State Dept: Keystone XL won't drive emissions ... maybe

What's next? More study and debate

Oil Pipeline Nebraska

The Sand Hills near Mills, Neb. (Nati Harnik/AP)

The U.S. State Department today issued a long-awaited final environmental impact statement that said given current projections of oil price and transportation costs, the Keystone XL pipeline would not significantly increase production — and by implication — carbon emissions from the oil sands.

The report states: “The proposed project is unlikely to significantly affect the rate of extraction in oil sands areas (based on expected oil prices, oil-sands supply costs, transport costs and supply-demand scenarios).”

But it raised the possibility that under different circumstances, the project could be driver of production and, by implication, emissions.

In response to the report pipeline supporters in Congress said “there is no reason to oppose the project” and called on Obama to approve it.

Here’s Alberta Premier Alison Redford: “The findings are consistent with the analysis Alberta has put on the table in our various face-to-face meetings with key decision makers in Washington and our submissions made on this important file. I’m pleased that by respecting and actively participating in the process, our input has been accepted and understood.”

But Kerri-Ann Jones, assistant secretery of state, emphasized that transportation costs and the price of oil could change the impact of the pipeline on development of the oil sands. “This is about looking at technical data and trying to model it,” she said.

She called it “an oversimplification” to suggest the report says the pipeline would not influence climate emissions. Jones noted that assumptions about oil markets and regulatory frameworks are “uncertain and changeable,” and she said the administration will look at “the broader question of where this project fits” with President Obama’s “efforts to address climate change.” (The report restated past conclusions that oil sands crude creates 17 per cent more greenhouse gases over its lifecycle than the average barrel refined in the U.S.)

Environmentalists had challenged State’s earlier conclusion that Keystone XL would not drive up emissions, arguing that the pipeline to U.S. Gulf Coast refineries would spur an increase in oil sands production. The U.S. Environmental Protection Agency had last April also asked State to do more in-depth analysis of its previous conclusions that the availability of rail transport meant the oil would be developed and exported anyway.
Today’s report conceded the pipeline could be responsible for additional oil sands development only if oil prices fell to $65-75 per barrel and “if there were long-term constraints on any new pipeline capacity, and if such constraints resulted in higher transportation costs, then there could be a substantial impact on oil sands production levels.”

Environmentalists said the report represented a “shift” in their favour. Here’s Larry Schweiger, president and CEO of the National Wildlife Federation:

“For the very first time, the state department acknowledges a scenario in which the Keystone XL tar sands export pipeline dramatically increases carbon pollution. That’s a welcome and long overdue change, and it gives President Obama all the evidence he needs to reject Keystone XL.

In a speech last June, Obama stated that carbon emissions would be an “absolutely critical” factor in his decision whether to issue a presidential permit for the cross-border pipeline — now in its sixth year of administration review:

“Allowing the Keystone pipeline to be built requires a finding that doing so would be in our nation’s interest.  And our national interest 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.  It’s relevant.”

Today’s report looked at water safety along the proposed route, which crosses important aquifers in Great Plains states. The report plays down concerns of large-scale contamination. “Modeling indicates that aquifer characteristics would inhibit the spread of released oil, and impacts from a release on water quality would be limited.” However, the report noted that 2,537 wells, including 39 public water supply wells are along the route, and said TransCanada would have to take special precautions to prevent and respond to potential spills.

U.S. Secretary of State John Kerry must next decide if the pipeline is in the U.S. “national interest.”  He’ll consider broader factors like economic impacts, job creation and geo-strategic interests. Those factors had long been expected to weigh in favour of the pipeline – however, environmentalists have raised the possibility that the growing domestic oil production in the U.S. that has been streaming to U.S. refineries could cut against the case for the pipeline. A former state department official who had been involved with the process told me there was “no mathematical formula” for weighing factors.

A State Department spokeswoman said Kerry would also consider public and agency comments, as well as “climate and environmental priorities.” (President Obama this summer downplayed the number of jobs the pipeline would create.)

So when can we expect a permit decision? A state department spokeswoman said that after the public comment period, “there is no timeline” for a final decision. Asked whether the Kerry could take “as long as he wanted” to decide, she said, “correct.”

Jones said the pubic would first have 30 days to comment on the report, and federal agencies would have up to 90. “Secretary Kerry is only beginning his involvement,” said Jones, adding that Kerry “hasn’t been briefed on this” and was not involved in preparing the document. “There is no specific timeline for his deliberation.”

With the congressional midterm elections looming in November, Obama is under pressure from some Democratic senators running for reelection in conservative energy-industry states to okay the pipeline. On the other hand, environmentalists say they have pledges from more than 70,000 people to engage in civil disobedience and demonstrations should the pipeline be approved.

In releasing its report today, the State Department ignored calls by some Democratic lawmakers that it wait until the conclusion of an investigation into conflict of interest allegations against the outside contractor that produced the report. Jones said the department is “confident” they followed proper procedures.

There is also a lawsuit pending in the Nebraska that has the potential to tangle up the final route there. Meanwhile, a lower portion of the pipeline — from Oklahoma to Texas — started to pump oil this month.

For the full story of the five-years-and-running saga of Keystone XL, please read my Maclean’s cover story.