The termination of the embattled Keystone XL pipeline yesterday launched a wave of environmental cheers, Republican attacks and new questions about how the move would shift the oil industry and legal cases.
In an announcement, developer TC Energy Corp. said its decision to cancel the project followed a "comprehensive review of its options" and the suspension of construction activities in January after President Biden rescinded KXL's cross-border permit (Greenwire, June 9). The pipeline, which was first proposed more than a decade ago, was originally intended to connect Canadian oil sands with Gulf Coast refineries but faced years of opposition from conservation and tribal groups.
Legal analysts say pending legal fights sparked by the pipeline may continue, with some suggesting the Canadian government could still keep the project alive. Republicans, meanwhile, charged the Biden administration with hypocrisy, considering its recent waiving of sanctions of Russia's Nord Stream 2 pipeline. But climate activists who spent more than a decade fighting the 1,210-mile conduit said the decision to nix the project is, in their view, a reminder that the project was never needed.
"The era of building fossil fuel pipelines without scrutiny of their potential impact on climate change and on local communities is over," said Anthony Swift, director of the Canada Project at the Natural Resources Defense Council.
Swift said the fight against KXL has prompted a conversation among investors and the public about the environmental and economic sustainability of investments in "long-lived, high-carbon energy sources."
The project has become a "symbol for the challenges the sector has faced in getting high-profile projects permitted and built, not just in Western Canada but across North America," Gavin MacFarlane, an analyst at Moody's Investors Service, said in a statement, noting that KXL was nine years past its planned in-service date.
The pipeline's cancellation will "make life more difficult" for producers in oil-rich western Canada, said Mark Finley, a fellow in energy and global oil at Rice University's Baker Institute. He said Canadian producers could find other "workarounds" like shipping their product via trucks or rail, but those methods are more expensive and have safety risks.
And some in the industry said the TC Energy decision — combined with a cycle of lawsuits, environmental reviews and protests of oil projects — injects more uncertainty into an already risky — though often highly profitable — sector.
"Companies can't afford the uncertainty of the on-again, off-again regulatory state," said Dan Eberhart, who owns the oil field services company Canary LLC. "If it took a decade to permit a house, everyone in America would be homeless."
He said KXL and other energy infrastructure projects "have become political footballs that get kicked around for ideological reasons. They are great for fundraising, but they wreak havoc on investment, jobs and energy prices. Big win for politicians and environmental advocates, but it's a lose, lose, lose for consumers."
"It's unfortunate that political obstructionism led to the termination of the Keystone XL Pipeline," said Robin Rorick, vice president of midstream and industry operations at the American Petroleum Institute, in a statement.
"This is a blow to US energy security and a blow to the thousands of good-paying union jobs this project would have supported," Rorick continued.
But the pipeline's longtime foes cheered the demise of a project they said would worsen climate change.
"This is a landmark moment in the fight against the climate crisis," said Jared Margolis, a Center for Biological Diversity senior attorney who had opposed the pipeline in court.
Rosebud Sioux Tribe President Rodney Bordeaux called the decision to terminate the pipeline "great news for the Tribes who have been fighting to protect our people and lands."
The cancellation comes as some energy giants have moved to reduce emissions and embrace renewable energy. TC Energy as recently as January announced plans to "achieve net-zero emissions across the project operations" when KXL was placed into service.
In its press release, TC Energy said it would "continue to identify opportunities to apply this level of ingenuity across our business going forward, including our current evaluation of the potential to power existing U.S. assets with renewable energy."
Before the fracking boom
TC Energy signaled its decision last month, when it wrote off the value of the pipeline and associated assets (E&E News PM, May 7). Portions of the pipeline are already constructed.
Today, KXL seems in many ways like a project from another era.
When it was proposed in 2008, the U.S. was producing about 5 million barrels of oil a day, the lowest output since the 1940s. Crude prices were above $130 a barrel, making it cost effective to mine Canada's oil sands and ship the sticky crude to refineries on the U.S. Gulf Coast.
Since then, the fracking boom has pushed U.S. output to 12.1 million barrels a day. Oil prices collapsed in 2014 and have generally stayed below $80 a barrel since then. Major oil companies, including Exxon Mobil Corp. and ConocoPhillips, have pulled out of oil sands projects, saying they're too expensive (Energywire, Aug. 23, 2019).
Climate activists opposed KXL in part because it would carry heavy oil sands crude that they say releases more greenhouse gas emissions in the production process than other forms of oil. For years, the project was perhaps the environmental movement's largest climate symbol, leading to activists being arrested at the White House during protests a decade ago.
The fracking boom in the U.S. comes with its own greenhouse gas challenges. Shale oil produces large amounts of natural gas as a byproduct, which often leaks from well sites and production equipment. In some states, particularly Texas and North Dakota, operators simply burn the gas in flares because it's too expensive to build pipelines and transport it to markets.
The cancellation was significant because TC Energy itself acknowledged that the project was unviable, said Thanu Yakupitiyage, a spokesperson for the environmental group 350.org. It will take a broader effort to address the climate crisis, she said.
"When it comes to fracking, when it comes to so-called natural gas, which we like to call fossil gas, these are all part of what is causing emissions," she said.
GOP pushback and union fights
The announcement came yesterday afternoon as Biden, embarking on his first overseas trip as president, cited climate change as one of the world's most pressing crises as he spoke to U.S. troops at Royal Air Force Mildenhall in England ahead of meetings with world leaders.
"We must all commit to ambitious climate action if we're going to prevent the worst impacts of climate change ... and lead the global transition to clean energy technology," Biden said.
Critics argue, however, that pipelines are efficient and can fit with efforts to curb emissions.
Biden's decision did not sit well with Canada, and Ian Cameron, a spokesperson for Canada's Office of the Minister of Natural Resources, said yesterday the pipeline's cancellation "follows the disappointing decision by President Biden to rescind Keystone XL's presidential permit earlier this year." He said the country would "continue to support and invest in workers in Alberta and across Canada."
"We remain disappointed and frustrated with the circumstances surrounding the Keystone XL project," added Jason Kenney, the premier of Alberta, in a separate statement. In its announcement, TC Energy said it made the decision in consultation with Alberta.
The White House did not respond to a request for comment late yesterday.
Republicans, who have hammered Biden for scrapping the cross-border permit and accusing him of killing jobs, lashed out yesterday, blaming Biden for the collapse of the project.
"This is devastating news for our economy, jobs, environment and national security — and it's entirely President Biden's fault," Sen. Steve Daines (R-Mont.) said in a statement, calling it "beyond clear that President Biden is beholden to extreme environmentalists."
Republicans have also accused Biden of hypocrisy for shutting down KXL but waiving sanctions on Russia's nearly completed Nord Stream 2 pipeline. Biden has called Nord Stream "a complicated issue affecting our allies in Europe," and the subject is likely to be raised when Biden meets next week with Russian President Vladimir Putin in Geneva.
"Thousands of jobs destroyed and our energy independence jeopardized," House Minority Leader Kevin McCarthy (R-Calif.) tweeted after the announcement. "Meanwhile, President Biden is meeting with Putin next week to tell him he can keep his pipeline."
Jake Sullivan, Biden's national security adviser, told reporters yesterday aboard Air Force One that Biden is also likely to discuss Nord Stream 2 when he sees German Chancellor Angela Merkel at the annual meeting of leading industrial nations this week.
Merkel supports the pipeline to help meet her country's energy needs, but Republicans say they fear Russia will become the preferred energy provider for Western Europe while also boxing out exports from Ukraine.
Sullivan said the U.S. plans to speak to Merkel "about what the implications of this pipeline are for energy security in Europe and for Ukraine."
AFL-CIO President Richard Trumka, whose union endorsed Biden's candidacy, told Axios in February that he thought Biden's repeal of the KXL permit was a mistake that would cost union jobs.
TC Energy's decision comes just days after anti-pipeline activists ramped up efforts to pressure Biden to cancel other projects, with hundreds protesting at Enbridge Inc.'s Line 3 oil pipeline in northern Minnesota. Activists are also running ads calling on Biden to stop Enbridge's Line 5, which carries light oil and natural gas liquids from Superior, Wis., to Sarnia, Ontario (Energywire, June 9).
The Biden administration has allowed Dakota Access, which was the subject of major protests near the Standing Rock Indian Reservation in the Dakotas in 2016 and 2017, to keep running. It is currently undergoing a National Environmental Policy Act review by the Army Corps of Engineers.
More court battles?
Although the pipeline was terminated, conflict over it may still continue with Canada and potentially in the courts.
Alberta officials could seek reimbursement for its investment in the project, said James Coleman, a law professor at Southern Methodist University.
The Canadian government could go through an arbitration process under the North American Free Trade Agreement, which would still apply for this pipeline because the investment was made under the treaty. They could potentially attempt to file a takings case in court, he added.
"The government of Alberta invested a bunch of money in this pipeline, and they've always insisted that they would be able to get their money back," Coleman said. "I think a NAFTA claim would be the more plausible one."
Such a move would follow in the footsteps of the KXL pipeline developer, then TransCanada Corp., which had previously filed a notice of arbitration under NAFTA in 2016 after President Obama rejected an approval for the pipeline.
Coleman noted that even without the current operator in place, the Canadian federal government could also decide to take over the project, as happened with the Trans Mountain oil pipeline in Canada in 2018.
"The mere fact that an operator doesn't want to go forward with it doesn't necessarily mean that it's done for good," he said.
The cancellation of the pipeline also may mean that pending court challenges involving KXL may now be considered moot, he said.
"It's a judgment call," said Coleman. "It depends on whether the judge wants to keep a handle on the case."
The Biden administration had already made requests in federal courts to toss out litigation from conservation and tribal groups over federal approvals for the project, following Biden's executive order axing the border-crossing permit.
The pipeline has faced years of court challenges, much of which came before Chief Judge Brian Morris for the U.S. District Court for the District of Montana.
In 2018, Morris, an Obama appointee, tossed out a presidential permit issued by the State Department granting approval for a 1.2-mile segment of pipeline to cross the U.S.-Canada border. The ruling prompted Trump to override the decision by issuing his own border-crossing permit in 2019.
The Indigenous Environmental Network and the North Coast Rivers Alliance quickly sued to block it.
Even though Biden's executive order eliminating the permit in his first day in office reversed the Trump permit, Morris recently declined to toss out their case (Energywire, June 2).
The court still could take action in the case because a pipeline remained in the ground, Morris reasoned, so he still had the power to order the pipe removed if the Biden administration or a future president decided to revive the project.
His decision came after the Biden administration had asked the 9th U.S. Circuit Court of Appeals to toss out an appeal of Morris' ruling on the Trump border permit.
The Montana district court also has another paused case from the Rosebud Sioux Tribe challenging the Bureau of Land Management's approval of a right of way for the pipeline for violating treaty rights. That case was put on hold in February to assess the impact of Biden's executive order.
That case is likely moot now, said Margolis, although the Center for Biological Diversity will be looking to see what TC Energy files with the district court "so we can have some concrete assurances of the cancellation."
Litigation over KXL has had repercussions in other legal challenges of major oil and gas pipelines.
Morris made headlines last year when he axed a streamlined Army Corps of Engineers water-crossing permit for KXL. He ruled the Army Corps had failed to assess the cumulative impact of its Nationwide Permit 12 (NWP 12) program.
The judge briefly halted all use of NWP 12, then narrowed his decision to only block the permit for new oil and gas pipelines. The Supreme Court then intervened and made his ruling only apply to KXL.
Morris' decision in the case brought by the Northern Plains Resource Council spurred a string of new lawsuits challenging the legality of NWP 12 for major oil and gas pipelines, including the Mountain Valley and Byhalia Connection pipelines.
The 9th Circuit appeal of Morris' NWP 12 decision was challenged to the Army Corps permit and not a project-specific challenge, so the cancellation of the pipeline would not moot the litigation, Margolis said.
"We're hopeful that the Biden administration will continue to shift this country in the right direction by opposing fossil fuel projects that threaten our climate, our waters and imperiled wildlife," he said. "Good riddance to Keystone XL."
Reporters Carlos Anchondo, Lesley Clark, Niina H. Farah, Mike Lee and Timothy Cama contributed.
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