Keystone XL Pipeline May Be Dead, At Least For Now

Rather than risk rejection by the President Obama, TransCanada Corp. has chosen to ask Washington to suspend its application to build the proposed Keystone XL pipeline through the United States and hope for a better reception from the next administration.

The venture has been touted for years as a significant benefit for the U.S. economy and its energy independence, though critics say few jobs will be forthcoming once the conduit has been built. Further, they argue, Keystone will also add more oil, and its pollutants, to the world's supply at a time when most countries are trying to limit greenhouse gas emissions.

The State Department, which decides whether to approve such cross-border enterprises, said that on Nov. 2 it received a letter from TransCanada. The company asked that its application, which is currently under review in Nebraska, be suspended. That process is expected to last as long as one year.

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"In order to allow time for certainty regarding the Nebraska route, TransCanada requests that the State Department pause in its review of the presidential permit application," the letter said. The agency reportedly was in the final stages of its review and now must decide whether to agree to the company's request or move ahead with its review and issue a decision.

Obama has said he expects to issue his final decision on Keystone before he leaves office in January 2017, and TransCanada evidently is concerned that he will reject the pipeline, given his growing skepticism about its purported value. The company also has lost its most important domestic ally in the Keystone effort, Conservative Stephen Harper, who was ousted last month as Canada's prime minister.

Harper's successor, Liberal Justin Trudeau, has offered tepid backing of the project, but also stresses that the pipeline project, which would be the conduit for Canadian oil sands, would be managed in an environmentally responsible way.

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Presumably TransCanada is betting that Obama will be succeeded in the White House by a Republican. All the candidates for that party's nomination in the 2016 election say they support Keystone XL. All the candidates for the Democratic presidential nomination say they oppose it.

Shortly before TransCanada's request was made public, White House Press Secretary Josh Earnest was asked, as he often is, about when Obama may issue his decision. He replied, "The president will make a decision before the end of his administration on the Keystone pipeline, but when exactly that will be, I don't know at this point."

TransCanada President and CEO Russ Girling said this wouldn't be the first time the State Department had permitted a suspension. "I note that when the status of the Nebraska pipeline route was challenged last year, the State Department found it appropriate to suspend its review until that dispute was resolved," he said in a statement. "We feel … a similar suspension would be appropriate."

Environmentalists argued that TransCanada's request was a blatant attempt to dodge what they believe was Obama's likely rejection of Keystone. They contended that any dispute over the pipeline's path through Nebraska wouldn't change in impact of the pipeline on the environment.

"Pause or no pause, we now know more than enough to do the right thing - reject the pipeline because it will worsen climate change," Anthony Swift, the director of the Canada Project of the National Resources Defense Council, said in a statement. "Altering its route through Nebraska isn't going to change that. Keystone XL isn't in the national interest, and the president should reject it."

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The pipeline would begin in Alberta and run south on a 1,700-mile course through six U.S. states. It would have the capacity to carry 830,000 barrels of oil a day to refineries on the coast of the Gulf of Mexico. Up to 100,000 barrels of the oil it would move would be from producers in North Dakota.

TransCanada began its effort to build the pipeline through the United States in 2008. Since then it has faced difficulties, not only from opponents in Washington but also landowners and environmentalists in Nebraska, whose concerns have delayed passage permits.

So far, the company has spent at least $2.5 billion on Keystone XL. If it ever gets final approval, the initial cost estimate of $8 billion is expected to rise to $10 billion or more.

By Andy Tully of Oilprice.com

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