Keystone Foes Struggle for Silver Lining in U.S. Report
It’s no easy task.
The report released Jan. 31 increases the possibility that the $5.4 billion Canada-U.S. oil pipeline ultimately wins approval, perhaps as soon as July, according to analysts including Kevin Book, managing director at ClearView Energy Partners, LLC in Washington.
“The president has given a test, and the pipeline has passed the test,” Book said.
Environmentalists aren’t giving up and offered a variety of responses, from refuting the report’s conclusions to seizing on elements that may boost their case or criticizing the U.S. State Department and the contractors that wrote the assessment for being too friendly with the oil industry. Some did all three.
TransCanada Corp. (TRP) 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. 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.
TransCanada has increased 0.9 percent since Jan. 30, the day before the report was released, closing yesterday at C$48.27 ($43.42) in Toronto trading.
Its planned 830,000-barrel-a-day capacity has spawned a multimillion-dollar lobbying fight, leaving Obama to choose between angering an ally in Canada or his supporters in the environmental movement.
Phil Radford, executive director of Greenpeace, said in a statement that the report’s conclusions were “laughable.” Frances Beinecke, president of the Natural Resources Defense Council, wrote in a blog post on the group’s website that the analysis gave Obama “everything he needs to reject” the project.
The main conclusion of the State Department report is that Alberta’s oil sands will be mined and refined with or without Keystone, contrary to the views of opponents who say blocking it would keep the carbon-heavy crude in the ground. Environmentalists sought to focus on its other findings: that production of oil from Alberta generates more gases linked to global warming; that output there would drop if oil prices fell; and that oil-sands crude can be hard to clean up because it sinks to the bottom of lakes and rivers when spilled.
“The silver lining is that nobody thinks this is pointing to a specific decision,” Kate Colarulli, who’s helping lead the Sierra Club’s campaign against oil, said in an interview. “This lays important groundwork for showing that Keystone is not in our national interest.”
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.”
In a Jan. 31 statement, the White House said that standard remains in place as the approval process shifts into a second stage, one focused on whether the project is in the U.S. national interest.
“A decision on whether the project is in the national interest will be made only after careful consideration” of the State Department report “and other pertinent information, comments from the public, and views of other agency heads,” White House spokesman Matt Lehrich said.
The report’s estimates of Keystone’s climate impact will be closely evaluated by Secretary of State John Kerry, he said.
“Obviously the Secretary has a long record on environmental issues,” said State Department spokeswoman Jen Psaki told reporters yesterday. “There are a range of factors that are taken into consideration that will be looked at as we undergo the next couple of months of this process.”
Obama has said the decision will ultimately be his. During an interview taped on Feb. 2 and aired on Fox News last night, Obama declined to say how he planned to decide and said the project still faced scrutiny from other U.S. agencies.
The report lists other pipelines and railroads as the main reasons that oil-sands crude will get to refineries with or without Keystone. Critics of the pipeline say evidence offered in the report shows that neither conclusion is as surefire as presented in the report.
“The conclusion overstates their own analysis,” said Daniel J. Weiss, senior fellow at the Center for American Progress, a Washington-based policy group opposed to the pipeline.
For example, the report said other proposed pipelines have faced delays and continued local resistance and hurdles posed by government agencies. “Nonetheless, all of the proposed pipeline projects within Canada have faced stringent political opposition and substantial regulatory uncertainty,” it said.
And while rail capacity is ramping up, it would need to rise six-fold to meet the Keystone capacity, Weiss said. The additional cost of shipping via rail may undercut the economic justification for mining the oil sands if oil prices fall to $75 per barrel, the report said.
While the State Department report concluded that this price pressure is unlikely to bite, critics disagreed.
Anthony Swift, a lawyer for the Natural Resources Defense Council, said efforts to address climate change or improve rail safety in the wake of recent crashes would increase price pressures and prevent oil-sands projects “on the margins of economic viability.”
“The added cost of alternatives like rail is likely to prevent many of these projects from proceeding,” Swift said in an e-mail.
“Given the long distances and higher cost of rail, we believe pipeline capacity growth is critical in Canada and the key to sustainably removing congestion in the system,” the research report said.
Goldman Sachs’s conclusion, and other similar reports and industry comments, shows that Keystone is critical, Swift said. Even so, the State Department said in its report that it asked the Goldman Sachs researchers about their findings, and they “clarified that the production impacts they described were not expected to be permanent.”
In addition to mining the State Department assessment for evidence, pipeline foes are questioning the objectivity of the agency and the contractor hired to perform the analysis, Environmental Resources Management.
Friends of the Earth filed a complaint against ERM with the State Department’s inspector general, saying the company lied about its previous work with Calgary-based TransCanada and had conflicts that should have prevented it from being selected for an impartial analysis.
The inspector general is to release a report soon on the matter, and may prompt the department to re-evaluate some of its findings. 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 last week.
“I would expect the Department of State to take it seriously, but it doesn’t dictate” a certain response, said Dan Gordon, associate dean for procurement law at George Washington University Law School.
The final environmental impact statement on Keystone “has suffered from a process that raises serious questions about the integrity of the document,” billionaire investor and pipeline opponent Tom Steyer wrote in a Feb. 2 letter to Kerry. Steyer, who hosted Obama at his home for a fundraiser in April, said the study was “on its face defective.”
TransCanada rejected that complaint. “Activists like Mr. Steyer have not liked the answers they’ve received as it relates to five separate U.S. environmental reviews of Keystone XL,” Shawn Howard, a TransCanada spokesman, said in an e-mail. “So when they don’t get the answers they like (or the facts refuse to support their misguided claims), they attack others or continue misleading people.”
Opponents of Keystone should focus on Obama’s climate legacy and give up trying to discredit the State Department’s report, Jeffrey Sachs, head of the Earth Institute at Columbia University in New York, said.
“The report definitely gives the administration a green light -- if it wants one -- to proceed with the pipeline,” Sachs said. “At some point, we have to draw a line between what reserves we’re going to use and what reserves we’re not going to use.”
There’s also the chance that something else could trip up the project. For example, the day before the report came out, the Sierra Club petitioned the State Department to link its review of Keystone with that of Enbridge Inc. (ENB)’s proposal to expand its Alberta Clipper pipeline.
Even if Obama approves Keystone, lawsuits will follow and activists are pledging to use civil disobedience to block construction. That means more delays.
“If it takes six years to approve a cross-border pipeline, you’ve done a lot to discourage” future pipelines, Book said in an interview. “Time is the enemy of capital.”
Keystone is already “a grand victory for environmental consciousness,” he said. Their forces aren’t going away if Keystone is approved. “This is the next wave of activism.”
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