State Department delays Keystone XL decision until 2013

By OGJ editors

In a move that will delay a decision on the Keystone XL pipeline until at least the first quarter of 2013, the US Department of State will study an alternate route for the important project to connect the oil sands region of Alberta with high-conversion refineries on the Texas Gulf Coast.

In August, the department accepted a final environmental impact statement (EIS) saying the project posed no major environmental threat. But environmental groups opposing the project have increased pressure on the Obama administration, which faces an election in November 2012. The possibility of a delay increased on Nov. 9 when the State Department inspector general said it would investigate the department’s handling of the EIS (OGJ Online, Nov. 9, 2011).

TransCanada, which made its proposal to build the 1,661-mile, 36-in. expansion of the existing Keystone system in 2008, said it remained confident about ultimate approval but warned of harm from the delay.

“This project is too important to the US economy, the Canadian economy, and the national interest of the United States for it not to proceed,” said Russ Girling, TransCanada president and chief executive officer.

The new delay, he said, could hurt shippers and US refiners.

“Supplies of heavy crude from Venezuela and Mexico to US refineries will soon end,” he said. “If Keystone XL is continually delayed, these refiners may have to look for other ways of getting the oil they need. Oil sands producer face the same dilemma—how to get their crude oil to the Gulf Coast.”

State’s decision

In its announcement about the delay, the State Department said that during public hearings it heard consistent expressions of concern about the proposed transit of Nebraska’s Sand Hills area, which includes wetlands and shallow aquifers.

The department noted that the Nebraska legislature has scheduled a special session to study the project.

“State law primarily governs routes for interstate petroleum pipelines,” it said. “However, Nebraska currently has no such law or regulatory framework authorizing state or local authorities to determine where a pipeline goes.

“Taken together with the national concern about the pipeline’s route, the department has determined it is necessary to examine in-depth alternative routes that would avoid the Sand Hills in Nebraska in order to move forward with a national interest determination for the presidential permit,” which is necessary because the pipeline would cross an international border.

“It is reasonable to expect that this process including a public comment period on a supplement to the final EIS consistent with NEPA (National Environmental Protection Act) could be completed as early as the first quarter of 2013.”

The department said it then would consult with eight other agencies to decide “whether the proposed pipeline was in the national interest, considering all of the relevant issues together. Among the relevant issues that would be considered are environmental concerns (including climate change), energy security, economic impacts, and foreign policy.”

Industry reaction

US oil industry and general business trade associations lashed out at the decision.

American Petroleum Institute Pres. and Chief Executive Officer Jack Gerard complained about a political dimension of the decision.

“Whether it will help the president retain his job is unclear, but it will cost thousands of shovel-ready opportunities for American workers” he said. “There is no real issue about the environment that requires further investigation, as the president's own State Department has recently concluded after extensive project reviews that go back more than 3 years.

“This is about politics and keeping a radical constituency opposed to any and all oil and gas development in the president's camp in November 2012.”

National Petrochemical & Refiners Association Pres. Charles T. Drevna said the decision “will strike a blow against American workers who need jobs, against American consumers who need energy, and against American economic and national security.”

Drevna said, “Turning our back on our good friend and ally Canada will exponentially increase the odds that Canadian oil is shipped to China and other countries overseas and will harm American fuel manufacturers and their employees.”

US Chamber of Commerce Pres. and Chief Executive Officer Thomas J. Donohue said, “Politics has trumped jobs in this decision, and we can only wonder if the administration’s delay will cause Canada to turn their pipeline west and ship their energy and American jobs elsewhere.”

National Association of Manufacturers Pres. and Chief Executive Officer Jay Timmons, citing what he estimated to be 118,000 jobs at stake, called on the administration to reverse a decision he described as “outrageous.”

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