How much flexibility did the State Department build into the language of its final environmental impact statement on the Keystone XL pipeline? During today's OnPoint, Kevin Book, managing director at ClearView Energy Partners, discusses the timeline for a final decision by the Obama administration and the political considerations facing the administration as it weighs the future of the pipeline project.
Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Kevin Book, managing director at Clearview Energy Partners. Kevin, always great to have you here.
Kevin Book: Thanks for having me back.
Monica Trauzzi: Kevin, the State Department released its final environmental impact statement last week on the Keystone XL pipeline. How much flexibility is built into the wording of the document for the White House as it moves towards its final decision?
Kevin Book: Well, as the White House has been quick to point out, the document is really just one input into the national-interest determination process. So, by that perspective, there's a lot of flexibility, because actually there's a whole 90-day process that could then be challenged in the 15-day review period that follows it, and you're just looking at one thing. On the other hand, in terms of the test that President Obama himself articulated at Georgetown in June of 2013 in terms of the greenhouse gas emissions profile, it looks like Keystone passes the greenhouse gases test twice.
Monica Trauzzi: There are many political considerations to make ahead of making a decision. We're nearing the 2014 elections. So, with that in mind, what kind of timeline do you expect on a decision?
Kevin Book: Executive Order 13337 stipulates that it's a 90-day turnaround and then there's that 15-day review period. On the other hand, if an agency challenges a national-interest determination and it goes to the president, it's not obvious when that is resolved. There's no obvious timeline for that. Ahead of the 2014 elections, you sort of think, "Well, if this wasn't an election-worthy issue, it was too politically exposing in 2012, why would you go for it again in 2014?" And so this really calls into question whether or not there's an interpretation or a mechanism for looking at the review process and justifying a delay. It's possible that they may say that in the public interest or in some question of safety, they need to keep going or look further or look deeper, in which case it could easily be after the elections.
Monica Trauzzi: And what's the interplay with the New Source Performance Standards for existing sources that we're expecting to come in June? How could these two decisions line up with each other?
Kevin Book: Well, if we do follow the words of Executive Order 13337, in 90 days plus 15 days from February 5 takes us to late May, and late May is just before the June 1 existing-unit proposal for NSPS for existing power plants. And that would be really sort of an interesting trade-off, 'cause now you've got a very big carbon bucket that's No. 1 target probably for most environmental groups and the crown jewel of the Obama administration's environmental policy, and then it's just a little pipeline next to that. It might be a nice way to sort of match up the purposes and explain that all of the above is compatible. On the other hand, if they don't do it at the same time, for some reason, then it's probably a post-election issue.
Monica Trauzzi: The headlines have been so varied on this based on who you're reading. Who has the tougher hill to climb on messaging? Is it environmentalists or industry?
Kevin Book: Well, it's not, again, the decision's going to be made by the State Department, which is responsible for the national-interest determination with probably strong input from the White House, and so the messaging that's happening right now is interesting from another perspective, which is at some point this decided one way or the other. What happens after Keystone, and what is the next target? What we've seen now is this unprecedented pouring in of private capital into this issue and into races, where it influences decisions. So, where do they go next? What happens after Keystone? Is it crude-oil exports? Is it crude by rail? Is it municipal fracking bans? In many ways, environmentalists have already won. They have already raised awareness of the issue and they've changed the name of the game so that it's a big-money, third-party issue.
Monica Trauzzi: Secretary Kerry is currently analyzing the report. How much pull and power does he have right now as the administration heads toward a final decision?
Kevin Book: Well, the first and most important thing is that Secretary Kerry serves at the pleasure of the president, and so were he to do something that were not in line with the approval of the White House, it's possible there could be a discussion that takes place thereafter. On the other hand, he is the head of the agency responsible under the process outlined in Executive Order 13337 that says yes or no. And so, technically he has a huge amount of input and a tremendous amount of influence. The question would be whether or not the decision could be made in a way that is documented so that it defends whatever decision they make.
Monica Trauzzi: Many people were surprised that State released the report prior to the IG completing its investigation. What's the significance of that? How do you read into that?
Kevin Book: Well, Monica, our view is that they must be very sure to take all the resources and devote them to this report and then in the executive summary very early on to say that, "We found our contractor ethically and observed ethical standards." They've got to be pretty certain that they're not going to be found in violation of some sort of conflict of interest, because they do have limited resources and this would be a tremendous misallocation if that were the case.
Monica Trauzzi: So what are your expectations for Congress moving forward? We've already seen attempts in Congress to sort of bypass the president on a Keystone decision. Will efforts like that continue, or will members of Congress take a wait-and-see approach now that the final report has been released?
Kevin Book: Well, let's imagine, I know this must strain your credulity, but imagine that we're wrong and that it's not actually more likely to be yes than no. Instead they find that it is not in the national interest. Well, now you could get a coalition of red-state and oil-state Democrats lined up with Republicans for congressional action, and you might actually get something 'cause you're getting closer to the election. This is a tangible representation of the obstruction of American jobs, et cetera, et cetera. Now, in the other case, where it's actually found in the national interest or the process continues for a while, what's the legislative hook for the next Keystone language? Not clear it's going to be the debt ceiling, so we think we might not see very much, more than words rather than deeds from the Hill.
Monica Trauzzi: All right, Kevin. We'll end it there. Thank you for coming on the show as always.
Kevin Book: Thanks for having me.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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