Keystone XL developer TC Energy canceled construction on the long controversial Canada-to-U.S. oil pipeline Jan. 20 after President Joe Biden moved to revoke the presidential permit for the $8-billion project as one of his first actions and a long-standing campaign promise.

Opponents cheered the cancellation, but it portends a diplomatic tiff with Canada over economic impacts, with job losses in a transforming energy construction market now a core issue. 

The Canadian energy firm says it will review Biden’s decision on the permit, needed for the 1,178-mile line to cross the border, and will consider its options. Biden said the permit “is not consistent with my administration’s economic and climate imperatives."

Donald Trump reissued the Keystone permit in 2017, two years after predecessor Barack Obama had rejected it.

The decision will result in layoffs of at least 1,000 union workers, the company said, and end a commitment—announced Jan. 17 along with the North America Building Trades Unions—to add renewable-energy sources to “achieve net-zero emissions across the project operations.”

TC Energy, unions and Canadian officials had touted the project as enhancing North American energy security and supporting as many as 40,000 jobs.

The line would have carried about 830,000 barrels of crude oil per day to an existing pipeline that extends to the U.S. Gulf Coast. TC Energy signed a project labor agreement in August with operating engineers, laborers, teamsters and plumbers and pipefitters unions to create up to 10,000 construction jobs.

In a strongly worded Jan. 21 statement, building trades President Sean McGarvey said unions “are deeply disappointed” in the quick Biden decision. “Environmental ideologues have now prevailed, and over 1,000 union men and women have been terminated from employment on the project.”

Tim Michels, vice president of pipeline contractor Michels Corp., said at a Jan. 22 press briefing held at the firm’s Keystone project site in Wisconsin, claiming that Biden’s decision to halt work would cost the state up to $3 billion in revenue. TC Energy hired Michels to build eight pump stations in Montana, South Dakota, Oklahoma and Texas, according to the contractor. The firm said it had been set to finish work by April.

Keystone’s Canadian leg has been under construction for months after the Alberta government agreed to invest about $1.1 billion in the project last year.

Provincial Premier Jason Kenney said rescinding the permit would damage relations between the two countries. He and Saskatchewan premier Scott Moe called for compensation and even sanctions against the U.S., according to media statements.

Canadian Prime Minister Justin Trudeau, who met with Biden after his action on Keystone, said Canada has made the case for the project, adding: “While we welcome the President’s commitment to fight climate change, we are disappointed but acknowledge the President’s decision.”

Seamus O’Regan, Canada’s natural resource minister, rejected sanctions. “I have not yet heard a single argument that would convince me that a trade war is in the best interests of our oil and gas workers,” he said. Lawrence Herman, a senior fellow at the C.D. Howe Institute in Toronto, said in a Globe & Mail opinion that it is up to TC Energy and provinces to pursue compensation claims against the U.S. government through the United States-Mexico-Canada trade pact. 

Building trades chief McGarvey said unions want the administration and pipeline project opponents “to engage with us on a rational national strategy” to make energy workforce impacts “equal to economic and climate imperatives.” 

How Keystone will affect Biden Administration stances on other high-profile U.S. pipeline projects is not clear. One energy-market observer, Height LLC analyst Josh Price, told Reuters that the action "spooked some investors," but he termed it a "stand-alone move" linked to the president's campaign promise. 

Others such as Michael Mann, atmospheric science professor at Penn State University and a climate action proponent, believes Keystone would have enabled enough fossil-fuel production and use to make climate-change recovery difficult.