This story has been updated.
In an Oval Office ceremony after pushing through the approval of TransCanada’s controversial Keystone XL tar sands pipeline, President Trump asked the company chief executive Russ Girling when work would start.
The answer wasn’t that simple.
TransCanada still needs to win the approval of state regulators. This week they got a taste of how difficult that could be as the Public Service Commission kicked off public hearings in Nebraska, the state where opposition to the $8 billion pipeline project has been strongest.
Two days featuring TransCanada experts are to be followed by two days of experts who are opposed to the pipeline, claiming that the steel line would pose environmental dangers and arguing that there was no reason to force landowners to allow it to cross their property.
At the same time, TransCanada must find oil producers ready to fill the 830,000 barrel-a-day 36-inch diameter pipeline running from Canada’s oil sands to a pipeline nexus in southern Nebraska.
During the years of haggling between TransCanada and the Obama administration, many producers of Alberta’s thick bitumen quality oil have turned to other pipelines or rail cars. As oil prices have sagged, many companies have shelved expansion plans. Others, such as Royal Dutch Shell, which had been ready to commit to using the Keystone XL earlier, have sold their oil sands interests altogether.
Nebraska might be TransCanada’s biggest obstacle. The pipeline, first proposed more than eight years ago, has touched a populist nerve and aroused concerns that a leak could contaminate farm land and pasture, the delicate Sandhills, or water supplies.
“We still have a bunch of family farmers on the land that their ancestors homesteaded,” said Jane Kleeb, chair of the Nebraska Democratic Party and a long-time organizer of opposition to the Keystone XL .“They have a deep emotional and cultural tie to the land and feel a responsibility that they must protect it.”
Many farmers and ranchers are angered by the idea of a foreign pipeline company using eminent domain, which the 2016 Republican Party platform criticized, to force them into letting large construction equipment plow a 50-foot-wide right of way to bury the pipeline about four feet below the surface.
Analysts said the regulatory process could still last another six months to a year.
The first days of the PSC hearings featured David Domina, a lawyer representing landowners, who led the cross examination of TransCanada experts. He sought to discredit Creighton University economist Ernie Goss, whose work on the pipeline was not peer reviewed, and he got a TransCanada environmental specialist, Sandra Barnett, to concede that the pipeline could contribute to soil erosion or contamination.
“It is critical for our side to show that TransCanada is not a company that can be trusted and whose information cannot be trusted,” said Kleeb.
Pipeline opponents plan to feature landowners, a whooping crane expert and experts on the Ponca tribe, which might have left undiscovered artifacts along the pipeline route.
Foes of the pipeline aren’t restricting their efforts to the PSC hearing room.
About a week before the hearings began, Keystone opponents had erected a set of solar panels in a cornfield along the route of the proposed pipeline. They dubbed it Solar XL. The landowners Jim and Chris Carlson had rejected a $307,000 offer from the pipeline company for right of way to lay down the pipeline, organizers said.
The organizers have a crowd sourcing page which as of Monday evening had raised $41,506.79 with a goal of $51,200. One long-time opponent of the pipeline, Jim Knopik, has launched his own rural solar installation business dubbed North Star Solar Bears.
The outcome of the PSC vote is not a sure thing. When Girling told Trump in the Oval Office that the company needed permits in Nebraska, the president said he would phone the governor, Pete Ricketts, and iron things out.
But the five-member PSC is an independent agency whose commissioners run for election every six years. Created to regulate railroads more than a century ago, the commission now oversees transmission lines, telecommunications carriers, grain warehouses, private water company rates and makers of modular homes and recreational vehicles.
Democrat Crystal Rhoades and independent-minded Republican Mary Ridder are the most likely to vote against the pipeline. Ridder is a rancher from the Sandhills, a region of grass prairie and sand dunes in north-central Nebraska covering just over one quarter of the state.
Although many pipeline opponents have tried to highlight pipeline dangers, Rhoades said in an email that “Safety isn't something the Commission is permitted to consider under the law passed by the legislature.” She said that the commission "can consider economic impacts, including loss of jobs to common carriers currently transporting tar sands or losses to green job growth or loss of land values and loss of tax revenue. We can also consider the fragility and permeability of the soil, the impact on endangered species, and threats to Native American burial sites and disruption of other cultural sites. We can consider input of the public.”
The swing vote will likely be Frank E. Landis, Jr., a lawyer and a Republican member since 1988 from a relatively progressive area of Lincoln, who has shown interest in the terms and need for new easements. Many pipeline foes have argued that TransCanada should have used the same route as an earlier Keystone pipeline.
After all that, TransCanada could still walk away from the pipeline if it can’t get enough customers to commit to 20-year contracts.
In announcing its second quarter earnings, the TransCanada conceded that some of its “core” oil shippers had reduced commitments, but the company added that it had picked up other customers.
Those customers could send oil from Hardisty, Alberta to Steele City, Neb., a tiny town that links to TransCanada’s existing network. That leads to Cushing, Okla., a major storage and pipeline hub, or all the way to the Gulf Coast through other TransCanada pipelines.
On July 22, TransCanada formally declared an “open season” to woo producers; the period will close Sept. 28.
“We continue to believe the U.S. coast is the largest and most attractive market for growing volumes of Canadian heavy oil,” Girling told analysts on July 23. “We also believe the Keystone XL is the safest, most efficient and more environmentally sound way to move that crude oil from western Canada to the U.S. Gulf Coast. This project will enhance U.S. energy security, create significant employment for many U.S. citizens as well as generate significant cash revenues.”
Despite relatively modest oil prices, industry trends are leaning in TransCanada’s direction. Platts Analytics, a forecasting and analytics unit of S&P Global Platts, estimates that marketable crude oil from western Canada is expected to average 5.4 million barrels a day in 2021, more than 1 million barrels a day above 2017 output. That is a combination of oil sands but also more conventional and shale oil production in Alberta.
Platts said that in 2016 an average of two to three trainloads a day carried crude from the oil sands due to lack of pipeline space. Without any new pipelines, that would rise to four to five trains a by 2019. In 2020 an expansion of Kinder Morgan’s Trans Mountain pipeline will help, but the need for rail would remain.
In 2021, Platts said, both TransCanada’s Keystone XL, and Energy East pipelines will come online. But uncertainty around Energy East makes Keystone XL still an appealing alternative for oil producers.
That’s why eyes have turned to Nebraska. South Dakota says its earlier approval of the Keystone XL project stands. Opponents have gone to court and lost, while Montana’s public service commission is gave a green light to TransCanada.
Even before the hearings started, both sides had submitted extensive materials and county boards of supervisors voted resolutions. One report said that property values would not be reduced. It said that there aren’t any existing residential structures in the 50-foot right of way and only 22 homes within 500 feet of the pipeline.
Steele City’s local leaders urged approval saying “just as important as the safety and environmental aspects of this project are, the economic benefits are just as critical.” The city of Seward applauded company’s change in route around a wellhead protection area.
But holdouts remained. The supervisors of Boyd County, on the northern border of Nebraska, voted unanimously on May 23 to oppose the line “unless there would be substantial compensation to the county.”
At a meeting of the Holt County supervisors, board chairman William Tielke “suggested a motion that Holt County is not opposed to pipelines but is concerned with the tar sands being pumped through Holt County,” according to notes submitted to the PSC. Afterwards, the board voted unanimously “to oppose all crude oil and or tar sand pipelines.”