Jan. 31 (Bloomberg) -- The proposed Keystone XL pipeline cleared a key hurdle today with a government study that found its impact on the climate would be minimal, which supporters said meets President Barack Obama’s test for allowing the project to be built.
In its final environmental review, the U.S. State Department found the Canada-U.S. oil pipeline would not greatly increase carbon emissions because the oil sands in Alberta will be developed anyway.
The study, while not the final word, is important because Obama has said he wouldn’t approve Keystone if it would exacerbate carbon pollution. Now the pipeline’s fate comes down to broader questions about whether the project is in the U.S. national interest, weighing matters such as energy needs and diplomatic relations.
“We are one step closer toward approval of the Keystone XL pipeline,” Senator Heidi Heitkamp, a North Dakota Democrat and pipeline supporter, said in a statement. “Not only is it unacceptable, but it’s embarrassing that we cannot approve a pipeline application in the time it took us to fight World War II.”
TransCanada Corp. applied more than five years ago for a permit to build the pipeline through the U.S. heartland, connecting the oil sands with refineries along the coast of Texas and Louisiana. It’s planned 830,000-barrel-a-day capacity would represent a fraction of U.S. oil imports, though the $5.4 billion 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.
White House press secretary Jay Carney said the Supplemental Environmental Impact Statement is “another step in the process” and declined to say today when Obama will make his final determination. The State Department said it would accept public comments until March 7. Other federal agencies will have 90 days to weigh in.
“This is a status quo report,” Michael Levi, a fellow at the Council on Foreign Relations in New York, an independent research organization, said in a phone interview. “There is nothing in this report that’s going to lead to anyone’s re-evaluation of the project one way or the other.”
Supporters have said the pipeline would create thousands of construction jobs and boost the nation’s energy security. The project would directly and indirectly support about 42,100 jobs during a year or two of construction, 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 today. “ The only thing left is for President Obama to declare that this project is in our nation’s interest.”
Opponents disagreed. In a change from the March draft, the State Department today 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.
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.”
Anthony Swift, an NRDC international attorney, said environmentalists were heartened by the absence of a definitive declaration that Keystone wouldn’t have a significant impact on the environment, 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 cost rose.
While today’s report deviated from a March draft in some ways, the revisions aren’t as sweeping as opponents had sought.
“The question is whether or not the building of one pipeline significantly would affect the overall development of the oil sands,” Assistant Secretary of State Kerri-Ann Jones said today in a conference call with reporters. “It’s a modeling exercise and so you really have to sort of put all these pieces together.”
The report includes a new analysis of pipeline safety issues. It incorporates data from a July 2010 rupture of a 30-inch Enbridge Inc. pipeline in Michigan that spilled more than 843,000 gallons into a creek feeding the Kalamazoo River, the official said. It includes a discussion of new measures to avoid and respond to spills.
The agency also deepened its analysis of market forces that may impact future development of Canada’s oil sands crude. Still, the department endorsed its earlier finding that the rejection of any single project to deliver Canadian oil won’t significantly impact the rate of development of oil sands crude or the refining of heavy crude on the U.S. Gulf Coast, according to the department officials.
The report does identify a scenario of lower oil prices and pipeline constraints that may slow development of the oil sands. Opponents have sought to knock down arguments that Keystone doesn’t matter because trains and other pipelines will emerge to deliver the oil, pointing to recent oil-train crashes to show railroads aren’t a good alternative.
“Several analysts and financial institutions have stated that denying the proposed project would have significant impacts on oil sands production,” the report says. New data “indicate that rail will likely be able to accommodate new production if new pipelines are delayed or not constructed.”
The Environmental Protection Agency sent a letter last year to the State Department saying the final report should include a “more careful review” of the ability of trains to move the heavy crude out of Alberta.
The report puts pressure on Obama to approve the pipeline, said Nebraska Republican Representative Lee Terry, who has sponsored legislation to automatically approve the pipeline.
“It’s been obvious that it has negligible impact” on the environment, he said in a phone interview from Nebraska. “The president has now no reason to kill the Keystone pipeline.”
TransCanada proposed building a 875-mile pipeline 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. It will be able to carry 830,000 barrels of oil a day if operating at full capacity.
TransCanada rose 1.2 percent to C$48.42 ($43.53) today in Toronto trading.
“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 with media today.
The State Department is handling the review because the project crosses an international border. The environmental assessment is 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.”
The report includes an analysis of greenhouse-gas emissions from a barrel of tar sands compared with a barrel of heavy crude from Venezuela or Mexico, the official said. Still, the new calculation is essentially unchanged from the March report, which found that Keystone won’t significantly contribute to climate change, the official said.
The national interest determination will review issues other than environmental risks, including its importance to the U.S.-Canada relationship, the economic benefits it offers to local communities and how it would improve U.S. energy security. Eight federal agencies have 90 days to give their views to the State Department.
“The report is vague and provides no timeline for a final decision, giving the president broad room to postpone a decision further,” Senator John Hoeven, a North Dakota Republican who backs the pipeline, said. “That would be consistent with his tactic over the past five years of trying to defeat the project through bureaucratic delay and deferral.”
The March draft report generated more than 1 million public comments. Another opportunity to weigh in during the national interest determination will open on Feb. 5. 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.
The department has addressed potential conflicts of interest and found that third-party contractors don’t stand to gain financially from the project, a State Department official said.
Douglas Welty, a spokesman for the inspector general, said no date had been set for the release though it is expected early this year.
“Since the beginning of the assessment, the oil industry has had a direct pipeline into the agency,” Erich Pica, president of Friends of the Earth, said in a statement today.
Production and refining of Alberta’s oil sands release more greenhouse-gas emissions than conventional forms of oil. Canadian supporters have argued that the oil will displace heavy crude from Venezuela and Mexico that has a similar carbon footprint and that the project will create thousands of construction jobs.
“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 on the Keystone XL pipeline,” 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.”
A decision by Obama to approve the pipeline will anger the thousands of activists who’ve held dozens of protests, written hundreds of letters, and are now pledging nationwide acts of civil disobedience in opposition to Keystone.
“Let’s be honest folks, if State Dep’t can’t get this right we will sue because ranchers’ water is more important then flawed status quo process,” Jane Kleeb, the head of Bold Nebraska, a local group fighting the pipeline, tweeted Jan. 29.
Credo Action, Rainforest Action, and the Other 98% have enlisted about 76,000 volunteers to sign a “pledge to resistance” to risk arrest if it looked like the State Department would recommend approving Keystone.
Rejecting Keystone carries its own consequences for Obama. It would anger Canadian officials and could hurt Democrats up for re-election in energy-intensive states, such as Alaska’s Mark Begich and Louisiana’s Mary Landrieu.
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