Keystone Review Moves to Obama Weighing U.S. Interests

Photographer: Andrew Harrer/Bloomberg

Demonstrators hold hands while surrounding the White House during a Keystone XL tar sands oil pipeline protest in Washington, D.C. Close

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Photographer: Andrew Harrer/Bloomberg

Demonstrators hold hands while surrounding the White House during a Keystone XL tar sands oil pipeline protest in Washington, D.C.

With the release of a long-awaited environmental review, debate over the proposed Keystone XL project moves into a new phase that puts the question directly to President Barack Obama: Is the pipeline good for America?

His answer could be based on anything from a desire to help an important U.S. ally and create jobs to concerns about oil spills.

The State Department yesterday said Keystone doesn’t pose a significant threat to the climate, which supporters said meets Obama’s test for allowing the Canada-to-U.S. pipeline to be built. The next stage, which could take 90 days, weighs other factors related to national interest, including its impact on U.S. energy security, local economies and foreign relations.

“The administration would be hard pressed to find that it was not in the national interest,” David Goldwyn, president and founder of Goldwyn Global Strategies, a Washington-based energy consultant, said in a phone interview.

Without a conclusion that Keystone would worsen global warming, the study left Obama facing new pressure to approve TransCanada Corp. (TRP)’s $5.4 billion project, including from energy-state Democrats up for re-election this year.

“This new study underscores what has been said all along about Keystone XL pipeline: it’s time to build,” said Senator Mary Landrieu, a Louisiana Democrat who’s facing a tough re-election campaign.

Rallies Scheduled

Environmental groups pledged to keep up the fight against the pipeline -- scheduling rallies for next week to keep the pressure on Obama. They said yesterday’s report underestimated the threat to the climate, though they also found glimmers of hope in document.

Anthony Swift, an attorney for the Natural Resources Defense Council, said the report didn’t include a definitive declaration that Keystone would have no significant impact on climate change, language that was in the earlier draft.

“This assessment is showing a lot of movement in a department entrenched on a position for five years that there would not be any climate impact,” Swift said.

The report says oil sands production could be substantially reduced if crude fell below $75 per barrel and if there weren’t enough other pipelines to carry the crude to market and other transportation costs rose.

TransCanada applied more than five years ago for a permit to build the pipeline through the U.S. heartland, connecting oil sands in Alberta with refineries along the coast of Texas and Louisiana.

Lobbying Fight

Its planned 830,000-barrel-a-day capacity would represent a fraction of U.S. oil imports, though the project has spawned a multimillion-dollar lobbying fight and is forcing Obama to choose between angering an ally in Canada or his supporters in the environmental movement.

Gary Doer, Canada’s ambassador to the U.S., said the report takes away a key argument by opponents: that development of the oil sands in Alberta depends to a significant extent on Keystone.

“This report knocks that down like a house of cards,” Doer said in a telephone interview.

The State Department is overseeing the process because Keystone crosses an international border. Eight other federal agencies including the Environmental Protection Agency have 90 days to weigh in. The public will have 30 days to comment starting on Feb. 5, according to a House aide briefed by the State Department yesterday.

Kerry Role

The national interest determination also marks the entrance of U.S. Secretary of State John Kerry into the process. As a Democratic senator from Massachusetts and in his current role, Kerry has pushed the U.S. and other governments to do more to address the risks of climate change.

Obama will make his decision on whether Keystone is in the national interest “only after careful consideration” of the State Department report, “other pertinent information, comments from the public, and views of other agency heads,” White House spokesman Matt Lehrich said in an e-mail.

Supporters have said the pipeline would create thousands of construction jobs and boost the nation’s energy security. The project would support thousands of jobs for a year or two, and add $3.4 billion to the U.S. economy, the report says.

“This final review puts to rest any credible concerns about the pipeline’s potential negative impact on the environment,” American Petroleum Institute President Jack Gerard said yesterday. “The only thing left is for President Obama to declare that this project is in our nation’s interest.”

Low Prices

Opponents disagreed. In a change from a March draft, the State Department said low global oil prices and higher transportation costs for Canadian crude could slow oil sands growth.

Under different scenarios, Keystone would incrementally increase annual greenhouse-gas emissions by as little as 1.3 million metric tons of carbon equivalent or as much as 27.4 million compared to other types of oil.

The higher estimate is equal to adding 5.7 million cars on the road, said Susan Casey-Lefkowitz, director of international programs at the Natural Resources Defense Council, which opposes the pipeline.

“Today’s reality is that we have lower oil prices and no place for tar sands to go except through Keystone XL,” Casey-Lefkowitz said in an interview. Obama “did not have options in the earlier report. This report gives him options.”

March Draft

While the report deviated from a March draft in some ways, the revisions weren’t as sweeping as pipeline opponents had wanted them to be.

“The approval or denial of any given project is unlikely to significantly affect the extraction of oil sands or refining on the U.S. Gulf Coast,” Assistant Secretary of State Kerri-Ann Jones said during a conference call with reporters.

The 875-mile pipeline would run from the U.S.-Canada border to Steele City, Nebraska. From there it would connect to an existing pipeline network, linking the oil sands with Gulf Coast refineries.

“The release of the FEIS is another important milestone in completing the regulatory review in what is a critical piece of north American energy infrastructure,” TransCanada Chief Executive Officer Russ Girling said on a conference call yesterday.

While the environmental assessment isn’t the final word, it’s important because Obama said in a June speech on climate change that he wouldn’t approve Keystone if it would “significantly exacerbate the problem of carbon pollution.”

Public Comment

The March draft environmental impact statement generated more than 1 million public comments. The executive order that establishes the process for considering international pipeline projects doesn’t set a deadline for the department to make a final recommendation.

Also expected soon is a report from the State Department’s Inspector General, on a complaint from Friends of the Earth that the department’s contractor reviewing the project is biased because of its ties to TransCanada and the oil industry. Critics say they hope that report would undercut any of the State Department’s conclusions, and force a re-start of the entire review process.

Douglas Welty, a spokesman for the inspector general, said no date had been set for the release though it is expected early this year.

“This environmental impact study,—which ignores the evidence gathered in the past year that indicates the pipeline will increase our level of emissions,—is by no means the final word,” Neera Tanden, president of the Center for American Progress, said in an e-mailed statement. “The fleeting boost in construction jobs is certainly not worth the impact that it would have on our climate and the risks of oil leaks that would damage our environment and health.”

To contact the reporters on this story: Jim Snyder in Washington at jsnyder24@bloomberg.net; Brian Wingfield in Washington at bwingfield3@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net

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