The Keystone XL saga: missed chances, shifting sands — Fuel for Thought
OREANDA-NEWS. November 25, 2015. If Bill O’Reilly, author of such books as “Killing Lincoln” and “Killing Kennedy” were to turn his attention to pipelines, his next book might be entitled “Killing Keystone.”
It would be a tale full of twists and turns, conspiracy theories, missed opportunities, miscalculations and bad timing surrounding TransCanada’s proposed Keystone XL pipeline. It would not, however, be a book about whether the now-notorious project would have been good simply on its merits.
The pipeline extension was rejected by US President Barack Obama on November 6 because it would not be in the national interest. The law governing cross-border pipelines leaves that phrase, “national interest,” as murky as the oil sands that Keystone was designed to transport from Alberta, Canada, to the US.
Obama pinned his rejection on climate change. Secretary of State John Kerry, in his formal recommendation to reject the application, called the oil sands “one of the dirtiest sources of fuel on the planet.”
But a look at the underlying rationale for the rejection shows that resilient US shale production played an equally important role in the decision.
In its initial Supplemental Environmental Impact Statement (SEIS) evaluating the environmental impact of Keystone XL, the US State Department concluded that the Alberta oil sands, while a more carbon-intensive form of fuel, would be developed with or without the pipeline. In the absence of Keystone XL, that crude would be transported to the US on railcars — a more dangerous mode of transportation — and to Asia on other yet-to-be-built (or in many cases, approved) pipelines.
That rationale was published in February 2014, when crude was trading above \\$100/b. But at \\$40/b, the argument loses much of its its power.
“Market conditions have changed since the (original report) was written; oil prices have declined considerably and the boom in US production has continued,” the US Energy Department noted recently.US Environmental Protection Agency put it this way in a February 2015 letter: “In early 2014, when the final SEIS was published, few predicted that oil then selling at over \\$100 per barrel would last week have been priced below \\$50 per barrel.”
What does a 14-inch pencil have to do with this?
In September 2013, the American Petroleum Institute decided to mark the fifth anniversary of the Keystone XL application by handing out huge pencils to legislators and the press. The pencils were emblazoned with the slogan: “KXL delay: 5 years and counting.”
While a clever gimmick (pencils, because the fifth wedding anniversary is wood), the handout missed its mark.
By the time the API distributed its cheeky anniversary gift, Keystone XL had already been rejected once and was in the midst of a second review. That break in the action is not often mentioned by the pipeline’s supporters, because it dredges up the memory of what many consider a major miscalculation by Congressional Republicans.
In 2011, as the mandatory review of the pipeline was nearing a close, proponents had a lot going for them. Unemployment was high, as were crude prices. Keystone XL was being promoted as a jobs producer, a pretty persuasive argument at a time when the unemployment rate was over 8%.
The Canadian government strongly suggested that approval of the project was a test of the relations between Canada and the US. One high-ranking Canadian official at an event held under Chatham House rules — where no direct quoting is allowed — remarked, “If you can’t make a deal with us, who can you make a deal with?”
But then Republicans decided to pass a provision to an unrelated bill forcing the Obama administration to make a decision on Keystone XL within 60 days. Obama warned against the move, saying it would not allow for sufficient time to complete the review. Republicans called his bluff and Obama rejected the permit in February 2012.
That forced TransCanada to resubmit the application, triggering another lengthy, and costly, review process, culminating in a second rejection. Of course, in the ensuing three years, the economic landscape shifted, market conditions changed dramatically, and presidential politics made Keystone XL an untouchable subject.
Whether the project would have been approved in 2011-2012 is a matter of speculation. And whether there will be a third application is a story for another time — and another pencil.