The Keystone XL pipeline, already one of the most politicized and delayed pipelines in history, has hit another roadblock.
On April 18, the Obama administration announced that it would delay its decision on whether to approve the US-Canada pipeline indefinitely until ongoing litigation in Nebraska that could affect the route of the pipeline is settled. TransCanada, the company behind Keystone XL, saw its share price sink 3.7 percent after news of the decision broke.
Three landowners along the proposed Keystone XL route are challenging a Nebraska state law that gave Governor Dave Heineman the power to approve the route against their wishes. In February, a lower court sided with the plaintiffs, ruling that the law was unconstitutional. The judge said that the power rested in the hands of the Nebraska Public Service Commission, a body established in 1885 to take politics out of railroad-related decisions.
The state is challenging the ruling, which has landed the case in front of the Nebraska Supreme Court. The Court is not expected to hear the case until September or October and its decision could come months later. If the ruling is overturned, the issue will end up back in policy limbo at the U.S. State Department. If upheld, jurisdiction will be ceded to the Public Service Commission, and the State of Nebraska may take the case to the U.S. Supreme Court.
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The 1,700-mile pipeline is intended to transport 830,000 barrels of crude oil per day from the Albertan oilsands to Gulf Coast refiners. TransCanada has already sunk more than $2 billion in preparation for the pipeline. “We are extremely disappointed and frustrated,” said TransCanada CEO Russ Girling. “Another delay is inexplicable.”
Despite ongoing delays and uncertainty, Shawn Howard, a spokesman for TransCanada, insists that demand for the project remains intact. “Energy infrastructure projects like Keystone XL are designed to meet a need -- and that need has not has changed,” Howard said.
Keystone XL is more than just a pipeline -- it’s also a political litmus test that could provide insight into the future viability of Canada-US energy trade. “This is really the only major pipeline that is increasing capacity going all the way down to the Gulf Coast. And any alternative would likely be crossing the Canadian-U.S. border, just like Keystone, so I would not anticipate a close alternative to come up unless you’re talking about shipping oil from a different region other than the oilsands,” said Lanny Pendill, an energy analyst at Edward Jones.
Opponents say that Keystone XL will increase U.S. reliance on high-carbon sources of oil. Proponents argue that it will decrease U.S. dependency on less reliable -- and less friendly -- foreign sources of oil, and avoid the risks of transporting oil by rail.
Further complicating matters, major unions are coming out in favor of the pipeline as they look to increase summer employment in the construction industry and skilled trades. This has put the Obama administration in the awkward position of seeing its political base split between anti-pipeline environmentalists and pro-pipeline labour groups.
The delays are also alienating U.S. allies in Ottawa.
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"We are disappointed that politics continue to delay a decision on Keystone XL," said a statement from Canadian Prime Minister Stephen Harper’s office. "This project will create tens of thousands of jobs on both sides of the border, will enhance the energy security of North America, has strong public support, and the U.S. State Department has, on multiple occasions, acknowledged it will be environmentally sound."
The Canadian Chamber of Commerce estimates that the Canadian economy is losing $50 million per day due to inadequate pipeline capacity.
This latest delay will push the conclusion of the Keystone XL approval process to late 2014 at best, while the worst case scenario will test the definitional limits of “indefinitely.”
By Rory Johnston of Oilprice.com