Keystone report leaves environmental, energy, safety debates far from settled

Sean Cockerham | Tribune Media Services,Curtis Tate

The State Department minimized the climate change impact of building the Keystone XL pipeline in its final environmental review issued on Friday, a key finding as President Barack Obama decides whether to approve the controversial project.

However, the review leaves the debate far from settled, with pipeline supporters continuing to push for its construction and environmentalists pushing back against it. It will leave the Obama administration open to charges, particularly from Republicans in Congress, that it’s squandering an opportunity to create jobs and to further national energy independence.

It will also leave petroleum producers looking for alternative ways to get their product to refineries, including rail. And that will heighten a debate over the safety of such shipments after a series of serious accidents involving trains carrying crude.

Keystone would bring crude oil from the Canadian oil sands to American refineries on the Gulf Coast. Plans for the pipelines are so controversial because tapping the thick Alberta crude would result in the production of more planet-warming gases than would conventional sources of oil.

The State Department acknowledged in its report that the Canadian crude produces 17 percent more carbon emissions than average sources of oil used in America and up to 10 percent more than other heavy oil coming from Venezuela and Mexico.

But the agency concluded that, even without Keystone, the oil sands still would be exploited and transported to market by rail or other pipelines.

“Approval or denial of any one crude oil transport project, including the proposed project, is unlikely to significantly impact the rate of extraction in the oil sands,” the report said.

Friday’s release of the report triggers a 90-day review to determine whether the pipeline is in the national interest, a finding that will take into account factors such as economic impacts and energy security issues as well as the environment. Secretary of State John Kerry will then make a judgment and Obama will ultimately decide whether to allow construction.

Petroleum producers, meanwhile, have already turned to a solution Obama can’t veto: rail.

Canada’s two largest railroads are already increasing Alberta crude shipments and developing new terminals to serve refineries throughout North America. According to the Transportation Safety Board of Canada, Canadian railroads handled 160,000 carloads of oil in 2013, up from just 500 in 2009.

There are drawbacks to rail. It costs more to ship crude oil by train than by pipeline, and recent fiery derailments in Quebec, Alabama and North Dakota have raised alarm over the safety of moving the flammable cargo in trains.

Nonetheless, cross-border rail shipments of crude oil do not require the kind of government approval a pipeline does.

And the North American rail network is virtually seamless and goes practically everywhere.

It’s faster to ship by rail, and in the case of the thick western Canadian oil, requires less chemicals to make it flow faster. Such chemicals would consume 30 percent of the proposed pipeline’s capacity.

“The oil needs to be diluted much less when moved by rail,” said Fritz Kahn, a transportation lawyer in Washington and a frequent expert witness in federal court and agency cases.

The major rail companies and transportation safety officials in Canada and the U.S. have called for new regulations to improve the crashworthiness of tank cars carrying crude oil and ethanol, upgrades that could slow shipments and raise costs.

Kahn said that safety concerns about moving crude oil by rail won’t slow the growth of shipments from Alberta, no matter what ultimately happens to Keystone XL.

“It’s just a matter of getting sufficient tank cars,” he said.

Keystone is among the biggest decisions that Obama faces going into this year’s midterm elections. Business groups, union leaders, members of Congress and the Canadian government are lobbying hard for its approval. But Keystone has become the driving issue for environmental groups who characterize it as the critical test for Obama’s presidency.

Obama has not expressed a view. But in a June climate speech he suggested he could veto the project if it adds to global warming.

“The pipeline’s impact on our climate will be absolutely critical in determining whether this project will go forward,” Obama said at the time.

Pipeline supporters say Keystone is needed for American energy independence. But the United States is on track next year to overtake Saudi Arabia and Russia as the world’s largest oil producer, and the nation’s reliance on importance from unfriendly nations is going down even without help from the pipeline.

Environmental groups said Obama, who identified climate change as a major threat in his State of the Union speech this week, must veto the Keystone pipeline.

“Piping the dirtiest oil on the planet through the heart of America would endanger our farms, our communities, our fresh water and our climate,” said Susan Casey-Lefkowitz of the Natural Resources Defense Council. “That is absolutely not in our national interest.”

Other environmental groups said oil industry influence skewed the report. The inspector general is investigating complaints that the State Department’s main contractor on the Keystone report, ERM Group Inc., has a conflict of interest because of its business ties to TransCanada Corp., the pipeline company that is seeking to build Keystone.

A State Department official Friday denied the conflict of interest.

“There were very rigorous conflict of interest screening guidelines, and we feel very confident there are no issues with this contractor,” said Assistant Secretary of State for Oceans and International Environmental and Scientific Affairs Kerri-Ann Jones.

White House spokesman Jay Carney sidestepped questions Friday about what Obama will do about the pipeline.

“We have a longstanding process … in place to determine whether projects like this are in the national interest,” Carney said. “And at this point, the process is now at the State Department, and we’re going to let that run its course.”

The State Department is involved because the pipeline would cross the international border with Canada.

Republican House Speaker John Boehner said Obama is now “out of excuses” and has no choice but to approve the pipeline.

“If President Obama wants to make this a year of action he will stand up to the extreme left in his own party, stand with the overwhelming majority of American people and approve this critical project,” Boehner said.

California Democratic Rep. Henry Waxman, a Keystone opponent, said Keystone is critical to the oil industry’s plans to triple production from the oil sands. He said the State Department underplayed the impact of the pipeline.

“While still flawed, this environmental review recognizes that the Keystone XL tar sands pipeline could have a significant effect on carbon pollution, depending on variables such as oil prices and transportation costs,” Waxman said.

Anita Kumar contributed to this story.


By Sean Cockerham and Curtis Tate
McClatchy Washington Bureau