America / Dpt. of State / Energy / Gov. Officials / Politics / Presidency / Regulation

Keystone Rejection: Goodbye Jobs, Energy, and Revenue

Last Wednesday, President Obama announced that he had rejected TransCanada Corp.’s request for a permit to construct the Keystone XL pipeline.

TransCanada was prepared to fund the highly publicized project that would consist of a crude oil pipeline extending from an oil supply hub, at the tar sands oil fields of Alberta, Canada, all the way down to the Texas Gulf Coast, with delivery points in both Oklahoma and Texas.

TransCanada took its first steps towards construction in 2008 when it filed an application for a Presidential Permit with the Department of State to build and operate the Keystone XL Project. The stats said the pipeline would be capable of transporting up to 830,000 barrels per day and, if its construction went through without any major delays, cost the company $7 billion and begin operating as early as 2013.

Whenever a proposed pipeline project crosses an international border Executive Order 13337 (Issuance of Permits With Respect to Certain Energy-Related Facilities and Land Transportation Crossings on the International Boundaries of the United States) directs the State Department to review the application and determine whether it is proper to grant the necessary Presidential Permit. The Presidential Permit review process requires the State Department to prepare an Environmental Impact Statement (EIS) in accordance with the National Environmental Policy Act (NEPA). It also directs the Secretary of State, or her designee, to consult with at least eight other federal agencies, and issue a decision as to the nation’s interest in project.

In 2011 pressure on TransCanada really started to heat up. The State of Nebraska and other state and federal environmental organizations began voicing their concerns about the pipeline’s potential environmental impacts on Nebraska’s Sand Hills region, which contains numerous wetlands of special concern, a sensitive ecosystem, and significant areas of shallow groundwater. National and international environmental organizations also became extremely critical of the environmental impact of the tar sands oil extraction process, pointing out that it will require large amounts of water and will result in carbon dioxide emissions.

Pipeline supporters, on the other hand, have pointed out that the extension would only add slightly over 1% to the total petroleum pipeline networks in the U.S. and Canada; the pipelines are much safer transport modes than truck, train, or tanker ship; and worst-case estimates show that the extension would only add negligible amounts of carbon dioxide into the atmosphere. Further, supporters point out that if Canada doesn’t sell that oil to the U.S. through the Keystone XL extension, it will sell it to Asian nations (including China) instead, resulting in greater risk of spills in transport and greater carbon dioxide emissions from less efficient and less regulated uses in those countries. Also, supporters explain how the 1,700-mile pipeline will enhance U.S. energy security and provide thousands of direct and indirect jobs, millions of barrels of oil, and billions of dollars to the American economy.

TransCanada took all the feedback it received during that time and responded to the concerns about a potential oil spill in the Nebraska Sand Hills Region, which if it occurred, could contaminate a large subterranean aquifer, by greatly increasing their safety measures in that geographic area.

On August 26, 2011, after 2 ½ years, the U.S. Department of State issued the Final Environmental Impact Statement (EIS) for the proposed Keystone XL oil pipeline. The rigorous study showed that the Keystone XL pipeline would not pose any undue risks to people or the environment – neither by the type of crude it would be carrying, nor by the safety of the pipeline itself. The issuance of the “Final” EIS was, however, just one step in the review process, and did not represent a final decision on TransCanada’s permit application.

Following the release of the EIS, a review period began to determine whether the project is in the nation’s best interest. According to the State Department, “This broader evaluation of the application extends beyond environmental impact, taking into account economic, energy security, foreign policy, and other relevant issues. During this time the Department will consult with, at least, the eight agencies identified in the Executive Order to obtain their views. The Department will also solicit public comments, both online and in public meetings in the six states the proposed project would traverse and in Washington, DC.”

The issuance of the positive EIS only increased the furor of the environmentalists pushing for permit delays. On November 10th, 2011 the Department of State, headed by Hillary Clinton, responded to this political pressure by throwing the project its first serious blow: the State would delay its decision on the permit until 2013. This would give the Department extra time to publish a Supplemental EIS considering an alternate route through Nebraska (in response to the concerns of the Nebraska and environmentalists).

Steven Paget, an analyst with First Energy Capital, estimated that if the delay were to take approximately 18 months, it would likely cost TransCanada an additional billion dollars. TransCanada had already invested $1.9 billion into the project at that point.

Despite this additional expense, TransCanada pushed forward and quickly announced the agreement it had come to with the State of Nebraska on a new alternative route, along with a plan to expedite the environmental review process. The State Department ignored the accomplishments TransCanada had made in its agreement with Nebraska and insisted that it would not speed up the process and its decision would be released in the first quarter of 2013.

The political response surrounding the Keystone pipeline changed quickly when, in mid-December 2011, Republican leaders came out stating they would not support an extension of the soon-to-expire Bush era payroll tax cuts unless the bill included language on speeding up work on the pipeline.

A House-passed version of the payroll tax bill mandated that President Barack Obama would have 60 days to decide whether the proposed, 1,700-mile Keystone XL pipeline was in the national interest or risk the Republicans ending the payroll tax cut extension.

When Obama issued his decision on January 18th, well in advance of his 60 day deadline, he adopted a “blame anyone except for himself” attitude.  “I’m disappointed that Republicans in Congress forced this decision,” Obama said on Wednesday. The President failed to mention that this pipeline had already been under consideration for well over 1200 days, and that the legislative decision mandating an up or down decision afforded him additional time to determine an appropriate route through Nebraska. Any attempt to blame the limited time frame created by conservatives was hollow.

Sadly, it is not only TransCanada who will be hurt by this illogical decision, but Americans too. We must now say goodbye to enormous amount of jobs, energy, and revenue which are greatly needed in these bleak economic times because government bureaucracy, with regards to this decision, operated at its finest.

2 thoughts on “Keystone Rejection: Goodbye Jobs, Energy, and Revenue

  1. What about the potential contamination of the Ogallala aquifer if, in fact, the pipeline were built? The pipeline would run 4 feet below the Ogallala aquifer, which supplies 1/3 of water to the United States, and is therefore responsible for the gross majority of US & world wheat production. If this pipeline were to burst, thousands of gallons of oil would inject in to this water source simply by the pressure of explosion (watch the video of the BP pipeline exploding underwater). This contamination would make this water unsuitable for food production, and therefore completely cripple US food supply and directly slice US GDP production. Even though is a hypothetical pipeline could hypothetically never spill, the last “state of the art” pipeline in the US spilled >5 times in the first year. If even one of these contamination problems happened, wouldn’t that cut this off as a viable water source for food production? Wouldn’t you rather have food? What about the children?

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