OIL AND GAS:

EPA keeps a Keystone XL weapon holstered, worrying environmentalists

Despite environmentalists' appeals for its help in halting what they consider a flawed Obama administration review of the $7 billion Keystone XL oil pipeline, U.S. EPA has declined to use one of its two binding chances to object to that process.

The 25-day clock EPA had to refer Keystone XL's environmental assessment to the White House under the National Environmental Policy Act (NEPA) is long expired, leaving the agency with one last chance to formally seek presidential buy-in for the politically volatile Canada-to-U.S. oil link, the Council on Environmental Quality (CEQ) confirmed. Indeed, CEQ chief Nancy Sutley told Greenwire yesterday that her team is not gearing up to weigh in on the required review of the pipeline.

EPA's decision not to elevate its concerns over the pipeline to the White House using NEPA is not "a good sign" that it would use the second arrow in its quiver to criticize a potential State Department final ruling in favor of Keystone XL, Center for Biological Diversity (CBD) senior counsel Bill Snape said in an interview.

"Do I believe that there's this sort of tacit resignation that [XL] is going to be approved within the agencies? I have a worry that that's the case," Snape added. "I'm still fighting the good fight and hopeful, but I am worried the die has been cast."

Conservationists at CBD already have challenged the oil sands crude pipeline in court, and Snape credited XL critics with keeping the heat on the White House via "far, deep and wide" opposition, most recently during a Denver protest yesterday that drew a personal response from President Obama (E&ENews PM, Oct. 26).

But earlier this year, greens had looked to EPA as their anti-XL champion within the administration, pointing to its stinging rebuke of a draft State Department environmental assessment in urging that EPA step in to give the lowest possible rating to State's final review (E&ENews PM, May 24). While EPA has yet to release comments on that final review, Sutley noted yesterday that its "insufficient" rating on the second of State's three evaluations of the pipeline "typically [would] not" presage CEQ involvement.

Obama is "very much aware" of the worries among Keystone XL critics about the 1,700-mile, six-state project's impacts on human health, wildlife and safety, EPA chief Lisa Jackson told a student group today (see related story). Even as she vowed to continue scrutinizing the possible health risks of the pipeline, however, Jackson today described the ultimate decision as in the hands of the State Department.

At a forum hosted earlier this month by Politico, Jackson put her take on Keystone XL -- the latest in a slew of flash points that have directed greens' ire at Obama -- in terms familiar to Jay-Z fans.

"I've got 99 problems ... but that ain't one," she quipped.

That perspective is unlikely to sit well with advocacy groups that have spent time and energy blasting State's decisionmaking as compromised by pro-pipeline bias.

"I've never been confident that EPA would take that second chance and object once a decision has been made," Natural Resources Defense Council International Program Director Susan Casey-Lefkowitz said in an interview. "That is a huge step for an agency to take."

Casey-Lefkowitz pointed to EPA's anticipated comments on the final State review as pivotal, particularly if they comport with pipeline critics in urging that Obama nix the XL link and requiring a second supplemental environmental assessment. "Hoping that is one thing," she added, "but knowing what EPA will do is another."

Past precedent, uncertain future

Bids for the White House to referee interagency NEPA disputes are uncommon but can become turning points for projects facing environmental controversies. EPA has instigated 16 of the 27 bids by an objecting agency for CEQ to step in since 1974, according to White House records -- among them New York City's West Side Highway and water use contracts in California's Central Valley.

Yet part of the reason that EPA declined to invoke NEPA in seeking White House involvement with Keystone XL this fall may be a desire within the administration for CEQ to avoid getting involved in such disagreements, according to two advocates working to stop the pipeline.

"We'd known for some time that Sutley's position was to avoid any referral during this administration, and I think [CEQ] had really viewed such a thing as a failure of the government process," National Wildlife Federation (NWF) energy adviser Ryan Salmon said in an interview.

Sierra Club Associate Campaign Director Kate Colarulli echoed that sentiment in describing the EPA move as unsurprising. "The word on the street," she explained in an interview, is that agencies with the power to weigh in on the pipeline were told that the decision was best left at State's doorstep. "Unfortunately, I think they're trying to keep the train on its tracks, even if it's on a bad track."

The prospect of a White House urging EPA to avoid NEPA referrals reminded one veteran of the application of the four-decade-old law by the George W. Bush administration.

"I think EPA has been strongly muzzled by the [Obama] administration on the ozone regs, on virtually every one of their initiatives," Tulane University Law School professor Oliver Houck said in an interview. "They've been put on a terribly short leash. But what's unfortunate is, I've never seen CEQ pull the leash."

In the end, EPA may yet have a third opportunity to scuttle the XL line, which would nearly double U.S. imports of emissions-intensive Canadian oil-sands crude if OK'd by the administration. Salmon, of NWF, noted that the same executive order that gives certain agencies 15 days to object to a final approval of the pipeline -- not a sure thing, as State officials frequently reiterate in the face of public push-back -- also allows those agencies to request more data on a project.

Such a request from EPA could effectively "pause" the clock for a final decision enough that Keystone XL's sponsor, Alberta-based TransCanada Corp., begins seeking an alternate path to export Canadian oil-sands fuel, Salmon said. The company has warned that leaving its permit application unanswered into 2012 could put its contracts with shippers at risk, dimming the pipeline's chances of being built (E&E Daily, May 26).

Reporters Allison Winter and Emily Yehle contributed.

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