Pivotal Keystone XL study seen boosting chances for approval

WASHINGTON — The State Department on Friday said the Keystone XL pipeline is unlikely to dramatically boost demand for Canada’s oil sands, delivering a verdict that disappointed environmentalists even as it gave President Barack Obama the ammunition he needs to approve the controversial project.

But the government review of the TransCanada Corp. pipeline that would link Alberta’s oil sands with Gulf Coast refineries is far from over. Now that it has released the long-awaited final environmental impact statement, Obama’s State Department will begin deciding whether the $7 billion pipeline is in the “national interest” — an analysis that folds in security, economic and environmental concerns.

In the just-completed study, the State Department held firm to its March 2013 conclusion that the amount of carbon emissions linked to oil sands development in Canada is unlikely to be significantly affected by Keystone XL because trains and other pipelines will transport it too.

“The dominant drivers of oil sands development are more global than any single infrastructural project,” the State Department said. Approving Keystone XL “is unlikely to significantly impact the rate of extraction in the oil sands or the continued demand for heavy crude oil at refineries in the United States.”

Those calculations are critical because Obama vowed last June he would only approve the pipeline if it does not “significantly exacerbate the problem of carbon pollution.”

Although the report did not give any specific recommendation to Obama, analysts and project allies said it boosts the chances the president will approve Keystone XL.

Kevin Book, managing director of ClearView Energy Partners, said the research agency’s review of the report “reinforces our view that the Obama administration has left the door open to final approval.”

“The trend thus far still suggests that approval remains more likely than not,” Book said.

Reaction: Keystone environmental report reignites battle over pipeline’s impact

Obama administration officials stressed this was just one step in a long process.

During the national interest determination, “there will be a lot of other considerations on the table,” said Kerri-Ann Jones, the assistant secretary of State for oceans and international environmental and scientific affairs. She added that environmental findings will be weighed against energy security, foreign policy and economic considerations.

Under more robust modeling than in the March 2013 evauluation, the State Department found that constraints on pipelines could have a “limited” effect on crude flows and prices, but “not enough to curtail most oil sands growth plans or to shut in existing production.”

The analysis also gave greater attention to the risks of spills and the challenge of mopping up the diluted bitumen that would flow through Keystone XL.

Environmentalists took some comfort in the report’s acknowledgement that Keystone XL potentially could generate an extra 1.3 million to 27.4 million metric tons of carbon dioxide annually over non-oil sands alternatives, the equivalent of emissions from as many as 5.7 million cars each year.But the State Department essentially said that the oil sands ultimately would be produced and used, and those emissions generated, regardless of Keystone XL.

“The State Department wisely walked away from its earlier contention that Keystone XL would have ‘no significant impact’ on climate disruption,” said Sierra Club executive director Michael Brune.

High stakes

For already wary environmentalists, the project is a major test of Obama’s commitment to combating climate change. If he decides in the pipeline’s favor, he could alienate a key faction of voters that helped put him into the White House. A verdict against Keystone XL would leave him vulnerable to accusations he is not committed to domestic energy security and the economy.

Because the bitumen harvested from Canada’s oil sands is unlocked using mining and other energy-intensive steam-based techniques, environmentalists say the resulting heavy crude has a bigger carbon footprint than alternatives.

Oil industry leaders say the diluted bitumen that Keystone XL would carry is no less green than the heavy crudes it would displace in Gulf Coast refineries. They argue  it would help further wean the U.S. off Middle East oil while creating domestic jobs.

‘Just one pipeline’

“Keystone is just one pipeline; there are six proposed pipelines to bring this to market,” said Cindy Schild, senior downstream manager for the American Petroleum Institute. Since the Alberta oil sands represent the largest source of Canada’s gross domestic product, Schild said, they are “not going to sit in the ground. They’re going to get it out.”

The public now has  until March 7 to comment; federal agencies have up to three months to weigh in. The public also will be able to comment on the “national interest” question, both in writing and through one possible public hearing requested by project foes.

Separately, the integrity of the environmental review itself is under question, as the State Department’s inspector general probes whether the company contracted to perform the analysis misrepresented its past work on other projects for TransCanada. That inquiry is on track to be released next month, and a negative finding could prompt calls for the study to be redone.

Five years of scrutiny

TransCanada first sought approval to build Keystone XL in September 2008, but the Calgary-based company submitted a new application in May 2012, after revising Keystone XL’s route to avoid environmentally sensitive areas in Nebraska.

The project would transport 900,000 barrels a day of crude from Alberta, Canada to the oil hub in Cushing, Okla, where it would connect with TransCanada’s just-launched Gulf Coast line.

Well outside of the nation’s capital, Keystone XL faces big logistical hurdles. Landowners in Keystone XL’s path are refusing to sign easments allowing TransCanada to bury the pipeline on their property.

The same environmentalists who protested at Gulf Coast line construction sites in Texas are vowing to put their bodies in the pipeline’s path again in acts of civil disobedience.

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