Joe Oliver to Washington at delicate moment

Natural Resources Minister Joe Oliver arrives in Washington, DC, Wednesday morning at a delicate moment in the battle to obtain a presidential permit to build the cross-border Keystone XL pipeline from Alberta’s oil sands to refineries on the Texas coast.

Supporters of the pipeline, worried by President Obama’s tough talk on climate change in his State of the Union speech in February, had breathed a sigh of relief last month when the State Department, in charge of reviewing the permit application, issued generally positive draft environmental impact statement that concluded that the project would not not substantially increase greenhouse gas emissions or contribute to climate change because the oil would be produced and exported in some fashion — either through alternative pipelines of by rail.

Yesterday, they had new reason for concern as the Environmental Protection Agency weighed in with a letter finding fault with the State Department’s analysis. The EPA rated State’s environmental report as insufficient: “Based on our review, we have rated the DSEIS as E0-2 (“Environmental Objections- Insufficient Information.”)

The EPA emphasized that, “oil sands erude is significantly more GHG intensive than other crudes, and therefore has potentially large climate impacts.”

The EPA letter also said that the State Department was too quick to conclude that if the pipeline is not built, the oil will be extracted and exported via pipeline or by rail. The EPA recommended “a more careful review of the market analysis and rail transport options”:

This analysis should include further investigation of rail capacity and costs, recognizing the potential for much higher per barrel rail shipment costs than presented in the DSEIS. This analysis should consider how the level and pace of oil sands crude production might be affected by higher transportation costs and the potential for congestion impacts to slow rail transport of crude.

The EPA also recommended that State outline ways the U.S. could work with Canada to reduce emissions from the oil sands:

EPA recommends that the Final EIS complement this discussion with an exploration of specific ways that the U.S. might work with Canada to promote further efforts to reduce GHG emissions associated with the production of oil sands crude, including a joint focus on carbon capture and storage projects and research, as well as ways to improve energy efficiency associated with extraction technologies.

The EPA also wrote that recent spills show that oil sands crude, known as diluted bitumen (dilbit), behaves differently than conventional oil. For example, in an Enbridge pipeline spill in Michigan,the EPA wrote, “oil sands crude sank to the bottom oft he Kalamazoo River, mixing with the river bottom’s sediment and organic matter, making the oil difficult to find and recover.”

As a result, the letter states:

We recommend that the Final EIS more clearly recognize that this characteristic of dilbit is different from the fate and transport of oil contaminants associated with conventional crude oil and refined product spills from pipelines. For that reason we recommend that as a permit condition TransCanada be required to develop a plan for long term sampling/monitoring in the event of an oil discharge to assess and monitor these impacts as part of the spill response plan.

Whether the EPA’s letter will have any impact on the State Department’s “national interest determination” and final recommendation to the president, is hard to know. Notably, the Washington Post writes that the letter matters “a lot.”

Meanwhile, in the State Department’s public comment period that just closed, anti-Keystone activists at the environmental group 350.org said they count over one millioncomments submitted to the State Department against the project. Last, week the State Department held a public hearing in Nebraska to solicit comments on an new alternative route that would avoid the state’s sensitive Sand Hills region – though it would still cross an aquifer there. The hearing was a rallying cause for opponents of the pipeline.

TransCanada’s CEO, Russ Girling, has disputed the EPA’s conclusions that construction of the pipeline would increase the pace of development of the oil sands in an interview with the Globe and Mail ahead of his company’s annual meeting this week:

The Keystone project “has become this symbol of everything that’s wrong with the fossil fuel energy industry. And it’s not,” he said. “It transports products from A to B, and it does that safely. It has no material impact on refining markets or supply.”

Meanwhile, last week another spotlight was shone on the issue of pipeline safety as the prestigious Pulitzer Prize for National Reporting was awarded to journalists Lisa Song, Elizabeth McGowan and David Hasemyer of the Brooklyn-based non-profit, InsideClimate News, “for their rigorous reports on flawed regulation of the nation’s oil pipelines, focusing on potential ecological dangers posed by diluted bitumen (or “dilbit”), a controversial form of oil.”

InsideClimate News has been giving Keystone XL a lot of attention. Recently, it disputed Alberta premier Alison Redford’s recent claim in a speech in Washington, DC that denial of the project would cause the province budget woes because of the discount on the price of bitumen that can’t reach Gulf Coast refineries. The article emphasized, instead, “the way Alberta has subsidized the oil industry by charging next to nothing in royalties for the oil.”

Oliver is scheduled to speak at the Center for Strategic and International Studies, a Washington, DC think tank. He will also meet with Sally Jewel, Secretary of the Interior; Robert Hormats, State Department Under Secretary for Economic Growth, Energy and the Environment; Senator Robert Wyden, Chairman of the Senate Energy and Commerce Committee; and Representative Fred Upton, Chairman of the House Energy and Commerce Committee.

It will be his fourth visit here and he still has his work cut out for him.