Monday is the deadline for eight federal departments, including the U.S. Environmental Protection Agency, to complete reviews of the Keystone XL oil pipeline. The critical milestone could put the Obama administration on track to issue its final verdict on the Canada-to-Texas conduit as early as this month, observers say.
President Barack Obama’s decision will have broad political impact outside the U.S. and Canada and could bolster -- or undermine -- the United States’ ability to influence global climate change talks later this year. Nearly 200 countries are expected to negotiate an agreement to reduce greenhouse gas emissions at a United Nations-led conference in Paris in December.
"The Keystone is one of the basket of issues that other countries are watching to see whether the U.S. is prepared to walk the walk on climate change," Jake Schmidt, the international climate policy director for the Natural Resources Defense Council in Washington, D.C., said. "For almost 20 years, there's been this perception that the U.S. is telling other countries to act on climate change while not moving at home.... Keystone XL is another sign of whether [Obama] is serious and will lead the world."
Obama's rejection of the $8 billion pipeline would mark the first time a sitting president has abandoned a major infrastructure project over concerns that it would exacerbate greenhouse gas emissions, according to Jamie Henn, communications director of the 350.org advocacy group in New York. “A Keystone rejection would really energize the international climate change process,” he said.
By the same token, approving the pipeline “would really damage the United States’ credibility on climate change and hurt our ability to shape the Paris agreement. The world is looking for a sign that the United States is serious about leaving fossil fuels in the ground, and Keystone XL would be a huge step in the opposite direction,” Henn said.
If built, TransCanada Corporation’s Keystone XL pipeline would run nearly 1,200 miles from the Canadian oil sands region in Alberta to Steele City, Nebraska, where it would connect to existing conduits to Texas Gulf Coast refineries. The pipeline would be able to carry up to 830,000 barrels of crude oil a day.
The comments that federal agencies submit by Monday will help the State Department to determine whether the Keystone XL is in the national interest. The department is reviewing the project because it crosses international borders, but Obama will have the final say because of its high political profile. The president in 2013 said U.S. interests “will be served only if this project does not significantly exacerbate the problem of carbon pollution. The net effects of the pipeline’s impact on our climate will be absolutely critical to determining whether this project is allowed to go forward.”
Monday’s deadline comes as lawmakers prepare to advance legislation to approve the Keystone XL. GOP House leaders have signaled they are leaning toward voting on a Senate version of the bill next week, Politico reported. Obama has vowed to veto the measure.
While the agency doesn’t have an exact deadline for wrapping up the permitting review process, a presidential veto could build momentum toward a final decision on the Keystone XL early this spring. "This is a process that's unfolding in real time, in some sense," Schmidt said. He said following Monday's comment deadline, "the process will pick up steam and come to a conclusion pretty quickly."
The EPA, Interior, Commerce, Homeland Security and other federal departments also made comments in response to the State Department’s final environmental impact statement, which it issued in January 2014. Among the report’s most important -- and contested -- findings is that the pipeline would not significantly contribute to climate change pollution when oil prices are high. Alberta oil sands producers would still have strong economic incentive to drill and mine the heavy crude, even if they couldn’t ship it through the Keystone XL, the State Department concluded. At the time of its report, U.S. benchmark West Texas Intermediate (WTI) crude was near $100 a barrel.
If oil prices slipped below $75, however, the scenario would change, the agency found. Without a pipeline, the costs of shipping heavy Canadian crude by railroad or through backlogged pipelines would force some producers to postpone or cancel projects. At those prices, “higher transportation costs could have a substantial impact on oil sands production levels … because many [oil sands mining] projects are estimated to break even around those levels,” the agency said. “Prices below this range would challenge the supply costs of many projects, regardless of pipeline constraints, but higher transport costs could further curtail production.”
Environmental groups opposing the Keystone XL say the report’s cheap oil scenario is already playing out.
With WTI and international benchmark Brent crude prices plunging by more than 50 percent in the past seven months, to under $50 a barrel, some Canadian oil sands producers have been forced to pull back. Norwegian oil giant Statoil SA last fall shelved a multibillion-dollar project in northern Alberta, blaming “limited pipeline access” for its “squeezing margins.” Canadian companies Cenovus Energy and MEG Energy have quietly announced delays for four total projects in light of falling oil prices.
“All these new developments only strengthen the connection between the [Keystone XL] pipeline and climate impacts,” said Doug Hayes, an attorney with the Sierra Club in Colorado. He pointed to a statement by the Sierra Club and other national groups that argues the “construction of Keystone XL would be throwing a lifeline to an industry already struggling in the current market.”
TransCanada has argued that Keystone XL would not have a dramatic impact on climate change. It estimates that the crude oil carried by the pipeline would result in greenhouse gas emissions of around 18.7 million metric tons -- or about 0.3 percent of total U.S. emissions in 2012. “When people take the time to learn more about what Keystone XL is ... then they realize that Keystone XL does not significantly exacerbate carbon emissions,” the company said in a statement on its website.