This story was updated at 1:20 p.m. EST.
U.S. EPA is urging the State Department to "revisit" its assessment of the potential global warming impacts of TransCanada Corp.’s Keystone XL oil pipeline in a comment letter released today.
Responding to State’s final supplemental environmental impact statement for the company’s request for a permit to let KXL enter the United States from Canada, EPA’s letter questions the department’s conclusion that the pipeline wouldn’t significantly increase greenhouse gas emissions.
"Given the recent variability in oil prices, it is important to revisit these conclusions," EPA Assistant Administrator for Enforcement and Compliance Cynthia Giles wrote.
The EPA letter goes to the heart of the debate about whether the Obama administration should allow KXL to cross the border as a conduit for Alberta oil sands developers.
EPA asserts KXL’s oil sands crude could generate as much heat-trapping gas annually as 5.7 million cars or 7.8 coal-fired power plants.
But EPA concedes that State’s final review documents is an improvement over earlier drafts. "The Final SEIS makes clear that oil sands crude has significantly higher lifecycle greenhouse gas emissions than other crudes," Giles wrote.
EPA also praises State’s reviewers for beefing up their market analysis, including a conclusion that under a high price scenario, oil sands crude would find its way to market with or without KXL. Producers would likely use higher-emission rail cars for transport.
But Giles says, "Given recent large declines in oil prices and the uncertainty of oil price projections, the additional low price scenario included in the Final SEIS should be given additional weight during decision making, due to the potential implications of lower oil prices on project impacts, especially greenhouse gas emissions."
Environmentalists have for years opposed KXL but have recently pointed to low oil prices as a key reason for President Obama to block the project. The pipeline, they say, could encourage production by giving companies a lower-cost transport alternative.
"The EPA’s assessment is spot-on," said Danielle Droitsch, Canada project director for the Natural Resources Defense Council. "There should be no more doubt that President Obama must reject the proposed pipeline once and for all."
But KXL supporters, including TransCanada executives and the American Petroleum Institute, dismiss the low-price argument, saying the cost of oil will likely rise again.
"Suggesting that the drop in oil prices requires a re-evaluation of the environmental impact of the project is just another attempt to prolong the KXL review," API Executive Vice President Louis Finkel said.
"The science behind building the Keystone XL pipeline has been settled five times over," Finkel said. "The State Department has concluded the pipeline is safe to build, and it will not have a significant impact on the environment."
TransCanada itself provided a long rebuttal to EPA’s letter, including pointing to the heavy crude that already reaches Gulf Coast refineries from Venezuela.
"As the FSEIS clearly demonstrated, emissions intensity for oil sands derived crudes is going down. However, the emissions intensity for other sources of heavy oil that the U.S. relies on is going up and that trend is expected to continue," said the company.
"The EPA did not acknowledge that KXL will deliver a substantial amount of light crude oil from the U.S. Bakken formation," the company added.
Kevin Book, an analyst for ClearView Energy Partners LLC, recently predicted oil prices would likely rise and KXL would meet the president’s climate test.
In a new analysis, ClearView analysts say oil sands crude can also rely on other proposed pipeline projects over rail. But they said EPA’s letter could create additional headwinds for KXL.
"For example, we would not rule out an additional study period for the State Department to re-examine environmental impacts at lower crude prices, even though we are not aware of any requirement for State to do so," they wrote.
"We also would not rule out a Presidential denial, even if the symbolic value of doing so runs counter to other practical actions that support the imports of Canadian crude," the analysts say.
Beyond climate, EPA welcomed State’s analysis on potential oil spills but suggested the review should have included more pipeline route alternatives.
Jane Kleeb, founder of the group Bold Nebraska, said, "It is reassuring the EPA stands with farmers and ranchers who know the Sandhills are still crossed by this risky pipeline and that alternative routes were not given enough serious consideration."
EPA said it waited to submit its comments because of pending litigation in the Nebraska Supreme Court over KXL’s route through the state.
Separately, EPA and other agencies had until yesterday to give State comments on its national interest determination with respect to the pipeline. The administration has yet to release any of those documents.
Yesterday, Deputy Interior Secretary Mike Connor said the Bureau of Reclamation had expressed concerns about rural water projects along KXL’s route. "We want to make sure that infrastructure is protected," he said during a budget-related conference call.
Today, department spokeswoman Jessica Kershaw said, "Interior encouraged the State Department to give appropriate consideration to comments previously submitted during the Keystone XL permit review process as well as concerns expressed by some tribes in Indian Country about the project."
House to vote next week on Senate KXL bill
EPA’s comments came as House Republican leaders announced this morning that the chamber will take up the Senate’s version of legislation to bypass the administration in approving KXL.
"We will take up the Keystone pipeline [bill] as passed by the Senate and send it to the president’s desk," Majority Leader Kevin McCarthy (R-Calif.) told reporters.
Obama has vowed to veto the legislation approving the Canada-to-Gulf Coast pipeline project, which passed the Senate by a vote of 62 to 36 last week.
The bill, backed by nine Democrats, passed with six amendments, including ones that put the Senate on record on the existence of climate change.
House Democrats predicted that the Senate’s version of the bill would easily pass the lower chamber despite some opposition from the caucus’ liberal wing. The House passed a clean bill approving KXL last month.
"The amendments don’t change the calculation of the [House] Democrats who voted against the bill" last month, Minority Whip Steny Hoyer (D-Md.) told reporters today. "I don’t think the amendments will make much of a difference."
Hoyer said the president will likely make a final decision on the project soon after vetoing the bill.
"The process is now pretty close to being finalized by the administration," Hoyer said. Obama’s decision, he added, will come "sooner rather than later."
Reporter Phil Taylor contributed.