The Latest in the Keystone XL Pipeline Saga

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    Jan 19, 2012

    On January 18, 2012, the Obama administration officially denied the TransCanada application for a Presidential Permit for a 1,700-mile-long pipeline, known as Keystone XL, which would bring approximately 800,000 barrels of oil per day from the Canadian oil sands to the U.S. Gulf Coast. The White House and Department of State press releases and statements make it clear that from their vantage point the decision to deny the permit was not based on the merits of the project but was forced on them by “the rushed and arbitrary deadline insisted on by Congressional Republicans,” which “prevented a full assessment of the pipeline’s impact, especially the health and safety of the American people, as well as our environment.” Proponents of the project reject this line of reasoning citing the nearly three years of investigation into the environmental and economic consequences of the pipeline that preceded this decision.

    In November 2011, coming into the final phases of the Presidential Permit process and ostensibly on the cusp of making a decision, the Obama administration extended its timeline for considering the permit application until 2013, when questions arose about the environmental integrity of the pipeline through the environmentally sensitive region of the Nebraska Sand Hills, causing the Nebraska state legislature and governor to insist on an alternative pipeline route. The Obama administration announcement to delay its decision was construed at least partially as politically motivated given the intense opposition to the pipeline from environmental groups. In response, congressional Republicans sought and passed legislative measures (then signed into law in December as part of the payroll tax cut extension) to force the administration to make a decision in 60 days’ time, in an effort to move the pipeline project forward or risk the political backlash from pro-pipeline labor unions of denying the project.

    True to its word, yesterday the administration denied the permit based on the assertion that the 60-day deadline did not provide enough time to adequately review the project. In response to the decision, congressional Republicans accused the administration of killing thousands if not tens of thousands of U.S. jobs and sending secure Canadian oil to China (a presumed alternate market destination for oil sands). TransCanada pledged to resubmit an application for the pipeline and keep the production schedule on track, citing the hope for an expedited permit process on the next application. Environmental groups applauded the administration’s decision as a victory for the anti-oil sands movement.

    The main questions to follow in the coming days are mostly political. Will the administration get lasting  credit from environmental groups for denying the permit, or will plans to move forward on another permit process overshadow this momentary easing of pressure from environmental groups? Will congressional Republicans seek new legislation to push the project forward in some way, either through the previous or a future permitting process? But some questions are market oriented. Will TransCanada be able to keep in place contractual arrangements with producers, refineries, contractors, etc. to keep the project going, or does this open up opportunities for other projects to fill the gap?

    In November 2011, the CSIS Energy and National Security Program published a Commentary on the undue political attention being placed on this pipeline as a proxy for the larger energy issues being debated in the country, and we still largely stand behind that analysis. In many ways, the importance of the decision to grant or deny the permit has been blown way out of proportion. The pipeline is neither the savior of U.S. energy security nor the death knell to U.S. low-carbon energy policy. With or without the pipeline, a few basic facts remain unchanged.

    First, both the Canadian oil sands and U.S. mid-continent crude slated to flow through the pipeline will find a way to market, through alternative pipeline routes or via tanker, truck, or rail. In the near term, the transport options may be more expensive, less efficient, and less environmentally sound, but the global demand for these resources means that markets and outlets will be found.

    Second, Canadians will continue to pursue policies that improve on and expand the production of Canadian oil sands. Perhaps the most underreported aspect of this entire Keystone XL debate is all the work being done in Canada to improve the environmental impact of oil sands across the board. It is still hard to claim that oil sands are environmentally benign, but at least Canada’s government, industry, and environmentalists are working together to chart a path forward. After decades of working to create an integrated energy market between the United States and Canada, our neighbors to the north have every right to start questioning the stability and continuity of the United States as a market for their energy products.

    Third, denial or approval of the Keystone XL Pipeline will not bring the United States any closer to discovering real answers about how to pursue a lower-carbon pathway in this country. Many in the environmental community argue that we should be investing more in alternatives to oil, and they are right. But in the absence of coordinated U.S. policy to do this on a more expedited basis, it is nearly impossible to force that kind of a transition by stopping oil production one pipeline at a time. U.S. policymakers should not be let off the hook on this larger policy question by placing disproportionate focus on a single pipeline debate.

    Unfortunately this is not the last of the Keystone XL Pipeline saga. When and if TransCanada resubmits its application for a Presidential Permit, one can expect an equally political and contentious debate to resume.

    Sarah O. Ladislaw is a senior fellow with the Energy and National Security Program at the Center for Strategic and International Studies in Washington, D.C.

    Commentaries are produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

    © 2012 by the Center for Strategic and International Studies. All rights reserved.

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Sarah O. Ladislaw