Keystone XL Battle in Washington Belied Pipeline's Actual Impact

Updated on
Obama: Keystone Would Not Serve U.S. National Interests
  • Obama rejection comes before global climate talks in Paris
  • More than 50 firms registered to lobby on Keystone in U.S.

The fight over the Keystone XL pipeline had all the elements of a classic Washington scrap: protests, political ads, scores of lobbyists on retainer.

What was sometimes missing in the seven-year struggle, energy analysts say, was an accurate accounting of the project’s impact on the environment or the economy, the twin issues that drove the debate.

Environmentalists said Keystone XL, which TransCanada Corp. first applied to build in 2008, raised the risks of climate change by encouraging greater production of Alberta’s tar sands. But a U.S. environmental review found the project’s contribution to global greenhouse gas emissions would be small.

Republican claims that the project would generate tens of thousands of jobs were exaggerated as well -- a few thousand workers would have been employed to construct the pipeline, and then about 50 positions were needed to operate the line. A third issue, energy security, was diminished by sharply rising domestic production in the U.S.

“Keystone is a pretty big pipeline,” said Ian Goodman of the Goodman Group, an energy consulting firm in Berkeley, California. “But it’s gained an importance symbolically in terms of the battle between proponents and opponents above and beyond its size and scope.”

No ‘Silver Bullet’

In pulling the plug on the $8 billion project, President Barack Obama said Friday the pipeline would not be a “silver bullet for the economy.”

“For years, the Keystone pipeline has occupied what I, frankly, consider an over-inflated role in our political discourse,” said Obama. “It became a symbol too often used as a campaign cudgel by both parties rather than a serious policy matter.

“All of this obscured the fact that this pipeline would neither be a silver bullet for the economy, as was promised by some, nor the express lane to climate disaster proclaimed by others,” Obama said.

Obama was expected to reject the project ahead of United Nations climate negotiations set to take place in Paris in December, Bloomberg Intelligence analysts Rob Barnett and Cheryl Wilson wrote in a note Thursday. Obama said Friday he would attend the Paris talks. The pipeline has been fraught with controversy because of the greenhouse gases associated with producing Canadian oil sands.

There were recent signs TransCanada knew the pipeline’s fate. The company asked U.S. Secretary of State John Kerry on Nov. 2 to suspend the review while Nebraska regulators finalized their own assessment of the pipeline’s route through the state. The State Department rejected the request.

The company said Friday it would review all of its options in light of the permit denial, including filing a new application.

“TransCanada and its shippers remain absolutely committed to building this important energy infrastructure project,” Chief Executive Officer Russ Girling said in a statement. TransCanada shares fell more than 4 percent on Friday.

830,000 Barrels

Keystone XL would have carried as much as 830,000 barrels of oil a day to refineries on the U.S. Gulf Coast designed to handle the type of heavy crude Alberta produces. That’s not an insignificant amount -- about 11 percent of the 7.3 million barrels a day the U.S. imported in 2014. It would also have had an on-ramp for oil produced in the U.S. Bakken region.

TransCanada, in its September 2008 application, said one advantage of building the pipeline would be the U.S. and Canada could then rely less on imported crude oil. Executives had reason to expect a relatively easy road to approval: that March, the U.S. approved an original Keystone project to deliver oil sands crude to U.S. after just 23 months of review.

At the time domestic drilling had dipped to an average of 5 million barrels a day, its lowest point in more than 60 years. Rising pump prices for gasoline turned oil supply into a top issue in the presidential campaign.

Energy Independence

Now, after years of development in the Bakken and other areas, oil companies are pumping almost twice as much oil. Production has reached the highest level in more than 40 years, undercutting the energy independence rationale for Keystone. U.S. gasoline prices now average around $2.22 a gallon nationally, according to AAA’s website.

The economic argument has also diminished. Shortly after TransCanada applied to build Keystone XL, the U.S. economy sunk into recession. A year after the company applied, the unemployment rate reached 10 percent.

Republicans like former House Speaker John Boehner, an Ohio Republican, said that Keystone would create tens of thousands of jobs, a figure that became a mantra for pipeline proponents. The State Department analysis, though, found less than 2,000 people would be employed in each of two years of construction, and once operating only a few dozen jobs would be needed to maintain the line.

42,000 Jobs

The State Department report also said about 42,000 jobs would be supported by the project, including positions at materials suppliers, food service providers or through the spent wages of construction workers. By comparison, the U.S. added 271,000 jobs in October, the biggest gain for 2015 so far, the Department of Labor said Friday.

“It’s as if a Metro extension to Dulles became a national political issue,” said Goodman, who helped write a 2011 study critical of job claims about Keystone, referring to the Washington D.C. area’s rail transit system and major airport.

More than 50 lobbying firms registered to influence Congress and the administration over Keystone. Opponents and proponents spent about $16 million battling it out over the nation’s airwaves during the 2012 presidential race.

Jeff Navin, co-founder of Boundary Stone Partners, a Washington-based consultancy, said the stakes over Keystone XL for environmental groups grew after the defeat of climate legislation in Congress in 2010.

“Clearly, there wasn’t going to be substantive, meaningful legislation, and there was a need to organize around something,” Navin, a former acting chief of staff at the Energy Department, said in a phone interview.

Oil Sands

Keystone made a good target for several reasons. For one, Obama alone had the authority to block it, allowing for a targeted lobbying campaign.

Keystone XL also supported a particularly dirty form of fossil fuel development, Navin said. Oil sands production razes Canada’s boreal forests and releases, on average, about 17 percent more greenhouse gases than drilling for conventional crude.

The pipeline itself, though not the larger oil sands, is a drop in the global carbon bucket.

The State Department, which is responsible for reviewing oil pipelines that cross national borders, found it would at most lead to the extra release of about 27.4 million metric tons of carbon pollution each year. That’s equivalent to about eight coal plants, but just 0.4 percent of the U.S.’s total.

The U.S. accounts for about 15 percent of global climate emissions, second only to China.

‘More Symbolic’

Keystone became “more symbolic than substantive,” said Michael Webber, deputy director of the Energy Institute at the University of Texas in Austin. “The security and economic arguments have been undermined. The environmental arguments had been undermined as well. Now it’s mostly about proving the other guy wrong.”

Jamie Henn, a spokesman for 350.org, an environmental group that helped lead the fight against Keystone, said blocking the pipeline won’t solve climate change. But projects like it make the problem worse.

The goal is to block fossil-fuel projects long enough to create the “political space” for more sweeping carbon regulations and clean energy alternatives to advance, Henn said.

Environmentalists, who argue the State Department undercounted Keystone’s carbon impact, are also challenging pipelines that would offer other avenues to ports and global crude markets, including TransCanada’s Energy East and Enbridge Inc.’s Northern Gateway.

“No one is going home after Keystone XL,” Henn said.

— With assistance by Elizabeth Wasserman

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