Obama’s Keystone approval could hinge on climate measures

WASHINGTON — The final verdict on the Keystone XL pipeline rests with Obama administration officials in Washington, but the project’s fate may hinge on decisions made in Canada.

Analysts say that the administration is telegraphing willingness to approve the project, which would transport diluted bitumen from Alberta’s oil sands, as long as stakeholders north of the border do more to shrink their carbon footprint.

In a June 25 speech, President Barack Obama vowed that his administration will approve the pipeline only if it “does not significantly exacerbate the problem of carbon pollution.”

“The net effects of the pipeline’s impacts on our climate will be absolutely critical to determining whether this project is allowed to go forward,” the president said.

Obama’s emphases on the “net effects” of the pipeline and whether it “significantly” exacerbates greenhouse emissions suggest TransCanada could take steps to make up for the 830,000 metric tons per year of carbon dioxide the State Department estimated would be linked to Keystone XL.

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While U.S. officials couldn’t compel such action, said ClearView Energy Partners analyst Kevin Book, “it might be a behind-the-scenes wink and a nod.”

For TransCanada Corp., the Calgary-based company behind Keystone XL, options include greening its own portfolio by investing in renewable power and buying carbon offsets. Keystone XL supporters also can argue that Quebec, Alberta and British Columbia already tax carbon.

TransCanada may have taken the first step already. Last Tuesday, the company announced it was paying $470 million to buy 86 megawatts of solar capacity in Ontario.

CEO Russ Girling touted the deal as part of a companywide move to the greener and cleaner.

TransCanada already has sunk more than $5 billion into U.S. hydro power facilities and wind farms in the U.S. and Canada.

“One-third of the power we provide to North American consumers today comes from carbon-free energy sources,” Girling said.

Expensive offset

Spread over 20 years, the cost of the carbon emission displaced by TransCanada’s new solar investment amounts to as much as $857 per metric ton, making it an expensive offset, according to ClearView Energy’s number crunching.

But the real value isn’t numeric, Book said.

“Solar sends a message that buying offsets in the market does not,” he said. “It says ‘we’re changing us.’”

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Broader efforts by Canada or oil sands developers working there also could support a White House decision to approve the pipeline.

In a letter blasting the State Department’s analysis of the project’s carbon footprint, the Environmental Protection Agency suggested a better review of  “specific ways that the U.S. might work with Canada to … reduce greenhouse gas emissions associated with the production of oil sands crude.”

Cynthia Giles, the EPA’s assistant administrator for enforcement and compliance, wrote that work could include “a joint focus on carbon capture and storage projects and research, as well as ways to improve energy efficiency associated with extraction technologies.”

Math disputed

Still, Keystone XL opponents dispute the State Department’s math on the carbon emissions tied to the project. In calculating that the emissions associated with Keystone would be “no substantial change” in global greenhouse emissions, the State Department assumed that other pipelines and crude-carrying trains would fill the gap and sustain oil sands development even if Keystone XL were never built.

Environmentalists say that assumption overlooks opposition to pipelines proposed to carry oil sands crude to Canada’s West Coast, the maxed-out capacity of railcars and the long lead times for possible pipelines to ferry supplies east.

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The opponents are pressing the State Department to revise that calculation and redo its entire analysis before issuing a final environmental impact statement. The Sierra Club, Natural Resources Defense Council and other groups outlined their case in a 48-page letter June 24.

“The oil industry wants you to believe that large-scale tar sands production is inevitable,” said Jeff Gohringer, of the League of Conservation Voters. But, he said, “the facts aren’t on their side.”