POLICY:

Keystone XL clears major hurdle, but opponents see silver lining

The State Department's long-awaited environmental review of Keystone XL on Friday sparked cautious optimism on both sides of the contentious pipeline debate, underscoring the public pressure facing the Obama administration before midterm elections.

Supporters of the $5.4 billion TransCanada project cheered the document's ultimate conclusion that the pipeline is unlikely to "significantly impact the rate of extraction in the oil sands," and therefore unlikely to exacerbate global greenhouse gas emissions.

Some environmentalists, however, emphasized that State acknowledged some potential climate change effects for the first time and raised the possibility that in one economic scenario, the pipeline could alter oil production growth in Canada. The deeper climate analysis indicates State's views may be shifting their way, several said.

Greens further took solace in State's emphasis that the final supplemental environmental impact statement is just one factor with the department's next phase of decisionmaking. Under the national interest determination process, Secretary of State John Kerry will play a more active role and consider broader climate issues before making a recommendation to the president. He has no deadline to do so.

The final environmental impact statement "does not answer the broader question about how a decision on the proposed project would fit into the broader national and international efforts to address climate change or other questions of foreign policy or energy security. These are the perspectives that we're going to be addressing in the next phase," said Kerri-Ann Jones, assistant secretary of State for oceans and international environmental and scientific affairs.

The document's conclusion that KXL likely will not affect oil sands production growth hinges on several considerations. One is that oil by rail already is picking up some of the slack during the pipeline stalemate, with approximately 180,000 barrels per day of Canadian crude now traveling via that transport method. In 2011, the amount of oil carried by rail from western Canada was less than 20,000 daily barrels.

The department also pointed to alternative pipeline proposals, and barge and tanker traffic, as potential alternative options to the northern segment of KXL, which would run from Alberta, Canada, to Nebraska before connecting to a Gulf Coast line. The southern part of the TransCanada line went into operation this month and did not require a permit from Obama.

Dirtier crude, but still low impact

Like a draft environmental review last year, State concluded that oil sands crude produces roughly 17 percent more greenhouse gases on a life-cycle basis than the average barrel of U.S. crude refined in the United States. Canadian crude would be roughly 2 to 10 percent more carbon-intensive than heavy crude oil it would replace, said Jones.

Despite that footprint, KXL supporters said the document clearly shows little environmental impact with the pipeline overall and that a final decision should be sped up. Under the national determination process, eight consulting federal agencies such as U.S. EPA have up to 90 days to submit comments to State, even though there is no ultimate deadline for Kerry.

"My view is that 90 days could be truncated significantly," said TransCanada CEO Russ Girling. "Let's get this done -- it's time to bring over five years of regulatory review to end."

Keystone supporters also said State fortified their views about climate change impacts, by concluding that rail-pipeline alternatives to move Canadian crude could produce more emissions than KXL. Because of factors such as additional diesel fuel for rail transport, those emissions from alternatives could be 28 to 42 percent higher than emissiong from the TransCanada line, according to the department.

For Canadian officials who have made numerous trips to Washington, D.C., the findings were a vindication of years of face-to-face meetings with U.S. officials.

"I'm pleased that by respecting and actively participating in the process, our input has been accepted and understood," said Alberta Premier Alison Redford in a statement.

Environmentalists, however, jumped on new figures and analyses in the document as reason to be "cautiously confident." The deeper climate analysis shows that the administration has everything it needs to determine the pipeline would "significantly exacerbate" carbon pollution under Obama's test, they said. Public opposition to spill risks could undermine the growth of rail, they said.

Up to 'climate champions' at State?

"We think the wind's at our back, because it is no longer in the hands of lower-level bureaucrats at the State Department" but instead is with "climate champions" Kerry and Obama, said Kenny Bruno, U.S. coordinator for the Tar Sands Campaign. On a conference call Friday, State official Jones said Kerry had not yet been briefed on the report.

State performed additional modeling after last year's draft and found one scenario that could slow down production and greenhouse gas emissions in the oil sands. Even though the department said that scenario was unlikely, the conclusion constituted a "critical change" from State's earlier reviews, said Susan Casey-Lefkowitz, international program director at the Natural Resources Defense Council.

For oil sands production to slow, other pipeline alternatives would have to be constrained, and gas prices would have to fall to a range between $65 and $75 per barrel, according to the department. Such a scenario could make many rail options too expensive, according to State.

Further, State concluded that the production, refining and combustion of KXL's 830,000 daily barrels would produce between 1.3 million and 27.4 million metric tons more carbon-equivalent emissions annually than reference crudes. The department restated that it was likely those Canadian barrels would get produced anyway, but the higher end of the range gave greens a rallying cry that KXL could have equivalent emissions of 7.8 coal-fired power plants under State's numbers.

"That's horrendous; it's the wrong direction for our country," said Casey-Lefkowitz.

The document also acknowledged challenges to alternative pipeline proposals in Canada, such as Enbridge's Northern Gateway, which would run to the country's West Coast, she noted.

There are several proposals in Canada to run major oil pipelines both east and west from Alberta, but all are facing various obstacles. Many First Nations groups in Canada, for instance, yield considerable power to challenge Northern Gateway under the country's constitution, if it is approved by Prime Minister Stephen Harper.

Additionally, State said that plans to run oil across Canada's east -- such as via TransCanada's proposed Energy East conduit -- "appear to be a bit more speculative and would incur logistical challenges and potentially permitting issues."

Environmentalists said they would be holding candlelight vigils this week around the country to keep pressure on the administration.

Friends of the Earth President Erich Pica called the document a "farce," as it appeared before State could complete a separate conflict-of-interest investigation of a relationship between TransCanada and a State contractor.

In remarks at Georgetown University last year when unveiling his Climate Action Plan, Obama said he would evaluate the pipeline based on whether it significantly exacerbates carbon pollution. He also said in a New York Times interview that Canada could be doing more to mitigate carbon release.

Questions of political timing

Since then, the politics have become more complicated. In a recent interview with Global News, Canadian Prime Minister Stephen Harper said he would prefer to work jointly with the United States on oil and gas emission reductions and hoped to accomplish this "over the next couple of years." That constituted a shift for Canada, which previously said greenhouse gas rules on its oil and gas sector would be imminent in a matter of months and not tied to U.S. policy.

The State document also comes at a time of relatively low poll numbers for Obama and a pivotal year for the Democratic Party. The timing of the environmental review increases pressure on the president to make a decision on the controversial project as Senate Democrats enter a difficult election year that threatens to tip control of the chamber to Republicans.

Some analysts believe the timeline of the KXL process is disadvantageous for the administration, which faces few palatable options just as campaigning will be intensifying this spring and summer.

If Obama rejects the 1,179-mile project, he stands to strengthen the GOP narrative that Democrats are more concerned about pleasing environmental allies than about helping American workers, according to some strategists.

That could hurt his party's political prospects in states like Alaska, Arkansas, Louisiana and West Virginia, all of which are hosting competitive Senate races that could reduce the Democrats' control of the chamber. Republicans would obtain a majority by netting six seats.

"A decision further imperils those states," said John Weaver, a Republican strategist who advised former Utah Gov. Jon Huntsman in the last presidential primary race. "If the choices are punt or turn it down, I'm sure those senators would rather him punt."

On the other hand, if Obama were to approve the pipeline before this year's midterm elections, he might dampen the attacks of GOP candidates, who accuse Democratic incumbents of restricting fossil fuel development.

"I think it would help the D narrative," said Grover Norquist, president of Americans for Tax Reform. "Yeah, because then you go, 'See, he's not so crazy.'"

Norquist believes that Obama will reject the pipeline.

Others believe that expanded U.S. oil development, such as that in the Bakken formation in North Dakota, has deflated the need for Canadian crude to strengthen national security. That means that Obama is freer to reject the pipeline because GOP attacks around the use of foreign oil and missed energy jobs have softened, said Roger Ballentine, who led a White House task force on climate change during the Clinton presidency.

"If I were a member of Congress and I was being criticized for turning down this pipeline, I'd turn around and say, 'What are we going to do with the oil we have?'" Ballentine said.

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