 2015 a multinational consortium of companies had agreed to build the pipeline. Permitting was granted by Germany, Finland, and Sweden in 2018 and construction began that same year. By end-2019, Denmark had also permitted the project and construction was 94% complete.
Enter the United States. Pres. Trump threatened sanctions against companies that would help complete the pipeline. The Biden administration picked up where Trump left off, describing the project as “a bad idea, bad for Europe, bad for the United States.” Secretary of State Antony Blinken put a finer point on it, saying that Nord Stream 2 was “ultimately in contradiction to the EU’s own security goals,” despite multiple EU countries having willingly agreed to the project.
What the two projects have in common, aside from building giant energy pipelines, is that both have been pursued conscientiously by the companies (or groups of companies) involved, in good faith, with the reasonable expectation that they’d be allowed to be completed.
The US is historically a champion of the rule of law, free markets, and the virtues of sticking to a deal. It would be well served to lead by example in these regards in terms of these two projects and its reaction to them. Let countries like Venezuela lead the way in the perpetual changing of terms.