Administration delaying Keystone XL decision until after 2012 election

The Obama administration said Thursday it will consider alternative routes for the Keystone XL oil pipeline to avoid ecologically sensitive areas of America’s heartland — a move that delays a final decision on the controversial project until after the 2012 election.

The move solves a political dilemma for President Barack Obama, who risked alienating key voting blocs no matter what decision he made on the pipeline that would carry Canadian oil sands crude from Alberta to Port Arthur, Texas. The project pitted environmentalists against some labor unions and the oil industry, and Obama would have been delivering a verdict before an election that could turn on who can do the most to turn around the nation’s ailing economy.

In a statement, Obama said the State Department made the right move.

“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,” Obama said. “The final decision should be guided by an open, transparent process that is informed by the best available science and the voices of the American people.”

Industry officials who back the pipeline accused the White House of playing politics by courting Obama’s environmental base at the expense of potentially thousands of construction jobs linked to the project.

“This is clearly about politics and keeping a radical constituency opposed to any and all oil and gas development in the president’s camp in 2012,” said Jack Gerard, president of the American Petroleum Institute. “It appears there is only one job that is being focused on here.”

Environmentalists cheered the decision as a major victory for the movement, coming just days after thousands of activists circled the White House to protest the pipeline. Environmentalists argue the project would make the U.S. more dependent on a form of bituminous oil that takes more energy to extract than other fossil fuels.

Residents along the planned 1,700-mile route also have warned about possible spills in the Nebraska Sand Hills and the Ogallala Aquifer that provides drinking water to 2 million people.

The State Department said it would examine “in-depth alternative routes that would avoid the Sand Hills in Nebraska,” in light of broad “national concern” about Keystone XL’s proposed 1,700-mile route.

Administration officials estimated that it would take until at least early 2013 to complete required environmental reviews of a new pipeline path — before the State Department could decide whether the project was in the “national interest.”

“We’re really looking at an approach that would minimize or avoid the Sand Hills region,” said Assistant Secretary of State Kerri-Ann Jones.

Jones insisted that the decision was not political.

“This decision is based on the process that we have been going through. This is not a political decision,” Jones said.
“The White House did not have anything to do with this decision. They did not direct us to make this decision.”

TransCanada Corp., which first sought approval for the project three years ago, said it would continue seeking a pipeline permit.

“We remain confident Keystone XL will ultimately be approved,” said TransCanada CEO Russ Girling.

But Girling acknowledged that may come too late for refiners who have inked contracts for crude that would be carried by Keystone XL.

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

At least one competitor, Enbridge Inc. is planning to build pipeline segments that also would allow Canadian crude to flow to southeast Texas refineries, providing an alternative to Keystone XL.

This “will send a signal to those refineries you need to continue to look to other parts of the world for your resources,” predicted API’s Gerard. And at TransCanada, he said, executives will be weighing whether it’s worth waiting another year — or longer — on a project that may never win approval:

“If you’re a business person and you’re looking at a legal process that has this much discretion in it that can be driven by political considerations, you’ve got to think twice about risking your shareholders’ assets, knowing that you can never complete the process” and “you’re at risk of every political whim,” Gerard said.

San Antonio-based Valero, the nation’s largest independent refiner, called the delay “unfortunate” and “short-sighted.”

“This decision is due to a small and misguided group of extremists who fail to realize that fossil fuels will continue to be consumed because they are efficient and economically viable,” Valero said in a statement. “The administration’s decision will actually increase greenhouse gas emissions because without this project, oil will be transported further and by more carbon-intensive means.”

Some organized labor groups have argued that approving the pipeline could swiftly put thousands of pipefitters and union members to work. And oil industry advocates insisted that Keystone XL would ensure the United States gets more of the oil it needs from a friendly North American ally while providing a new route for oil extracted from the Bakken shale in Montana to reach Texas refineries.

Environmentalists said the State Department’s move should kill the project. Larry Schweiger, president of the National Wildlife Federation, said the “do-over is likely a lethal blow.”

“The project won’t be able to stand the scrutiny because Americans now understand that it will increase our addiction to dirty, expensive tar sands oil for decades,” Schweiger said. “You can change the route, but it is still the wrong project at a time when we need investments in clean energy alternatives that don’t spill, don’t pollute and don’t run out.”

Susan Casey-Lefkowitz, director of the Natural Resources Defense Council’s international program, said Obama was “displaying leadership and courage by putting the interests of the American people before those of Big Oil.”

The State Department already looked at 14 different route options as part of its final environmental review of the pipeline.

But Jones noted the alternatives that the State Department studied did not include routes that avoided the Sand Hills while still going through Nebraska. The evaluation also came before public hearings in Nebraska that amplified residents’ concerns and before the state legislature convened a special session to explore ways to force an alternative path.

“It’s a very important issue for the state,” Jones said. “it’s a very unique area. We are looking at something that is new and that we had not done before, even though we had done all the appropriate work on alternative routes. We didn’t look at a route in Nebraska that avoided the Sand Hills.”

Following an environmental analysis, the State Department concluded in August that there would be “no significant impacts to most resources” in Keystone XL’s 1,700-mile path. The State Department also said potential spills from the pipeline “would likely be limited.” That kicked off a 90-day period for the State Department to evaluate whether the project is in the “national interest.”

Environmental advocates and congressional critics of the project had already implored the Obama administration to delay a final decision while the State Department’s inspector general probes whether the review process was tainted by bias and conflicts of interest.

Sen. Bernie Sanders, an independent from Vermont who caucuses with Democrats, applauded the State Department’s move.

“I strongly believe that the more the American people learn about this project, the more they will understand that it would be disastrous for our environment and for our economy,” Sanders said. “They will want the president to keep his promise that the United States will lead the world in combating global warming by rejecting this pipeline.”

Rep. Ed Markey, D-Mass., said “the Obama administration is right to reevaluate this pipeline.”

But Markey wants the administration to go further than studying a new route — and instead also thoroughly evaluate the carbon footprint of the oil sands crude Keystone XL would deliver to southeast Texas.

“President Obama should take into account the impact of increased Canadian tar sands production on the amount of carbon dioxide pollution in the atmosphere, and the looming deadline the world faces in averting the disaster of climate change,” Markey said.