A year ago, the 1,700-mile, $7 billion Keystone XL pipeline, designed to export Alberta's oil sands oil to U.S. refineries on the Gulf of Mexico, seemed a slam dunk.
Approval of the Keystone XL pipeline is critical for TransCanada and the Canadian energy industry. If constructed, the three foot wide pipeline would transmit 700,000 barrels a day of hot, heavy, high-pollutant and corrosive oil sands tar bitumen from northern Alberta across the central U.S. to refineries near Houston and Port Arthur in Texas and facilities in Louisiana via a conduit whose walls would be ½ an inch thick.
But what seemed a done deal up to a few months ago is no more, and investors seeking the next safe project should look elsewhere.
Environmentalists have been up in arms against the project since its inception, with more than 1,000 demonstrators being arrested in Washington's Lafayette Square across from the White House in recent weeks, an event that has received virtually no attention from the mainstream U.S. media. Quite aside from the issue of the tar sands having a higher carbon footprint than traditional oil sources, environmentalists are concerned that leaks from the pipeline could pollute the Oglala aquifer, the water source for America's breadbasket. A further concern came when Trans-Canada applied for a waiver to run oil through the pipeline at pressures higher than those now used on oil pipelines in the U.S., resulting in a lower margin of safety, which the company has since withdrawn.
A perfect storm of unlikely allies is rising against the project, including environmentalists, stalwart Republican governors and Washington Senators. The project has acquired a Gibraltar-sized pebble in its shoe in the form of the determined opposition to the project of Nebraska Republican Governor David Heineman, a key transit state and Congressional unease continues to grow.
Even though Nebraska is one of the reddest of the Republican states, and if Governor David Heineman deploys the full arsenal of state agencies against the project, it could be mired in lawsuits for years.
Having clearly overstepped Washington lobbying "red lines," TransCanada Corp. is looking at new roadblocks for Keystone XL, including recent congressional demands for an investigation into the U.S. State Department's process for issuing permits.
On 26 October Vermont Democratic Senator Bernard Sanders wrote to the State Department, urging that no decision on the pipeline be made until the State Department's Inspector General Office investigates allegations of influence peddling inside the State Department, commenting, "On a decision of such consequences, with a project that could have a 50-year lifespan and that presents tremendous environmental and safety risks, we believe it is critical that the American people have confidence that all the facts have been presented in an objective and unbiased manner, and that the State Department and all private parties have fully complied with the letter and spirit of all federal laws and regulations."
While TransCanada might dismiss Sanders as a "maverick" politician, his letter had 13 Democratic Congressional co-signators. The Congressmen have also asked the State Department Inspector General to investigate allegations of inappropriate communications between TransCanada lobbyist Paul Elliott and State Department officials, based on e-mails released under Freedom of Information requests. TransCanada lobbyist Elliott was a deputy campaign director for Hillary Rodham Clinton, now U.S. Secretary of State, during her failed 2008 presidential race.
On 10 September a State Department staffer at U.S. Embassy in Ottawa, Marja Verloop, sent a congratulatory message to Elliott after he forwarded a news release to multiple people announcing that Democratic Senator Max Baucus from Montana endorsed the Keystone XL project, writing, "Go Paul! Baucus support holds clout."
State Department officials are also facing allegations that they hired Texas-based environmental consulting firm Cardno Entrix, to conduct an environmental analysis of Keystone XL after TransCanada itself recommended the company. In a move perhaps to be expected, Cardno Entrix subsequently supported the pipeline.
As for Nebraska, Governor Heineman is to convene a special session of the legislature on 1 November to deal with pipeline issues. In a statement Heineman noted that while he remains opposed the pipeline project in his entirety but he said in a statement: "Nebraskans are expecting our best efforts to determine if alternatives exist. Therefore, I will be calling a special session of the Nebraska Legislature to have a thoughtful and thorough public discussion about alternative solutions that could impact the route of the pipeline in a legal and constitutional manner."
Hanging tough, on 3 October TransCanada company spokesman Terry Cunha said in an e-mailed statement, "Mr. Elliott was and is simply doing his job - no laws have been broken. His role is very similar to the job the over 60 registered D.C. lobbyists for 10 environmental groups perform" before adding that "it's absurd to suggest that any one person might influence a process" that includes 10 federal agencies and "a myriad of local governments." Elliott is also standing his ground, stating in an interview, "There's nothing illegal here. There's no wrongdoing. Supposedly, these emails are supposed to show I was having undue influence on Secretary Clinton. And I don't know that they've established that."
But the TransCanada oil slick now appears even to be lapping at the White House. On 24 October the White House hired veteran Democratic attorney Broderick Johnson to serve as senior adviser to the President's 2012 reelection team. Johnson previously worked for the powerhouse lobbying firm Bryan Cave LLP, where he represented a number of high-profile clients, including FedEx, Comcast, Microsoft, and TransCanada, according to Federal lobbyist disclosure records. Not surprisingly, TransCanada denied that Johnson personally lobbied in favor of the Keystone XL pipeline.
In an effort to stampede Washington into rubberstamping the project, on 28 October Canadian Natural Resources Minister Joe Oliver told journalists that, "If they (the U.S.) don't want our oil... it is obvious we are going to export it elsewhere. As a broad strategic objective we have to diversify our customer base... China has emerged as the largest consumer of energy in the world, so it is utterly obvious what we must do. They are hungry for our resources..."
Canada remains the largest supplier of U.S. oil imports - according to the U.S. Energy Administration, of the U.S. oil imports averaging 9,033 thousand barrels per day (tbpd), Canada supplies 2,666 tbpd, just under 30 percent.
The question now in Washington now is whether it wants to augment that with 700,000 bpd of imports that will generate bipartisan lawsuits for years to come. If the upsurge in opposition to Keystone XL continues, the answer is much less certain even a month ago, when Verloop was congratulating former Clinton staffer Elliot on his Beltway clout even as the White House maintains a studied silence on Johnson's previous employment.
The BP Gulf of Mexico oil disaster last year swamped the White House in recriminations, and it's increasingly unclear if the Obama administration wants yet more environmental static less than a year before the upcoming Presidential elections.
By. Dr. John C.K. Daly of Oilprice.com