Key Facts, Issues and Next Steps on Keystone XL Pipeline

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The cards increasingly are on the table for a decision on the proposed ‘tar sands’ oil pipeline. But unknowns and uncertainty abound on what comes next … and when.

After five-plus years of bureaucratic deliberations, landmark protests, and headline-making acts of civil disobedience by a reinvigorated and broader environmental movement, the basic numbers involving the Keystone XL Pipeline were served up to the media and the public on a Friday afternoon just before Super Bowl weekend in late January.

Total greenhouse gas (GHG) emissions from oil sands crude pumped through the Keystone Pipeline — about 300 million barrels annually — will be an estimated 124 to 157 million metric tons a year, according to the State Department’s final Environmental Impact Statement. To put that in perspective, GHG emissions in the U.S. were 6,702 million metric tons in 2011. A barrel of West Canadian Sedimentary Basin heavy crude is about 17 percent more emissions-intensive than other barrels of heavy crude. That means Canadian oil sands may add an extra 1.3 to 27.4 million metric tons of GHG emissions a year, depending on models, if that oil were to displace less emissions-intensive oil.

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The planned path of the 36″ diameter XL pipeline, covering about 1,179 miles.

In terms of employment, about 42,000 U.S. jobs would be supported during some of the two-year building period; 3,900 would be project area-specific workers directly constructing the pipeline. Construction would add $3.4 billion to GDP. The pipeline would only need 35 permanent workers to operate it, the State Department report states.

It is this math that the media, public, policymakers, the Secretary of state, and ultimately the President are now left to contemplate, parse, and debate.

As for whether all this “dirtier” — that is, more GHG-intensive — “tar sands” oil would remain in the ground if the U.S. denies a permit, the State Department report says this: Approval or denial of the proposed project is “unlikely to significantly impact the rate of extraction in the oil sands, or the continued demand for heavy crude oil at refineries in the United States.”

This market analysis assumes that oil prices will stay high — more than $75 a barrel; a fall-off to $65 to $75 a barrel level, and/or less pipeline capacity built, could diminish demand. “[T]here could be a substantial impact on oil sands production levels,” the report notes, and some of the Canadian oil sands crude might end up being left in the ground. Oil has been comfortably above $80 a barrel for several years, and is currently near $100 a barrel. However, as if on cue, long-term prices for oil to be delivered in December 2016 dropped below the $80 level, the lowest price since 2009, just as the State Department report was released. Keystone would not be operational for two years after final approvals, leaving its true economic merits subject to conditions in an unknown and relatively distant future.

There are experts, both at the Environmental Protection Agency and among respected think tanks, who question the relatively optimistic numbers and conclusions (and there are questions too about the impartiality of the consultants who produced earlier drafts). The White House has been quick to point out that the final report is not an “approval” of any kind, and Secretary of State John Kerry and President Obama must still engage in deeper analysis.

Prospects for Approval, Rejection of Permit

The conventional wisdom remains that the pipeline permit will be approved, more with sorrow than enthusiasm, by President Obama, who has consistently framed his decision as part of a larger energy strategy.

Political handicappers have, for some time, expected that he would approve the pipeline while vigorously pursuing GHG limits on existing power plants, a lengthy and difficult policy process that EPA is engaged in with the states — and is set to run nearly to Election Day 2016.

Implementation and defense of the EPA power plant policy is said to be considered the highest priority for the White House in the area of climate change, and is seen as a big prize in terms of the administration’s legacy.

The coming 2014 congressional elections, with prospects of the President’s Democratic Party losing its Senate majority, further complicates the picture, as support for permitting of the pipeline is not limited strictly to Republican legislators. Two Democratic Senators facing tough re-election campaigns in energy-producing states, Mary Landrieu of Louisiana and Mark Begich of Alaska, for instance, have been urging the White House to approve the project.

The Senate in March 2013, with substantial Democratic support, passed a non-binding resolution in support of the pipeline by a vote of 62 to 37. A September 2013 Pew Research Center survey found that 65 percent of the public favors the project (two-thirds also say they favor stricter emissions limits on existing power plants). But experts emphasize that Americans’ views on these issues may be fairly “soft” — they don’t know much about them — and more recent polls suggest substantial opinion swings may be possible.

Some of the best analytical pieces of journalism on the behind-the-scenes politics, such as Ryan Lizza’s New Yorker feature and Amy Harder’s insiders’ account in National Journal detailing the views of recent White House advisors, strongly suggest that Obama is leaning toward approval.

In his June 25, 2013, speech on climate change at Georgetown University, President Obama stated:

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.

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Might the President’s ‘significantly exacerbate’ carbon pollution and his ‘net effects’ terminology prove decisive in a final permitting decision?

But those cautious words about Keystone were carefully structured to fit within a deliberate sequence of ideas: Leading into that passage is a discussion of Obama’s “all-of-the-above” energy strategy, where he reminded the audience that planning for a clean energy future “does not mean that we’re going to suddenly stop producing fossil fuels. Our economy wouldn’t run very well if it did. And transitioning to a clean energy economy takes time.”

Lizza reported that Obama has said similar things behind closed doors at a Democratic fundraiser with the most ardent of left-leaning environmentalists opposed to the project: In other words, even in a moment ripe with potential to pander, the President apparently has shown little indication that he would deny the permit.

Meanwhile, a landmark letter from 18 environmental groups strongly objecting to Obama’s energy strategy was delivered prior to the late January release of the State Department’s final report. These groups suggested the current White House policy is incoherent, and that a “carbon-reducing clean energy,” not an “all of the above” strategy, should become the new “operative paradigm” for administration energy decisions.

Reporters Matthew Daly and Dina Cappiello of the Associated Press have noted that the letter “marked new territory,” as it was “the first time the [environmental] lobby has been both united and sharply critical of Obama’s central environmental issue and one they support in principle: curbing climate change.” The White House had been urging environmental groups to hold off on the letter for a long time, they reported, describing the letter as signaling a growing “schism.”

What’s Changed? Trainspotting and Pipeline Rerouting

The U.S. side of the project as now proposed would involve building an 875-mile-long pipeline stretching from Morgan, Montana, to Steele City, Nebraska, at a cost of $3.3 billion, to be paid for by the TransCanada Pipeline’s subsidiary Keystone Marketlink. (The oil would begin flowing from Hardisty, Alberta, and travel about 300 miles to the U.S. border.)

Ultimately, the raw oil sands material would flow through existing and already approved pipelines that connect to the Gulf of Mexico, where U.S. refineries specializing in heavy crude eagerly await new supply.

Since the pipeline proposal first got under way about five years ago, two developments have significantly changed the calculus. First, strong objections from the state of Nebraska — the original plan for the pipeline had it crossing through the Sand Hills Region and Ogallala Aquifer — have been partially alleviated, as the underground pipe has been rerouted to now avoid that area. Previously, Nebraska’s objections and concerns for the aquifer had looked like the potential sticking point in the whole project.

Second, and perhaps more importantly, there has been massive growth in the number of rail cars carrying crude oil through Canada and the United States. In 2010, when the debate got under way, there were far fewer. The State Department illustrates just how fast rail shipments of Canadian oil sands have increased since 2011:

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Rapid increase of rail transport of crude oil over the past three years is a key part of the equation in permitting or not permitting XL pipeline.

The assumption is that Canadian companies would merely accelerate this push toward crude-by-rail should Keystone be denied a permit. However, in April 2013, an analysis by Patrick Rucker of Reuters that surveyed views of key Canadian companies suggested that they may not be so eager to adopt crude-by-rail at a more massive scale, and corporate leaders worry that it is not profitable.

Public health risks, such as those posed by rail accidents, are addressed in the report, which concludes that putting all the Canadian crude on rails “would result in an estimated 49 additional injuries and six additional fatalities” per year, compared to one additional injury and no fatalities with the pipeline option.

The rail issue, needless to say, is a key variable in the market analysis — especially on the question of whether oil sands crude will be produced one way or another — and the State Department acknowledges there are “various uncertainties” in its models.

Timeline for Decision: 90 days … and Quite Possibly More

The next phase of formal Obama Administration decision-making on the pipeline now lies with Secretary of State John Kerry, who must make a determination about the project’s national energy and security implications.

A 30-day public comment period began February 5. Over the next three months, eight federal agencies will weigh in on the analysis. After a State Department decision is issued, those agencies will have about two weeks to file objections for consideration by the President. That means May is the earliest a decision might be issued by the President, but that doesn’t mean the decision will be made and announced by then.

A State Department official told reporters that “Secretary Kerry is just really beginning his involvement in this process…. There is no timeline for his deliberations.” Much has been made of Kerry’s busy shuttle diplomacy across three major Middle East crises — Iran, Syria and Israel-Palestine — so being dragged into a hot-potato domestic political controversy is not eagerly welcomed by the State Department and the White House.

And Still, among the Lurking Uncertainties …

A host of issues — and some potential outside events and factors — could well influence the timeline and the decision:

  • The State Department’s Inspector General is expected to soon issue a report detailing whether a contractor, ERM Group Inc., which helped draft the environmental impact statement, properly disclosed ties to TransCanada. If that report were to be sharply critical, it’s conceivable that a new or partially new impact statement could be ordered, thus significantly extending the timeline.
  • Long-term oil prices could continue to fall, making some models used in the State Department’s impact statement look increasingly obsolete by decision time. At $50 a barrel, experts say, a substantial portion of the potential Canadian oil sands crude might actually be left in the ground, altering the calculus about the pipeline’s impacts on GHG emissions.
  • Green groups have already begun to substantially ramp-up protests, and could finally sway public opinion more substantially against the project. As a key Obama political ally in past campaigns, their involvement and sway in the upcoming congressional elections cannot easily be ignored by Democratic partisans. Further, there are many property owners across the 875-mile route who may resist selling land rights or easements, or government eminent domain, and litigation could stall the building process, even if the pipeline’s cross-border permit is approved. Eminent domain is an issue that energizes conservative libertarians and liberals alike, potentially creating a toxic political brew for the administration and Democratic candidates facing a challenging campaign season.
  • The idea of a “presidential permit” has seldom come under scrutiny. Some legal observers have written that, while the President seems to have entirely unfettered authority under constitutional powers regarding the conduct of foreign affairs, it is hypothetically possible that the permit decision itself could come under judicial review.
  • The Keystone decision, while it has mid-term election implications, also continues to serve as something of a foil, deflecting attention away from broader critiques of new White House regulatory policies on carbon emissions. As Dan Weiss of the liberal Center for American Progress told Politico, “The longer the process lasts, the more of a shiny object Keystone is from having Republicans attack his carbon pollution standards for power plants.”
  • Finally, it is worth remembering that the Deepwater Horizon oil spill was a salient consideration about oil-related projects in 2010, when news media first began covering the Keystone proposal. Another major attention-getting oil spill, or another headline-grabbing crude-by-rail train accident, could alter the politics around the XL Pipeline permitting decision.

John Wihbey

A regular contributor to The Yale Forum, John Wihbey is an editor and researcher at the John F. Kennedy School of Government at Harvard. (E-mail: johnwihbey@gmail.com, Twitter: @wihbey)
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3 Responses to Key Facts, Issues and Next Steps on Keystone XL Pipeline

  1. Paul Quigg says:

    The Keystone decision is 100% political. Economic and environmental considerations have been argued to death over the last five years. The environmental community, having lost most of their argument, are now framing the discussion as a test of the administrations commitment to the environment. The volume of their protest is inversely proportional to the strength of their argument.

    increases as their argument decreases

  2. John Garrett says:

    Climate activists have become increasingly irrational. More and more of the public sees the bizarre opposition to the Keystone XL pipeline as proof that a large portion of those involved in climate activism are actually modern-day Luddites masquerading as environmentalists.

  3. Allen S says:

    Keystone has always been a test of the administration’s commitment to fighting climate change. The fact is, we are hurtling toward a crisis and have done little to nothing to stop it. Small steps starting 20 – 30 years ago would have aided us greatly, but I guess hindsight is 20/20 (well, for those who bother to look).

    The fierce opposition to Keystone doesn’t come from “modern-day Luddites” (ridiculous), but rather from a growing number of people who recognize that the longer we feed our addiction to fossil fuels, the worse off we will be. The longer we wait, the bigger steps we will have to take and the harder it will be.

    The first step to getting out of a hole is to stop digging, and thus, the Keystone decision is a litmus test for the administration. The fact is, building the pipeline will greatly loosen a bottleneck for the extraction of the dirtiest type of fossil fuel. To just assume that it will all be extracted by rail anyways neglects both the huge costs of rail transport and the serious (and increasingly successful) efforts to shut down or deny permits to export terminals in the Northwest.

    Climate change is a tricky issue, because it is statistical in nature (heh, get it?). We can’t really point our finger at it, and we’re all at least a tiny bit culpable (though I would argue those fighting against any sort of systemic change in order to protect their cash flows deserve the vast majority). The uncertainty makes it hard to know what to do and hard to rally around a specific cause. And yet year after year, the CO2 creeps higher and the warnings from the IPCC get more dire.

    This is the context. So when a big project comes along, and one of the leading climate scientists says that it’s a game changer if it gets built, and stopping it doesn’t require getting congress to do anything, but rather just convincing a (supposedly) “liberal” president to say no, then of course people are going to latch on to that opportunity. It’s one nugget of certainty in an otherwise very complicated issue, and I think that’s why it’s managed to blow up.

    And I hope that we can harness that and take it further, since it’s really not about Keystone, it’s about the climate. As humans, it’s really hard to take tough action now to avoid an amorphous threat down the road, but that’s why we have scientists. They look at the data objectively, take our human biases out of it, so we can decide on the best course of action.
    Well the scientists have been yelling for quite some time now: this shit is real and we better start doing something about it.

    The current climate movement is growing quickly and is pretty diverse. It’s not just those “environmentalists” from the 70s – it’s people from all walks of life and all over the globe recognizing the threat that a changing climate has on all of our infrastructure and means of living. People are fighting on all fronts, personal to political, and we need them all. There is not one right way, but rather let’s support each other as we try to build stable economies and food systems in our own ways and together.

    Now if you ask me, hands down the best (and pretty broadly supported) thing we could do as a nation is to institute a carbon tax. If only we had a congress that did something other than drain our pocket books…

    In the mean time, Step 1: Stop digging
    No KXL

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