Keystone XL oil pipeline battle has only just begun

When it comes to the fate of the 1,700-mile Keystone XL pipeline, proponents and foes agree that the fight did not end with President Obama’s decision Wednesday to reject the pipeline’s permit application. The question is how the battle will be waged in the months to come.

A war of words is being fought on the campaign trail. And some House Republicans vow to again seek legislation to clear the path for the controversial pipeline. Environmental groups say they will fight not only new Keystone proposals but also other major oil pipelines that would carry crude from Canada’s oil sands region.

Meanwhile, TransCanada, which proposed the pipeline, said it will not only file a new permit application but also might pursue a truncated system within U.S. borders that would not require State Department approval. Such a pipeline could serve the growing output from the Bakken shale oil fields in Montana, ease the bottleneck of crude oil at the major terminal in Cushing, Okla., and later hook up with cross-border lines.

“We think that the Keystone pipeline will get built,” said Jamie Webster, a senior manager at the Washington consulting firm PFC Energy. “The caveat is that it might not be called the Keystone pipeline. The point is that there will be a way for these barrels to find a way to the United States.”

Rep. Fred Upton (R-Mich.), chairman of the House Energy and Commerce Committee, said in an interview Thursday that “we’re going to look for every opportunity to pass legislation” to ease the way for the pipeline’s construction. He said he supports a measure introduced by Rep. Lee Terry (R-Neb.) that would take the permit decision “out of the hands of the State Department” and give it to the Federal Energy Regulatory Commission.


Upton said it would be possible to again attach a Keystone provision to an extension of the payroll tax reduction, which expires in late February, though he said the GOP leadership was “just getting organized in terms of priorities we’re going to pursue.”

Other energy experts said, however, it is unlikely that the Terry bill could pass the Senate (it failed to last year) or that the Republican congressional leadership will risk a showdown over a payroll tax cut rather than simply make political use of Obama’s decision.

“There are some Republican members who really wanted to get the pipeline approved this year and thought this legislative strategy would work and they are dismayed,” said Robert McNally, an energy consultant who served on President George W. Bush’s National Economic Council. But he said there are others “who believe that the defeat on Keystone will pay dividends in the election this year.”

TransCanada and the province of Alberta took a pragmatic stance.

“There is a regulatory process in place, and we have to respect that process,” Alberta Premier Alison Redford said. “The good news is that the president said he wasn’t making a decision on the merits of the project. It does allow for reapplication.”

“There are a lot of options that are being looked at right now,” TransCanada spokesman Terry Cunha said. “At the end of the day, we’re interested in building a pipeline that will move additional crude oil into the U.S. Gulf Coast.”

Environmentalists contend that extracting oil from Alberta’s oil sands, also called “tar sands,” would accelerate global warming while posing a danger to vulnerable habitats along the pipeline route. Relying on oil from the region, as opposed to conventional crude, results in a 15 percent increase in greenhouse gases.

“By no means is this fight over, though we had a nice day yesterday,” said Melinda Pierce, deputy director of national campaigns for the Sierra Club, an advocacy group.

The Sierra Club and its allies are working to defeat a proposal floated by Obama on Wednesday that would add capacity between Cushing and refineries in Port Arthur, Tex.

At the same time, they are targeting proposals by a Canadian company, Enbridge, to reverse the flow of a pipeline that runs from Houston to Cushing and one that runs from Portland, Maine, to Sarnia, Ontario. Both changes would boost the shipment of the oil sands crude to U.S. facilities.

On Wednesday, Enbridge chief executive Pat Daniel expressed concern that the Obama administration’s decision could, by example, jeopardize his company’s Northern Gateway project, which would carry oil sands crude from Alberta into British Columbia.

“To have that project turned down for the reasons being indicated is horrible for our industry, and it’s a horrible precedent,” Daniel said at an investment conference. “It only will embolden those opposed to [the Northern Gateway project] and other new project developments.”

Indeed, 350.org, a group which mobilized more than 1,200 climate activists to get arrested in front of the White House, is now mobilizing voters in swing states.

Daniel Kessler, a 350.org spokesman, wrote in an e-mail that the group would “build an army so strong that it will not allow a national politician to set foot in a swing state without being met by hundreds of climate activists demanding that politicians ‘Make Polluters Pay’ and end taxpayer subsidies to fossil fuel companies.” He said the group planned to fight Enbridge’s Northern Gateway proposal and push television networks to ask presidential candidates “about the climate crisis.”

“Short-term the impact of Obama’s decision will not be very great,” said Robin West, president of PFC Energy, noting that oil can still be moved by truck or rail. But, he added, ”long-term, if there’s going to be this North American unconventional energy renaissance, which we think is real because the resources are there and the industry is ready to invest, the one thing that can stop it is if you can’t get the infrastructure in place.”

Steven Mufson covers energy and other financial news.
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