Canada-U.S. pipeline poses few environmental risks -- State Dept.

Story updated at 2:30 p.m. EDT.

The $7 billion Keystone XL oil pipeline cleared a key hurdle today, as the State Department finalized an environmental review that found limited hazards from the controversial Canada-to-U.S. project.

The State Department's review drew quick fire from green activists who have escalated their condemnation of Keystone XL in recent weeks, warning that their political support for President Obama could evaporate if his administration approves the pipeline. Against the backdrop of that pressure, a top department official reiterated publicly today that its findings did not constitute an official go-ahead for the 1,700-plus-mile proposal.

The environmental impact statement (EIS) on the pipeline -- which would nearly double U.S. imports of Canadian oil sands crude if constructed -- is but "one piece of the information that will be considered" alongside foreign policy, economic and other concerns, before State makes a final decision by year's end, Assistant Secretary of State for International Scientific Affairs Kerri-Ann Jones told reporters today.

The EIS addressed many of green groups' most high-profile complaints about the pipeline, from the pipeline's risk of spilling heavy Canadian crude in sensitive areas of the Plains to the higher greenhouse gas emissions produced by oil sands relative to conventional fuel. Those issues were dismissed or rebutted to varying degrees, particularly a claim echoed by senior congressional Democrats that Keystone XL could raise gas prices in the Midwest and benefit Chinese markets.

Despite the finding of minor negative environmental effects, Jones said that the EIS "should not be seen as a lean in any direction, either for or against the pipeline," and described DOS's take on the project as neutral.

Conservationist groups that have cheered anti-Keystone XL protests at the White House this week had a different view.


Sierra Club executive director Michael Brune slammed the department's review as "an insult to anyone who expects government to work for the interests of the American people."

National Wildlife Federation Senior Vice President Jim Lyon blasted the EIS as "strike three" after two earlier State Department reviews, adding in a statement: "It is almost certain to be scrutinized in other venues, including a probable legal challenge."

Industry interests hailed the review. Consumer Energy Alliance Vice President Michael Whatley, deeming the move "a huge win for American consumers," added in a statement: "The Keystone XL pipeline is being built in a way that is safer and steadier than any other in the country."

House Energy and Commerce Chairman Fred Upton (R-Mich.), who led a legislative push this summer to fast-track Keystone XL's approval, also hailed State's review but reiterated long-standing criticism of the administration's speed in acting on the permit bid by project sponsor TransCanada Corp.

"[T]he American people are still waiting on the president for action ... nearly three years of delay have left a cloud of uncertainty around a project that will bring so many immediate jobs and so much secure energy to our country," Upton said in a statement.

Among the entities that now could scrutinize the document during a 90-day comment period are other federal agencies -- including EPA, which called for more in-depth review of the project's footprint in June comments that called an earlier EIS "insufficient" (Greenwire, June 7). That stance has led some green groups to look to EPA to expose any potential flaws they might see in the final EIS, while some of the pipeline's supporters view the agency as a de facto ally of environmentalists.

Robert Jones, vice president of the Keystone pipeline system at TransCanada, said earlier this month that "I want to be responsive" to EPA's concerns, but "the frustration I have is that I might as well be talking to NRDC or the Sierra Club."

The 90-day comment period and broader interagency review of the pipeline is also set to include public meetings in the capital and the six states through which it would cross en route to the Gulf Coast.

Greenhouse gases

Producing crude from the bitumen-rich Canadian oil sands generates more lifecycle emissions than conventional fuel, a carbon uptick that environmentalist and climate scientist James Hansen has warned amounts to "game over" for global warming if Keystone XL were approved.

But the State Department's review takes a considerably more measured look at the emissions question. Its EIS notes that the increased greenhouse gases generated from oil sands depend on what source fuel it is compared with -- a caveat often employed by the XL link's backers -- and which extraction methods are used.

State's review concluded that replacing other imported and domestic crudes would generate between 3 million and 21 million metric tons of emissions per year. That projection is similar to an estimate offered by Andrew Leach, a University of Alberta business school professor who has criticized Hansen's oil sands math as "hopelessly leveraged."

Canadian oil sands producers defend their progress in developing strategies to mitigate the environmental footprint of extraction and processing, but their nation's environment agency recently echoed green groups in predicting future increases in emissions from the sector (Greenwire, Aug. 16). Still, today's EIS holds out hope that the uncertainty surrounding the issue could shake out in such a way to make oil sands crude less carbon intensive than in the past.

"[O]n balance it appears that the gap in greenhouse gas intensity may decrease over time," the State Department wrote in its review.

Spills and safety

Another controversy shrouding the pipeline is whether one type of crude it would carry, diluted bitumen, or dilbit, poses a greater risk of pipeline corrosion and future ruptures than other types of fuel (Greenwire, Aug. 23).

State's review ultimately throws cold water on environmentalists who blast Keystone XL as unsafe, stating that dilbit is "similar in composition and quality to the crude oils currently transported in pipelines in the U.S."

The EIS adds that dilbit would "initially float on water if spilled," though as time passes "the lighter aromatic fractions of the crude oil would evaporate, and water-soluble components could enter the groundwater."

Such spills of 2,100 gallons or more would occur along Keystone XL between 1.18 and 1.83 times annually, the State Department estimated. A recent pipeline rupture along Montana's Yellowstone River, by contrast, is projected to have spilled 42,000 gallons, while last year's oil sands crude leak into Michigan waterways was pegged at 800,000 gallons by EPA.

State described the overall impact of any potential spill from the pipeline as likely to remain limited "unless it reaches an active river, stream, a steeply sloped area, or another migration pathway such as a drainage ditch," based on evidence from previous pipeline-caused leaks.

Furthermore, the EIS added: "Crude oil spills are not likely to have toxic effects on the general public because of the many restrictions that local, state and federal agencies impose to avoid environmental exposure after a spill."

Nonetheless, the State Department revealed in its review that it would commission a further independent study of Keystone XL's safety, particularly its valve locations and the value of using "external leak detection systems in areas of particularly sensitive environmental resources."

State said it would consult with EPA and the Pipeline and Hazardous Materials Safety Administration before selecting a company to make that assessment and vowed to consider "additional mitigation measures" that might arise from such a third-party report.

Pump prices and China

TransCanada and other oil-industry representatives view Keystone XL as economically valuable for the jobs and business it would create as well as the oil sands route it would carve for Gulf Coast refineries.

That fresh access point for Canadian crude, however, has driven politically volatile debate over whether gas prices in the Midwest -- the current destination of most oil-sands crude -- would rise as a result of Keystone XL (E&E Daily, May 24). Similarly, green groups and Democratic lawmakers have charged that the pipeline would not prevent heavy new volumes of oil sands crude from going to Asian markets, an outcome that the GOP and oil industry have used to urge U.S. approval of the XL link.

State's review included a memo from Carmine DiFiglio, an Energy Department deputy assistant secretary for policy analysis, that takes on and dismisses both arguments from pipeline critics.

"Current transport constraints give Midwest refiners a crude price advantage that is not justified by long-term transportation costs," DiFiglio wrote. "Eliminating those constraints would produce a more competitive oil market."

DiFiglio also predicted that "without a surplus of heavy oil" in the Gulf Coast refining region, the Canadian supply carried by Keystone XL likely would replace imports of heavy crude from less stable nations such as Mexico and Venezuela rather than benefiting Asian markets. Moreover, he wrote, economic incentives suggest that an alternative pipeline proposal that does not require a permit from the State Department would emerge if Keystone XL is rejected.

In fact, such a project emerged this month from Enbridge Inc., the leading transporter of Canadian crude to the United States. In a call with investors earlier this month, Enbridge indicated plans to expand its Monarch line to include a segment shipping oil sands crude to the Gulf Coast.

Click here to download a copy of the final EIS on the Keystone XL.



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