U.S. Delays Pipeline Decision

Daily News Article — Posted on November 14, 2011

(by Deborah Solomon, The Wall Street Journal, WSJ.com) WASHINGTON – The Obama administration said Thursday it would seek to reroute a portion of a proposed Canada-U.S. oil pipeline, postponing until after the 2012 election a decision on an issue that has divided the Democratic Party’s environmental and union supporters.

While the Keystone XL pipeline could still be built in 2013 or later, environmentalists called the delay a clear victory. Industry and labor groups, which argue the pipeline would create thousands of jobs and allow the U.S. to increase its imports of oil from a friendly neighbor, issued swift denunciations.

The decision highlighted President Barack Obama’s difficult choices on environmental issues as he heads into an election where he has little margin for error. Republicans and the oil industry say his policies are hindering economic growth, while enthusiasm for the president among environmentalists waned after he put off tighter curbs on smog-forming emissions.

Mr. Obama said a delay was needed to ensure environmental concerns were adequately addressed. “Because this permit decision could affect the health and safety of the American people as well as the environment, and because a number of concerns have been raised through a public process, we should take the time to ensure that all questions are properly addressed and all the potential impacts are properly understood,” he said in a statement.

The decision could reshape the North American energy industry, given the project’s importance for Canadian oil producers looking to the U.S. market and for refiners that have spent billions of dollars to handle the influx of heavy Alberta crude, one of the world’s most promising sources of fuel. Canadian officials and oil-industry executives have recently hinted they would go elsewhere to sell their oil.

Terry O’Sullivan, general president of the Laborers’ International Union of North America, said the move would “inflict a potentially fatal delay to a project that is not just a pipeline, but is a lifeline for thousands of desperate working men and women. The administration chose to support environmentalists over jobs—job-killers win, American workers lose.”

“This is clearly about politics and keeping a radical constituency opposed to any and all oil and gas development in the president’s camp for 2012,” said Jack Gerard, director of the American Petroleum Institute.

A State Department official, Kerri-Ann Jones, said, “This is not a political decision.” The White House didn’t tell the department how to decide, she said.

Environmental groups praised the delay and called on the administration to reject the pipeline outright. “It doesn’t make sense for America to be building infrastructure for dirty oil for the next five decades,” said Susan Casey-Lefkowitz, a director with the Natural Resources Defense Council.

TransCanada Corp., the company which has applied for a permit to build the pipeline, said it believed the project would ultimately be approved. “If Keystone XL dies, Americans will still wake up the next morning and continue to import 10 million barrels of oil from repressive nations, without the benefit of thousands of jobs and long-term energy security,” said Chief Executive Russ Girling.

The move is something of an about-face for the administration, which had said it would make a decision on the 1,700-mile pipeline by the end of the year. Just as it seemed headed toward green-lighting the project, …protest[s] emerged, with environmental groups and concerned citizens protesting at rallies and public hearings. On Sunday, thousands of protesters formed a human chain around the White House. The outcry surprised the White House, which hadn’t expected the pipeline to become such a flashpoint, administration officials said.

On Thursday, [the] State [Department] said it would seek an alternative route for a small portion of the pipeline that runs through an environmentally sensitive part of Nebraska known as the Sand Hills. That will require a new environmental review that will take until at least the first quarter of 2013, the department said.

Department officials said the decision was influenced by recent public hearings in Nebraska, where ranchers, farmers and others pleaded with the administration to avoid the Sand Hills area, which sits atop an aquifer supplying fresh water to Nebraska and other states.

The State Department had previously considered alternative routes to bypass the Sand Hills but concluded they were either economically or environmentally impractical. Ms. Jones said the new analysis would look only at alternative routes that bypass the Sand Hills but remain within Nebraska.

Canadian government spokesman Andrew MacDougall said the country was disappointed with the U.S. decision to delay approval but “we remain hopeful the project will be decided on its merits and eventually approved.”

—Ben Lefebvre and Angel Gonzalez contributed to this article.

Write to Deborah Solomon at deborah.solomon@wsj.com.

Background

The Keystone Pipeline System is a pipeline system to transport synthetic crude oil and diluted bitumen from the Athabasca Oil Sands in northeastern Alberta, Canada to refineries in Illinois and Oklahoma, and further to the U.S. Gulf Coast. It consists of the operational "Keystone Pipeline" and proposed Keystone XL (Keystone Expansion) pipeline.

TransCanada Response to opponents of the pipeline: (from wikipedia)

TransCanada has replied to opponents by saying that development of oil sands will expand regardless of whether the crude oil is exported to the United States or alternatively to Asian markets through the Enbridge Northern Gateway Pipelines or the Kinder Morgan's Trans-Mountain line.
TransCanada Corp. CEO Russ Girling argues that "the U.S. needs 10 million barrels a day of imported oil" and the debate over the proposed pipeline "is not a debate of oil versus alternative energy. This is a debate about whether you want to get your oil from Canada or Venezuela or Nigeria."
Girling has also argued that if Canadian oil doesn't reach the Gulf through an environmentally friendly buried pipeline, that the alternative is oil that will be brought in by tanker, a mode of transportation that produces higher greenhouse-gas emissions and that puts the environment at greater risk.
Girling has described the Keystone Pipeline as "routine," noting that TransCanada has been building similar pipelines in North America for half a century and that there are 200,000 miles of similar coil pipe in the United States today.
He also stated that the Keystone Pipeline will include 57 improvements above standard requirements demanded by U.S. regulators so far, making it "the safest pipeline ever built."

In a speech to the Canadian Club in Toronto on September 23, 2011, Joe Oliver, Canada's Minister of Natural Resources, sharply criticized opponents of oil sands development and the pipeline, arguing that:

The total area that has been affected by surface mining represents only 0.1% of Canada's boreal forest.
The oil sands account for about 0.1% of global greenhouse-gas emissions.
Electricity plants powered by coal in the U.S. generate almost 40 times more greenhouse-gas emissions than Canada's oil sands (the coal-fired electricity plants in the State of Wisconsin alone produce the equivalent of the entire GHG emissions of the oil sands.
California bitumen is more GHG-intensive than the oil sands.
Oliver criticized opponents of the pipeline, stating that all of the above facts are ignored by "celebrity protestors."

Writing in the National Post, editor Diane Francis argued that:

opposition to the Pipeline "ma[kes] no sense because emissions from the oil sands are a fraction of the emissions from coal and equivalent to California heavy crude oils or ethanol" and questioned why "None of these has been getting the same attention as the oil sands and this pipeline."
She also argued that much of the opposition to the oil sands actually comes from foreign countries such as Nigeria, Venezuela, and Saudi Arabia, all of whom supply oil to the United States and who could be affected if the price of oil drops due to the new availability of oil from the pipeline.
She cited as an example a recent effort by Saudi Arabia to stop television commercials by a pro-oil sands NGO [non-governmental organization] called EthicalOil.org.