The U.S. Department of State announced Thursday afternoon that it will postpone making a decision on whether TransCanada's proposed Keystone XL Pipeline project is in the national interest until at least early 2013.
Under Executive Order 13337, the State Department can issue Presidential Permits for transborder pipelines projects that it deems are in the national interest. The department has led what it calls a "transparent, thorough and rigorous" review of TransCanda's permit application for the Keystone XL project, and the executive order directs the secretary of state or a designee to consult with at least eight other federal agencies. The pipeline would carry crude oil approximately 1,661 miles from Alberta's Oil Sands to refineries along the Texas Gulf Coast.
This past summer, the State Department issued its Final Environmental Impact Statement (EIS) for the project under the National Environment Policy Act (NEPA). The agency found that the 36-inch-diameter pipeline would pose "no significant impacts" to most resources along the proposed route. Prior to Thursday's decision to delay making the national interest determination, the State Department accepted public comments during a 90-day review period. Click here for a timeline showing the agency's role in the permit review process.
Proponents of the project, including a broad coalition of business and labor interests, touted its benefits in terms of job creation and energy security. According to some estimates, the project could generate more than 20,000 jobs. In addition, it would provide a conduit for refiners to receive crude oil from a close U.S. ally.
Opponents ranging from environmental groups to celebrities to Republican elected officials in Nebraska argued, among other things, that the pipeline would carry "dirty oil" (actually diluted bitumen, or "dilbit") from the Oil Sands that would threaten the environment. In the case of Nebraska, the opposition stemmed largely from fears that pipeline leaks would threaten the Ogallala Aquifer—an important groundwater source for much of the Great Plains region. Earlier this month, Nebraska's governor called a special session of the state's unicameral legislature to review the options it had to influence TransCanada to re-route the pipeline around the Sand Hills area above which the aquifer lies.
Citing the "concentration of concerns regarding the environmental sensitivities of the current proposed route" through the Sand Hills, the State Department said that it will now conduct an "in-depth assessment" of other routes that the pipeline could take in Nebraska. The agency also said that the lack of a legal or regulatory framework in Nebraska enabling state or local authorities to determine where a pipeline goes justifies its decision to postpone making a national interest call.
"Based on the Department's experience with pipeline project reviews and the time typically required for environmental reviews of similar scope by other agencies, it is reasonable to expect that this process including a public comment period on a supplement to the final EIS consistent with NEPA could be completed as early as the first quarter of 2013," the federal agency stated Thursday.
A Sampling of Responses
The response from project supporters and opponents was predictable.
In a public statement, TransCanada said that it will work with the State Department on new route options and remains optimistic that the project ultimately will be approved.
"This project is too important to the U.S. economy, the Canadian economy and the national interest of the United States for it not to proceed," said Russ Girling, TransCanada's president and chief executive officer. He cautioned, however, that the delay could hurt industry players both in Western Canada and the U.S. Gulf Coast.
"Supplies of heavy crude from Venezuela and Mexico to U.S. refineries will soon end," Girling continued. "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."
Another project backer, the National Petrochemical & Refiners Association (NPRA), fretted about the decision's impact on employment and energy security.
The decision "will strike a blow against American workers who need jobs, against American consumers who need energy, and against America's economic and national security," said NPRA President Charles T. Drevna. "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 employers."
Also criticizing the decision was the American Petroleum Institute (API), which called the move "deeply disappointing and troubling." According to API, a recent poll found that nearly 80 percent of Americans favor receiving greater supplies of oil from Canada.
"Whether it will help the president retain his job is unclear, but it will cost thousands of shovel-ready opportunities for American workers," API President and CEO Jack Gerard noted. "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 three 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."
On the other side of the issue, project opponent the Sierra Club was pleased with the decision.
“Today's announcement is a death knell for the Keystone XL tar sand pipeline and lands a considerable blow to Big Oil, their lobbyists, and their campaign of lies to keep Americans addicted to oil," stated Michael Brune, Executive Director of the Sierra Club. Brune said that the organization believes that the additional review of what it calls the "true costs of this dirty project" will persuade the State Department to "reject this pipeline."
An ABC television affiliate in Lincoln, Nebraska, quotes Gov. Dave Heinemann as calling the delay "'an exceptional moment for Nebraskans'" and proof that federal officials listened to pleas from him and other Nebraska officials opposed to the current route through the state.
The postponement of a Keystone XL decision until after the next election could also provide a political victory for President Obama with his base of supporters who are often against the growth of the oil and gas industry.
"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.
Interestingly, despite the extensive public scrutiny the project has undergone to date, Obama added that 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."
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