March 24, 2017 at 1:10 PM
President Trump announced Friday morning the granting of a permit for construction of the controversial Keystone XL pipeline, calling it "the first of many infrastructure projects" that he would approve in order to put more Americans to work.
Trump said that "government too often failed its citizens and companies over the past long period of time. Today we begin to make things right." The $8 billion project would span 1,200 miles, connecting Alberta's massive tar sands crude with pipelines and refineries on the Texas gulf coast that are particularly well-suited to handling the thick oil.
TransCanada, the Calgary-based firm that has been trying to win approval for the pipeline for nearly 10 years, announced earlier Friday morning that the State Department has signed and issued a construction permit for the project.
"This is a significant milestone for the Keystone XL project," Russ Girling, TransCanada's president and chief executive, said in a video release early Friday. "We greatly appreciate President Trump's administration for reviewing and approving this important initiative, and we look forward to working with them as we continue to invest in and strengthen North America's energy infrastructure."
As a result of the approval, TransCanada will drop an arbitration claim it filed for $15 billion in damages under the North American Free Trade Agreement. And Trump made no mention of using U.S. steel, as he earlier said would be required of any new pipeline. TransCanada purchased steel pipe about four years ago, only half coming from U.S. mills. The White House said earlier this month that the requirement would be waived for the Keystone XL.
On Friday, Girling and the president of the North America's Building Trades Unions Sean McGarvey stood on either side of Trump, who made the announcement from his desk in the Oval Office
The move comes two months after Trump, only days into his presidency, signed an executive order aimed at reviving the Keystone XL and Dakota Access pipelines. Both projects had drawn massive protests and had been stalled by the Obama administration.
Although Trump has spoken frequently about the need to spur job development in the United States, the project marks one of the first concrete steps his administration has taken to set aside environmental considerations to foster economic growth.
In a statement Friday, the State Department said that in reviewing TransCanada's application in light of Trump's recent executive order, officials determined that issuing a permit "would serve the national interest." It said the undersecretary who signed the permit, Thomas A. Shannon Jr., had "considered a range of factors, including but not limited to foreign policy; energy security; environmental, cultural and economic impact; and compliance with applicable law and policy."
Secretary of State Rex Tillerson, the former chief executive of ExxonMobil, had recused himself from the decision.
The State Department, as instructed in Trump's presidential memorandum of Jan. 24, relied on the supplemental environmental impact statement issued in January 2014. In that analysis, the State Department, which oversees applications for cross-border pipelines, had concluded that the tar sands would be developed with or without the pipeline and that as a result the decision would not affect climate change. The department said Friday that "there are no substantial changes or significant new information which affect the continued reliability" of that report.
In halting the Keystone construction in late 2015, Obama argued that the project would contribute to climate change because it would carry tar sands crude oil, which is especially greenhouse-gas intensive because of the energy required to extract the thick crude. And on the eve of the international climate talks in Paris, Obama said that rejecting the pipeline would bolster U.S. credibility and leadership at the talks.
"America's now a global leader when it comes to taking serious action to fight climate change," Obama said in November 2015. "And frankly, approving this project would have undercut that global leadership. And that's the biggest risk we face — not acting."
TransCanada had said it would be interested in reviving the pipeline, which would carry up to 830,000 barrels of crude oil a day, but those plans looked tenuous until Trump took office.
Construction will not start just yet, the company said. It still needs a permit from Nebraska's Public Service Commission.
The company last month filed for the Nebraska PSC permit, which is necessary for construction and in cases in which the company resorts to using eminent domain because landowners refuse to let construction take place. TransCanada has said that it has agreements covering 90 percent of the route in each of the three states the pipeline will cross.
At the Oval Office Friday, Trump seemed surprised that TransCanada still needed the state's approval. Trump said "I'll call Nebraska." He praised Nebraska's governor Pete Ricketts (R) and said he would call Ricketts today. Ricketts, however, does not participate in the decision of the PSC, which has five commissioners.
"He is so arrogant to think that a phone call to Gov. Ricketts … would somehow grant and greenlight this project in this state," said Jane Kleeb, president of Bold Alliance and a founder of Bold Nebraska, a group of farmers and ranchers opposed to the pipeline. "Newsflash to President Trump – Gov. Ricketts actually has no role."
The pipeline also traverses Montana and South Dakota. In Nebraska, it would connect with other pipelines linked to oil refineries along the Texas Gulf Coast.
Five years ago, the Keystone XL project faced stiff opposition from Nebraska landowners and environmentalists, many of them worried about potential damage to the state's massive Ogallala water aquifer and fragile Sand Hills region. In response, the company moved the pipeline's path farther east. But even that route is sure to face resistance.
In its statement Friday, the company said it "will continue to engage key stakeholders and neighbors throughout Nebraska, Montana and South Dakota to obtain the necessary permits and approvals to advance this project to construction."
The project's supporters and detractors immediately weighed in, promising to continue the fight over the pipeline on many different fronts.
"This project will not get built," said Michael Brune, executive director of the Sierra Club. "We will defeat this pipeline in the courts and in the court of public opinion."
Thomas Donohue, president of the U.S. Chamber of Commerce, called the pipeline's approval "long deserved."
"This pipeline, and countless other projects around the nation, will improve America's energy security, create jobs and help get the economy back on track," he said in a statement.
Even if the permits can be obtained in a few months to a year, construction of the pipeline would probably not be completed until mid-2019, according to Platts Analytics, a part of S&PGlobal;.
The firm said that a combination of rising output of oil sands crude and conventional crude would bring western Canadian production up to 5.4 million barrels a day by 2021, about 1 million barrels a day more than current output. In 2016, an average of two to three trains a day were used to carry oil out of the region due to a lack of pipeline capacity, Platts Analytics said.
In 2020, Kinder Morgan's expansion of its Trans Mountain pipeline will siphon off some of that rail needs, but the firm said there would still be demand for the Keystone XL.
Investors seemed to agree. On Friday at 11:20 am, TransCanada's shares were up about 1.25 percent, slightly outstripping the overall market.
Juliet Eilperin contributed to this report.
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