State Department: Keystone XL wouldn’t expand Canada’s oil sands

The State Department released a fresh environmental assessment of the Keystone XL pipeline on Friday, concluding that the project is unlikely to dramatically boost demand for Canada’s oil sands or the amount of heavy crude oil processed in Gulf Coast refineries.

The publication of the draft analysis will kick off a 45-day comment period and moves the Obama administration one step closer to a final decision on whether the $7 billion project is in the nation’s interest, eight years after TransCanada Corp. first proposed the pipeline.

The highly anticipated review, prompted by TransCanada Corp.’s decision to reroute the proposed pipeline around the environmentally sensitive Sand Hills region of Nebraska, effectively concludes that Canada’s oil sands will be developed whether or not President Barack Obama issues a permit for Keystone XL.

Read more: Keystone XL won’t affect climate, TransCanada says

“We find in this draft that the approval or denial of any one crude oil transport project _ including this proposed project _ really remains unlikely to significantly impact the development of the oil sands or the demand for heavy crude in the U.S.,” Assistant Secretary of State Kerri-Ann Jones told reporters.

Canada’s oil sands crude would make its way into the United States even without Keystone XL, as companies could turn to rail and other options to transport the product to the Gulf Coast, the State Department found. If Keystone XL were denied but other pipelines went forward, Canadian oil sands production might decrease by 0.4 to 0.6 percent by 2030, under State’s projections, and even if all pipelines were blocked, production would drop no more than 4 percent.

The State Department also predicts fewer greenhouse gas emissions than environmentalists have warned would result from the pipeline’s approval. According to State’s analysis, the amount of carbon dioxide emissions tied to oil sands production would drop just 0.83 million metric tons annually if Keystone XL were not built, in contrast to warnings that new oil sands development fostered by the project could send 27 million metric tons of greenhouse gases into the air each year.

The conclusions clash with predictions by environmentalists who argue Keystone XL would exacerbate climate change by encouraging companies to harvest more bitumen from Canada’s oil sands using mining or other energy-intensive steam-based methods. The result, they say, is a type of heavy crude that has a bigger carbon footprint — from production to combustion — than alternatives.

Environmentalists insist that if Obama grants the pipeline permit, he will be undermining his State of the Union pledge to combat climate change, with or without help from Congress.

But pipeline advocates reject opponents’ assertions that diluted bitumen from Canada is significantly dirtier than the crudes from Venezuela and other nations that it would likely displace in Gulf Coast refineries. And project supporters say Keystone XL would give the U.S. greater access to oil from a North American ally while fostering jobs in 49 states.

Keystone XL would transport diluted bitumen and synthetic crude oil from Canada — along with some domestic crude harvested in North Dakota and Montana — to Gulf Coast refineries. The State Department is vetting the 875-mile northern leg of the project under a 2004 executive order that tasks it with determining whether border-crossing petroleum pipelines are in the “national interest.” Meanwhile, TransCanada is already building the southern portion of the pipeline, which is not subject to State Department review.

Obama administration officials cast State’s review as preliminary, noting that a final analysis will be completed only after a public meeting in Nebraska and sifting through comments filed with the department. “We’re looking forward to the public debate on this one,” Jones said.

Already, the State Department has received more than a million comments, e-mails and letters on the project, which is being viewed as the biggest environmental test facing the Obama administration.

Environmentalists blasted State’s analysis as inadequate. League of Conservation Voters President Gene Karipinski said it “failed to accurately reflect the devastating impact the Keystone XL tar sands pipeline would have on our already warming climate.”

And Jim Lyon, vice president for conservation policy at the National Wildlife Federation, disputed State Department’s projection of relatively unfettered oil sands development even without Keystone XL. Native Canadians have raised objections to pipelines that could send Alberta’s tar sands crude to the West Coast for export, he noted.

“If Keystone XL wouldn’t speed tar sands development, why are oil companies pouring millions into lobbying and political contributions to build it?” Lyon asked.

Pipeline advocates stressed that the State Department’s conclusions dovetail with its previous environmental assessments of Keystone XL.

Given the previous reviews spanning four years, Sen. John Cornyn, R-Texas, it’s long past time for Obama to approve the project. “There is no reason for the president to delay this job-creation project any further,” he said.

TransCanada CEO Russ Girling stressed the company’s commitment to “making sure that Keystone XL operates safely.”

“More than four years of exhaustive study and environmental review show the care and attention we have placedon ensuring this is the safest oil pipeline built to date in the United States,” he said.

Marty Durbin, executive vice president of the American Petroleum Institute, said the State Department review “puts this important, job-creating project one step closer to reality.”

Still, a final decision could be months away. The 45-day comment period on the draft environmental impact statement released Friday will begin in about a week, once that document is published on the Environmental Protection Agency’s website.

The State Department will only issue a final environmental impact statement after sifting through the resulting comments, and that document is subject to another 30-day public comment period. Before it makes a final national interest determination (also subject to a 45 day comment period), the State Department will consult with the Energy Department, EPA and other agencies, which have a chance to appeal the final decision afterward.

All told, there is likely at least 120 days before a verdict, putting a final decision into July at the earliest, ClearView Energy Partners said in a research note to clients.

The Obama administration rejected a permit for the northern leg of the project last year, saying more environmental study was needed of a planned project rerouting in Nebraska.

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Read ongoing FuelFix coverage of the battle over the Keystone XL pipeline:

Southern segment of Keystone XL is halfway finished (Feb. 24)
Senate Democrat touts support for Keystone XL (Feb. 20)
Murdoch reveals Keystone XL opposition via Twitter (Feb. 18)
Texans join activists at Keystone XL rally in D.C. (Feb. 17)
Keystone for climate: Could Obama craft a horse trade? (Feb. 15)
Oil industry steps up campaign for Keystone XL (Feb. 13)
Pipeline protesters arrested at White House (Feb. 13)
Man walking route of Keystone XL (Feb. 6)