Review passed, Obama nearer Keystone choice

Canadian Natural Resources Minister Joe Oliver said Canada is encouraged by the outcome of the final environmental-impact study on the Keystone XL pipeline and urged the administration of President Barack Obama to make a “timely decision.”
Canadian Natural Resources Minister Joe Oliver said Canada is encouraged by the outcome of the final environmental-impact study on the Keystone XL pipeline and urged the administration of President Barack Obama to make a “timely decision.”

WASHINGTON - The proposed Keystone XL pipeline cleared a key hurdle Friday with a government study that found its effect on the climate would be minimal, which supporters said meets President Barack Obama’s test for allowing the project to be built.

In its final environmental review, the U.S. State Department found the Canada-U.S. oil pipeline would not greatly increase carbon emissions because the oil sands in Alberta will be developed anyway.

The study, while not the final word, is important because Obama has said he wouldn’t approve Keystone if it would exacerbate carbon pollution. Now the pipeline’s fate comes down to broader questions about whether the project is in the U.S.’ national interest, including matters such as energy needs and diplomatic relations.

“We are one step closer toward approval of the Keystone XL pipeline,” Sen. Heidi Heitkamp, a North Dakota Democrat and pipeline supporter, said in a statement. “Not only is it unacceptable but it’s embarrassing that we cannot approve a pipeline application in the time it took us to fight World War II.”

TransCanada Corp. applied more than five years ago for a permit to build the pipeline through the U.S. heartland, connecting the oil sands with refineries along the coast of Texas and Louisiana. Its planned 830,000-barrel-a-day capacity would represent a fraction of U.S. oil imports, though the $5.4 billion project has spawned a multimillion-dollar lobbying fight and is forcing Obama to choose between angering an ally in Canada or his supporters in the environmental movement.

White House spokesman Jay Carney said the Supplemental Environmental Impact Statement is “another step in the process” and declined to say Friday when Obama will make his final determination. The State Department said it would accept public comments for 30 days. Other federal agencies will have 90 days to weigh in.

“This is a status quo report,” said Michael Levi, a fellow at the Council on Foreign Relations in New York, an independent research organization. “There is nothing in this report that’s going to lead to anyone’s re-evaluation of the project one way or the other.”

Supporters have said the pipeline would create thousands of construction jobs and boost the nation’s energy security. The project would directly and indirectly support approximately 42,100 jobs for a year or two during construction and add $3.4 billion to the U.S. economy, the report says.

“This final review puts to rest any credible concerns about the pipeline’s potential negative impact on the environment,” American Petroleum Institute President Jack Gerard said Friday. “The only thing left is for President Obama to declare that this project is in our nation’s interest.”

The report includes an analysis of greenhouse-gas emissions from a barrel of tar sands compared with a barrel of heavy crude from Venezuela or Mexico, a State Department official said. Still, the new calculation is essentially unchanged from the March report, which found that Keystone won’t significantly contribute to climate change, the official said.

The National Wildlife Federation said the analysis estimated Keystone would increase annual greenhouse-gas emissions by as little as about 1.4 million tons of carbon dioxide equivalents or as much as about 30.2 million.

“This is a large source of carbon that’s going to be unleashed,” said Larry Schweiger, the president of the National Wildlife Federation. “We’re headed in a terribly wrong direction with this project, and I don’t see how that large increase in carbon is going to be offset.”

The State Department report concludes that the process of extracting and burning tar sands oil creates about 17 percent more greenhouse-gas emissions than traditional oil but that the heavily polluting oil will be brought to market with or without the pipeline.

“The approval or denial of any given project is unlikely to significantly affect the extraction of oil sands or refining on the U.S. Gulf Coast,” Assistant Secretary of State Kerri-Ann Jones said Friday in a conference call with reporters about the study.

The report includes a new analysis of pipeline safety issues. It incorporates data from a July 2010 rupture of a 30-inch Enbridge Inc. pipeline in Michigan that spilled more than 20,000 barrels into a creek feeding the Kalamazoo River, the department official said. A barrel is 42 gallons.

The report includes a discussion of new measures to avoid and respond to spills.

The department also deepened its analysis of market forces that might affect future development of Canada’s oil sands crude. Still, the department endorsed its earlier finding that the rejection of any single project to deliver Canadian oil will do little to change the rate of development of oil sands crude or the refining of heavy crude on the Gulf Coast, the department official said.

“Several analysts and financial institutions have stated that denying the proposed project would have significant impacts on oil sands production,” the report says.But new data “indicate that rail will likely be able to accommodate new production if new pipelines are delayed or not constructed.”

But moving oil by rail has its own hazards. As the practice has increased in recent years, so have crashes resulting in the explosion of rail cars carrying oil.

The Environmental Protection Agency sent a letter last year to the State Department saying the final report should include a “more careful review” of the ability of trains to move the heavy crude out of Alberta.

NATIONAL INTEREST

The report puts pressure on Obama to approve the pipeline, said Nebraska Republican Rep. Lee Terry, who has sponsored legislation to automatically approve it.

“It’s been obvious that it has negligible impact” on the environment, he said. “The president has now no reason to kill the Keystone pipeline.”

TransCanada proposed building an 875-mile pipeline from the U.S.-Canada border to Steele City, Neb. From there it would connect to an existing pipeline network, linking the oil sands with Gulf Coast refineries.

“The release of the [federal report] is another important milestone in completing the regulatory review in what is a critical piece of North American energy infrastructure,” TransCanada Chief Executive Officer Russ Girling said on a conference call with the media Friday.

The State Department is handling the review because the project crosses an international border. Obama said in a June speech on climate change that he wouldn’t approve Keystone if it would “significantly exacerbate the problem of carbon pollution.”

The national-interest determination will review issues other than environmental risks, including the pipeline’s importance to the U.S.-Canada relationship, the economic benefits it offers to local communities and how it would improve U.S. energy security.

Although Secretary of State John Kerry must weigh in with a recommendation to the president on whether to approve the pipeline, it is the president who must make the ultimate decision. Nonetheless, the assignment creates a difficult situation for Kerry, who has a long record of trying to tackle climate change and hopes to make the issue a signature of his tenure at the State Department.

Kerry has repeatedly been asked about his views on the pipeline but has never publicly commented on it. He has no deadline to make his recommendation. A State Department official said he was preparing to “dive in” to the11-volume environmental impact statement as a first step.

Eight other agencies with jurisdiction over elements of the project - the Departments of Defense, Justice, Interior, Commerce, Transportation, Energy and Homeland Security, and the EPA - will also weigh in. They have 90 days to give their views to the State Department.

Also expected soon is a report from the State Department’s inspector general on a complaint from Friends of the Earth, an environmental organization, that the department’s contractor reviewing the project is biased because of its ties to TransCanada and the oil industry. Critics have said they hope that report will undercut the State Department’s conclusions and force a restart of the entire review process.

The department has addressed potential conflicts of interest and found that third-party contractors don’t stand to gain financially from the project, the State Department official said.

Douglas Welty, a spokesman for the inspector general, said no date had been set for the release of that report, though it is expected early this year.

Environmentalists criticized the new review, particularly in light of the Inspector General’s investigation.

“Since the beginning of the assessment, the oil industry has had a direct pipeline into the agency,” Erich Pica, president of Friends of the Earth, said in a statement Friday.

“In what could be perceived as eagerness to please the oil industry and Canadian government, the State Department is issuing this report amidst an ongoing investigation into conflicts of interest, and lying, by its contractor,” Pica said. “By letting the oil industry influence this process, Secretary Kerry is undermining his long-established reputation as a leader in the fight against climate change.”

Thousands of activists already have held dozens of protests, written hundreds of letters, and are pledging nationwide acts of civil disobedience in opposition to the Keystone proposal.

Credo Action, Rainforest Action, and The Other 98% enlisted about 76,000 volunteers to sign a “pledge to resistance” to risk arrest if it looked like the State Department would recommend approving Keystone.

“Let’s be honest folks, if State Dep’t can’t get this right we will sue because ranchers’ water is more important then flawed status quo process,” Jane Kleeb, the head of Bold Nebraska, a group fighting the pipeline, tweeted Wednesday.

But rejecting Keystone would carry its own consequences for Obama. It would anger Canadian officials and could hurt Democrats up for re-election in energy-intensive states, such as Alaska’s Mark Begich and Louisiana’s Mary Landrieu.

Privately, people close to Obama said that though he is committed to building a climate legacy, he does not see the pipeline as a central part of that effort. Instead, the president is moving forward with a set of EPA regulations on coal-fired power plants, the nation’s largest source of greenhouse-gas emissions.

Those regulations do not have the potent political symbolism of the pipeline, but, if effective, they could have a far greater effect on the nation’s greenhouse-gas emissions by freezing construction of new coal plants and closing hundreds of existing plants.

Information for this article was contributed by Jim Snyder, Mark Drajem, Jim Efstathiou Jr., Theophilos Argitis and Margaret Talev of Bloomberg News and by Coral Davenport of The New York Times.

Front Section, Pages 1 on 02/01/2014

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