Supporters and foes of TransCanada Corp. (TRP)’s Keystone XL pipeline are bracing for the release of an environmental analysis from the U.S. government that could determine the $5.4 billion project’s fate.
While the report isn’t the final step, it’s eagerly anticipated because it will answer a question central to whether President Barack Obama approves the project: would Keystone contribute significantly to climate change? Obama has said he wouldn’t support the pipeline if it were found to substantially boost carbon-dioxide emissions that many scientists say are raising the Earth’s temperature.
“If that report comes out and it says Keystone is not going to have a significant climate impact, it will be hard for Obama to ignore his own agency’s finding,” said Ross Hammond, senior campaigner for Friends of the Earth, an environmental group based in Washington and Berkeley, California.
Keystone has emerged as a flashpoint in the debate over global warming. Like other pipeline critics, Hammond says TransCanada’s proposed project poses a risk to the climate because it would encourage increased production from Alberta’s oil sands, a process that releases more carbon dioxide than the extraction of conventional forms of oil.
The State Department report won’t be the final word on TransCanada’s proposed link between oil sands in Alberta and refineries on the U.S. Gulf Coast. It will be followed by a separate, 90-day assessment to judge whether Keystone is in the U.S. national interest, a review that considers other factors including economic impact.
The department, which has jurisdiction because the pipeline crosses an international border, said this week there isn’t a timeline for releasing the environmental analysis. It had previously said the report wouldn’t be issued until it posted online the more than 1.5 million public comments to an earlier draft. That was achieved in September.
Anticipation is so high that rumors of the report’s release frequently swirl in Washington. Jim Murphy, a counsel at the National Wildlife Federation, a Reston, Virginia-based environmental group, said he hears every few weeks or so that it will come out imminently. Like other interested parties, he’s still waiting to see it.
Murphy said his best guess is that it will come out early next year. That would give the State Department enough time to address objections raised by critics, and the Environmental Protection Agency, to the draft released in March that found Keystone wouldn’t have a big impact on the climate, he said.
Supporters agree the environmental impact statement could be a momentous step in the Keystone saga, now in its sixth year. The pipeline has attracted interest from a wide range of groups, from labor unions and a Jewish rights organization to oil interests and environmentalists.
The report “will likely be the key indicator showing whether President Obama approves the project or not,” said Matt Dempsey, a spokesman for Oil Sands Fact Check, a group supported by oil producers in the U.S. and Canada.
Dempsey said he expected the final environmental review to show that Keystone is safe to build, as assessments of earlier iterations of the pipeline have found. Backers say the heavy crude pumped by Keystone will displace oil from Venezuela and Mexico that has a similar carbon footprint. TransCanada hasn’t said which refineries would get the oil its ships through Keystone. Valero Energy Corp. and Exxon Mobil Corp. (XOM) operate facilities in the U.S. Gulf Coast.
Obama rejected an earlier permit application after officials in Nebraska said the pipeline would imperil a sensitive ecosystem. TransCanada, which is headquartered in Calgary, re-applied in May 2012 with a new route through Nebraska, which has won approval from state officials.
The current environmental review updates an analysis completed for the company’s initial application. Released in August 2011, it also found that the project wouldn’t impact the pace of oil sands production. Even so, because fuel derived from oil sands has a higher carbon footprint, greenhouse gases in the U.S. could increase by 21 million metric tons, the equivalent of about 4 million cars, if Keystone were built, the report found.
“Previous reports have all indicated that Keystone XL will have a minimal impact on all of the environmental resources along the entire route and with the safety standards we’ve voluntarily agreed to will result in the safest pipeline built to date in America,” TransCanada spokesman Shawn Howard said in a statement.
The draft released in March is a mammoth, four-volume document running hundreds of pages in length. It includes diagrams of how the pipeline will be buried, maps of the new route, assessments of its impact on endangered and threatened species such as the American Burying Beetle, and the potential economic benefits to communities in its path.
In waging their war against Keystone, opponents have zeroed in on the section of the draft report that concludes the pipeline wouldn’t worsen climate change because the oil would make its way to market anyway, by rail or other means.
NextGen Climate Action, a group funded by billionaire investor and pipeline foe Tom Steyer, sponsored an event in Washington this week designed to rebut that assessment.
“The pipeline changes the economics of this and makes is profitable for people to develop a ton more of it,” Steyer, the founder of Farallon Capital Management LLC, said in an interview. In September, Steyer said he would spend $1 million on an ad campaign against Keystone.
An RBC Capital Markets report in September said that without Keystone, as much as 300,000 barrels of oil a day in development in the oil sands could be delayed. Increased reliance on rail in lieu of the pipeline could benefit companies including Burlington Northern Santa Fe, a unit of Berkshire Hathaway Inc. (BRK/A), that carry crude to refineries.
Keystone’s climate effects will be a “major issue” although the environmental analysis won’t necessarily be determinative, said Anthony Swift, an attorney with the Natural Resources Defense Council, a New York-based environmental group.
“The real question is the credibility of State’s environmental review,” he said.
If the State Department’s analysis repeats the results of the draft, environmental groups will probably argue in court that it doesn’t satisfy the requirements of the National Environmental Policy Act that requires agencies to assess the environmental impact of their actions, Swift said.
Friends of the Earth and other groups have argued that the environmental impact statement should be restarted because the contractor writing the analysis, ERM Group Inc., didn’t disclose on its application that it worked for a pipeline project involving TransCanada and Exxon Mobil. TransCanada has said its partner had the contract with ERM.
The State Department’s inspector general is reviewing the complaint, and will probably reach a conclusion early next year.
Murphy said it doesn’t appear that State Department officials are awaiting the results of that audit. Instead, the discussions have focused on trying to resolve disagreement with the EPA, which called in a letter to the State Department for a “more careful review” of the rail industry’s ability to pick up the slack if Keystone were blocked.
Michael McKenna, a Republican strategist and president of MWR Strategies Inc., a Midlothian, Virginia-based lobbying firm, said Obama may not want to decide on Keystone at all because it splits two important Democratic constituencies. Labor groups including the Laborers’ International Union of North America back it, while environmental organizations including NRDC and the Sierra Club oppose it.
“The right answer politically for the president is to keep kicking the can down the road,” McKenna said.
Swift from the NRDC said the administration can’t delay a decision indefinitely.
“Keystone XL has become a lighting rod for the broader climate issues in the U.S.,” he said. “This is a real leadership moment for the administration.”
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