Keystone’s Fate Shifts to Climate Hawk KerryJim Snyder and Rebecca Penty
As a senator, John Kerry fought for sweeping climate change legislation, called human-induced warming among the top challenges facing the U.S., and pushed for an international accord to cut carbon dioxide emissions.
That track record has emboldened critics of TransCanada Corp.’s Keystone XL pipeline who want him to scuttle the remaining $5.3 billion portion of the project if he’s confirmed as secretary of State. Appearing yesterday at a hearing on his nomination before the Senate committee he chairs, Kerry was non-committal on the Canada-U.S. pipeline, though called himself a “passionate advocate” for action on climate change.
“He’s made climate leadership a signature issue in his Senate career,” said Erich Pica, president of Friends of the Earth, an environmental group, in a phone interview yesterday. “At the State Department, Kerry has the ability to ensure the analysis that is done gives the president the full flavor of the global warming impacts from the pipeline.”
A rejection of the Keystone XL project would exacerbate a bottleneck of shipments from Alberta’s oil sands that has made Canadian heavy oil among the cheapest in the world. The shortage of pipeline capacity and rising output has widened the gap between heavy Canadian crude and a U.S. benchmark to $36 as of yesterday.
The decision ultimately rests with President Barack Obama, who in his inaugural address this week pledged to act on climate change. Kerry’s influence may come as the State Department updates an environmental assessment originally criticized by green groups as inadequately weighing how the pipeline, which would carry bitumen from tar sands in Canada, may affect climate change.
“There is a statutory process with regards to the review and that is currently ongoing,” Kerry told the Senate Foreign Relations Committee yesterday. “It will not be long before that comes across my desk, and I will make the appropriate judgments about it.”
Investors appear to be betting on Keystone approval, sending TransCanada shares to a record high this week. TransCanada, the country’s second-largest pipeline operator, has climbed 3.9 percent since Kerry was nominated Dec. 21 and has advanced 4.1 percent this year. It fell 0.2 percent to C$48.84 in Toronto at 1:53 p.m. today, after touching C$49.11 on Jan. 21, the highest since it began trading more than 30 years ago. The Calgary-based company has gained 17 percent in the last year versus a 3 percent decline of peers on the S&P/TSX Energy Index.
Critics say the pipeline will promote mining of Canada’s oil sands, which produces more greenhouse gases than most conventional drilling. Keystone supporters say the project will create jobs and make the U.S. less dependent on oil from less friendly places.
Blocking Keystone or even curtailing production from Canada’s oil sands would have a negligible impact on worldwide greenhouse gas emissions, said TransCanada Chief Executive Officer Russ Girling.
“A decision has to be made on the facts, not on rhetoric,” he said at a conference yesterday in Whistler, British Columbia. “It doesn’t matter who’s adjudicating those facts.”
Girling did not directly address the impact of Kerry’s potential appointment. He remains “optimistic” the pipeline plan will be approved.
This week, Nebraska Governor Dave Heineman, a Republican, approved TransCanada’s revised route through his state, leaving the Obama administration the project’s final hurdle. Obama rejected the pipeline last year after concerns were raised about its route through an environmentally sensitive area of Nebraska, and invited the company to re-apply, which it has.
Keystone requires State Department sign-off because it would cross the U.S.-Canada border.
“There is no question this is the president’s decision,” said Adam Kolton, the executive director of the National Wildlife Federation’s National Advocacy Center, in a phone interview. “With respect to Senator Kerry, he’s like the Ted Williams of climate change advocacy. I don’t think we could have someone at the secretary of State level whose advice and leadership would be better at addressing this issue than Senator Kerry.”
Joe Romm, a senior fellow at the Center for American Progress, a Washington-based group that says it supports progressive public policies, said Obama’s embrace of climate action and Kerry’s nomination for secretary of State puts the odds Keystone is rejected at greater than 50-50.
“Kerry has invested more time and effort on climate than any other senator since Al Gore; he is a true climate hawk,” Romm wrote on Jan. 23 blog post.
Kerry, while among the most forceful advocates for fighting climate change as a member of Congress, has said little on Keystone.
The Foreign Relations Committee, which oversees the State Department, hasn’t held a hearing on Keystone. Pica said Kerry and his staff made inquiries to the State department about the project.
Kolton and other environmental advocates say they are optimistic about Kerry’s selection because he is among the most prominent voices in Congress on the need to cap carbon dioxide emissions to lower the risks of global warming.
Ultimately, he couldn’t find enough agreement among his Senate colleagues to go forward with a climate-change bill. Obama dropped the push for a legislative fix following that failure, turning instead to Environmental Protection Agency regulations.
Environmentalists say their hopes for progress were raised anew when Obama pledged in his second inaugural Jan. 21 to “respond to the threat of climate change, knowing that the failure to do so would betray our children and future generations.”
Elliott Diringer, executive vice president of the Center for Climate and Energy Solutions, an Arlington, Virginia-based group that promotes action on global warming, said Kerry may have kept a low-profile on Keystone over the years because, “he understands that the issue is not so cut and dried.”
“There’s a notion that blocking Keystone will shut down the oil sands, and that’s really just not the case,” Diringer said. “As long as demand for oil remains high, the oil sands will continue to be developed.”
Imposing a carbon tax on industry or limiting emissions through federal regulation would be a more effective response to climate concerns than blocking Keystone, Diringer said.
Oil sands production will double to 3.2 million barrels a day by 2020, from 1.6 million barrels in 2011, according to a forecast from the Canadian Association of Petroleum Producers.
Keystone XL would transport 830,000 barrels a day of crude from Canada’s oil sands and shale fields in North Dakota to refineries on the U.S. Gulf Coast. A portion of the pipeline from Cushing, Oklahoma, and the Gulf of Mexico is already in construction.
“I think it would be extremely presumptuous for us or anyone to somehow act as if they know how Senator Kerry would evaluate this project or anything else,” said Shawn Howard, a TransCanada spokesman, said in an interview. “The real question to be answered on our presidential permit application is very simple: is this cross-border pipeline in America’s national interest?”
While oil sands production will continue without Keystone, a decision to reject the pipeline could delay development, said Bob Schulz, a professor of strategic management at the University of Calgary’s Haskayne School of Business.
“From a Canadian perspective, it would slow down employment, slow down revenues and it would have Canadian production go sideways for a while here because there’s nowhere to store the oil other than putting it in the pipeline,” Schulz said.
Besides Keystone, Kerry will also be able to influence climate policy as U.S. representative in international climate talks, Diringer said.
“There is a lot our chief diplomat can do to advance this cause,” he said. “I don’t think other countries view Keystone as a litmus test of U.S. action on climate change. What counts is our emissions.”
Pica of Friends of the Earth said Keystone approval will weaken the administration’s ability to call for other countries to make cuts to greenhouse gas emissions.
“Whatever credibility the United States had in negotiating kind of just gets further eroded,” with Keystone approval, Pica of Friends of the Earth said.
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