What's blocking up the Keystone XL pipeline?

The proposed U.S. route for oil sands crude is facing intense scrutiny

What’s blocking up the pipeline?

Jimmy Jeong/Bloomberg/Getty Images

Stephen Harper has urged Barack Obama to approve it. Alberta’s energy minister demanded that the President “sign the bloody order,” already. But the soft-spoken diplomat leading the American government’s review of TransCanada Pipelines Ltd.’s proposed Keystone XL pipeline, Daniel Clune, is keeping his cards close to his chest. The approval of the US$7-billion, 2,700-km pipeline that would bring oil sands crude from Canada, through the U.S. heartland down to the Gulf Coast, has become one of the biggest issues between Canada and the U.S., a hot environmental cause south of the border—and a tug of war between two departments of the Obama administration.

To the pipeline’s backers, the approval process is dragging on longer than any before it—but for critics who oppose building infrastructure to tie the U.S. to even more carbon fuels, and oil sands in particular, it’s whipping by too fast. The State Department has said it will made a decision by the end of the year, and its every move is being scrutinized on both sides for evidence that oil interests have captured the Obama administration—or that federal bureaucrats are about to sabotage the national interest by scuttling a golden opportunity to create jobs and help wean America off Middle Eastern oil.

Congress is watching closely. House Republicans, who tout the pipeline as a “no-brainer,” have introduced legislation to try to fast-track a decision by Nov. 1. Meanwhile, in the Senate, a Republican and a Democrat, both from Nebraska, have expressed concern about the safety of the pipeline, which would traverse their state’s important agricultural aquifer. Several recent leaks in the existing Keystone pipeline that runs from Alberta to the Midwest have heightened those worries.

On June 6, the Environmental Protection Agency issued a formal letter telling State that its environmental impact statement —the department’s second draft, after the EPA criticized the first one—was still insufficient. They asked for more information and more analysis, and environmentalists immediately said State should take extra time to conform with the EPA’s requests.

Managing this contentious process falls to the State Department’s Bureau of Oceans, International Environmental and Scientific Affairs, which deals with everything from polar issues and infectious diseases to whaling and fish. Handling the review is Clune, a veteran diplomat with short-cropped white hair who has a no-nonsense demeanour and the unwieldy title of principal deputy assistant secretary of state. A career diplomat rather than a political appointee, he served as deputy chief of mission in the U.S. Embassy in Canberra, Australia, and had stints in Peru and Indonesia.

In an interview in his State Department office, where he is flanked by a departmental lawyer and a media minder, Clune speaks with the carefully chosen words of someone who understands that every move surrounding the pipeline is likely to one day be scrutinized in court. Some environmental groups have said they will sue if the project is approved.

A central concern for the critics is whether the department can answer the EPA’s concerns and still reach a decision in time for the self-imposed end-of-the-year deadline. Clune says yes. “We still expect to make a decision on whether to issue the permit or not by the end of the year. With respect to the EPA’s comments, we’ve been working very closely with them as well as with other agencies to analyze the environmental impacts of the proposed pipeline, and look forward to working with them on issues described in the letter.”

Asked what criteria will be used to assess the “national interest,” Clune is careful to refer to criteria that have been used in past reviews. “They include environmental impacts, the impact of the proposed project on diversity of supply to U.S. crude oil demand, security of transport pathways, the stability of trading partners from whom the U.S. obtains crude oil, the cross-border facility on relations with the country with which it connects,” says Clune. And how will those factors be balanced? “There is no mathematical formula where you plug in numbers and an answer spits out,” he says. “We will present a full record of all the facts we have gathered in this process to the decision-maker and it will be up to the decision-maker to weigh the various factors.”

Of course, how those facts are presented will matter a great deal. For example, does the State Department assume, as do backers of the pipeline, that if it is not built, Canadian oil sands product will be developed anyway and simply shipped to China? “We’re not assuming anything,” says Clune. What about the critics’ contention that the pipeline will not ultimately increase U.S. supply, but rather it will provide a means for Alberta’s land-locked oil to be shipped overseas via the Gulf of Mexico? “That is an issue we’re looking into but have not made a decision on.” Does the unrest in the Middle East and the conflict in Libya have any effect on evaluating whether the oil sands pipeline is in the U.S. national interest? “These are factors that will be considered in the final decision—among others,” he says.

Even the identity of the final decision-maker remains uncertain. The decision is the President’s, but he has delegated it by executive order to Secretary of State Hillary Clinton. She, in turn, has delegated the task to her deputy secretary, James Steinberg—who is scheduled to leave the department within weeks. Will his replacement or his deputy make the final decision? “No decision has been made yet,” says Clune.

And then there is the question of what happens if State approves the project but the EPA continues to consider it problematic. On paper, the EPA has the power to “refer” the matter to a White House body called the Council on Environmental Quality. But it’s unlikely that the White House wants to be forced to mediate a high-profile spat between agencies. Clune is optimistic State can satisfy the EPA. “We have been working very closely with the EPA over the course of the past year and will continue to work closely with them on the environmental impact statement. We’ve already adopted many of their suggestions and will continue to talk with them about ways to make the [environmental impact statement] even better,” he says.

Asked to respond to the frustration in Alberta that the process is too slow, Clune replies, “First of all, it’s in all of our interests that this process be carried out in a fair and even-handed manner that is consistent with all the applicable laws and regulations, and I believe the applicant [TransCanada] has made statements to that effect as well. And second, we’ve stated publicly that we expect to come to a decision by the end of the year.”

Environmentalists see in State’s decision to stick to its deadline evidence that the department wants to approve the project, and that the EPA’s concerns will not be adequately addressed. Asked why it is important to be done by Dec. 31, Clune says only, “It’s our estimate of when this process will be finished. People have asked us when we will be finished, and that is our answer.”

Environmentalists rejoiced when State announced this month that six more public meetings would be held examining the project—one in each state the pipeline passes through, and one in Washington. But they were disappointed when it emerged that the hearings would be held after the environmental impact statement was complete—taking it as another sign that State intends to approve the project. Clune confirmed that the public meetings will be held not as part of the environmental review, but as part of the broader national interest determination—which will also include the issues that favour the pipeline, such as energy security. “Since other considerations are coming into play in the national interest determination, we thought it would be of interest to hear from the public on some of these other issues,” he explains.

Asked whether there is any doubt that the pipeline will be approved, Clune is vehement that the issue has not been prejudged. “I’m serious when I say that we haven’t made a decision yet on the application,” he says. “That decision we expect before the end of the year—but we don’t know what that decision is going to be. Seriously.”