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Oil prices and politics blur future of Keystone XL pipeline

Oil prices and politics blur future of Keystone XL pipeline
President Obama at the TransCanada Stillwater Pipe Yard in Cushing, Okla., in 2012. (Pablo Martinez Monsivais / Associated Press)

Remember the Keystone XL pipeline?

It began as a proposed piece of energy infrastructure — a pipeline shortcut that would transport more than 800,000 barrels of crude oil a day from the tar sands of Alberta, Canada, across the U.S. border, through the upper Great Plains and south to refineries in Texas.

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But Keystone XL quickly became a symbol, a political litmus test and a line in the sand. Opponents said rejecting it would also reject the fossil-fueled past and present in favor of a renewable-energy future. Supporters said it would generate thousands of jobs and help provide national energy security at a time of international turmoil.

The truth was more complicated, but neither side gave ground. The Obama administration, which has ultimate authority because the pipeline would cross an international boundary, was expected to approve or disapprove it at any moment.

Of course, that was long ago — back when oil prices were soaring, Hillary Rodham Clinton was secretary of State, the company that wants to build the pipeline had not yet realized the strength of the opposition from some Nebraska landowners, and President Obama was worrying more about reelection than reaching a global climate agreement during upcoming talks in Paris.

Years later, Obama still has not made a decision on Keystone XL. He could do so any day — or he could leave the issue to whoever wins the presidency in 2016.

What has changed since the pipeline was conceived?

The price of oil, which had exceeded $100 a barrel in recent years, has fallen below $50. Low prices have affected production in many places in North America, including Alberta, where tens of thousands of jobs have been lost in recent months, oil rig activity has declined by at least half in the first seven months of the year, and corporate profits are expected to be half of what they were last year, according to provincial economic forecasts.

Have Canadian politics shifted too?

Yes. Alberta's premier, Rachel Notley, a liberal elected this spring, has initiated a review of whether oil companies contribute enough royalties to the province. Notley also says the oil industry needs to improve environmental protections — a notable assertion in a province that is running a multibillion-dollar deficit in part because of its heavy dependence on the struggling industry. And she says she would rather see Alberta oil refined within Canada instead of transported through the United States.

Is anything likely to change after Monday's elections in Canada?

Canadian Prime Minister Stephen Harper, a conservative, has been a steadfast supporter of Keystone XL, but was considered highly vulnerable. Election night projections showed him losing to his leading opponent, Justin Trudeau of the Liberal Party.

Trudeau, son of the late Prime Minister Pierre Trudeau, supports the project but promises closer environmental oversight, including finding ways to reduce greenhouse gas emissions. Trudeau has accused Harper of damaging Canadian-U.S. relations by focusing too much on the pipeline. The Canadian Broadcasting Corp. projected that Trudeau would lead a majority government.

A third candidate, Tom Mulcair of the New Democrats, says he opposes the pipeline, in part because it would provide jobs in America, not Canada.

Has anything changed with TransCanada, the company that has been trying to build Keystone XL for a decade?

Although TransCanada says the near-term economic situation has not affected its ambitions, the company did recently change tactics.

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Faced with legal challenges in Nebraska to a state law that allowed the company to establish a pipeline route and take property by eminent domain, TransCanada decided last month not to use that law. Instead, it will apply for a permit through a more traditional process with the Nebraska Public Service Commission.

Although the commission could take a year to make a decision — and more lawsuits could follow — Mark Cooper, a spokesman for TransCanada, said, "This is the most strategic way to move forward."

Why did TransCanada back down?

Perhaps because it fears the Obama administration will reject Keystone XL. Creating a delay of its own might persuade the president to leave the decision to the next administration. (Even if Obama rejects the pipeline, however, the company could reapply.)

Cooper said TransCanada's "focus is not on political machinations."

"If the project is judged on its merits, it'll be approved," Cooper said. "If it's judged on science over symbolism, it'll be approved."

What are American politicians saying?

The leading Republican presidential candidates support Keystone XL. (Some of them also deny that climate change is real.) They have criticized the Obama administration for delaying its decision.

The leading Democratic candidates oppose the pipeline. Even Clinton, who as secretary of State said she was "inclined" to approve it, now opposes it.

"I oppose it because I don't think it's in the best interest of what we need to do to combat climate change," Clinton said last month in Iowa. She waited so long to express her opposition, she said, out of respect for the Obama administration, which she had expected to decide earlier.

What will Obama do?

Although the State Department is responsible for reviewing the project to determine whether it is "in the national interest," Obama has made clear that he will make the final decision. There is a growing sense that he will reject Keystone XL.

Obama said in 2013 that he would not want the project to significantly increase greenhouse gas emissions. This year, a top official in the Environmental Protection Agency told the State Department in a letter that tar sands crude "represents a significant increase in greenhouse gas emissions" over conventional crude, and that Keystone XL could lead to expanded production of greenhouse gases. The EPA letter was seen as providing potential cover for the president to reject Keystone XL.

With Obama's recent moves to reduce emissions from power plants, limit truck pollution and even travel to the Alaska Arctic to bring attention to climate change, the president is widely seen as trying to burnish his environmental legacy while positioning the United States to lead a push for a global accord on emissions reductions at the Paris conference at the end of the year.

The timing of any announcement remains uncertain. A State Department official said Monday that "our review process is ongoing."

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