SHAFAQNA (International Shia News Association)- The now Republican-controlled U.S. Senate is expected to pass a bill supporting the controversial Keystone XL pipeline over the next few weeks.
But the TransCanada Pipeline project still faces big hurdles in the U.S.
Keystone XL, which would transport up to 830,000 barrels per day of bitumen from Alberta’s oilsands to the U.S. Gulf Coast, has been awaiting U.S. approval since 2008. President Barack Obama has said that Keystone XL will only go forward if it “does not significantly exacerbate the problem of carbon pollution.”
Pro-Keystone Republicans defeated anti-Keystone Democrats in several Senate races in the mid-term elections, giving them a majority of Senate seats. Along with support from pro-Keystone Democratic Party senators, they have shown they have enough votes to overcome any anti-Keystone filibuster.
Despite the strengthened support for the project in the U.S. Senate, there are still five significant challenges ahead for the Keystone XL pipeline.
1. ‘The last hurdle’: A presidential veto
It’s been called “the last hurdle” for the Keystone XL project — Obama’s power to veto legislation passed by both houses of Congress.
Until this year, the Democrat-controlled Senate had declined to deal with Keystone XL legislation coming from the Republican-controlled House of Representatives.
With the Senate in Republican hands, Keystone XL approval is a priority for the party’s leadership. Immediately after the November vote, Republican Senator John Hoeven of North Dakota said “Keystone will be one of the first things we pass.”
Four Senate seats moved from anti-Keystone or wavering Democrats to pro-Keystone Republicans and none of the 57 Senate seats held by pro-Keystone senators changed hands.
That arithmetic also means there are enough pro-Keystone senators — more than 60 — to block a potential filibuster on the Senate floor.
In a Jan. 12 vote on allowing debate on the pipeline bill, 63 voted in favour. The Senate is now debating the bill and any proposed amendments. The Senate leadership expects the bill to get passed no later than early February.
Those 63 votes won’t be enough to block a presidential veto, which requires 67 votes (a two-thirds majority) to override.
A presidential permit is required because the pipeline crosses the Canada-U.S. border.
2. Falling oil prices
In 2013 President Barack Obama said Keystone XL will only go forward if it ‘does not significantly exacerbate the problem of carbon pollution.’ (Carolyn Kaster/Associated Press)
Because the pipeline crosses an international boundary, approval of Keystone also required sign off by the U.S. State Department, which released an environmental impact study of the project last January, when oil was about $100 US a barrel.
That study concluded that Keystone XL would have minimal impact on greenhouse gas emissions because not building the pipeline would have only a small impact on oilsands production, since the oil could be shipped by rail.
But the State Department’s report also says that at prices below $75 per barrel “higher transportation costs could have a substantial impact on oilsands production levels.”
And that brings it back to Obama’s stated criteria about climate change impact. If the State Department is correct, and if the price of oil stays below $75 — today the price is below $50 — some oilsands production won’t happen because the cost will be too high without a pipeline.
On the other hand, TransCanada has filed an application for its Energy East pipeline to transport oilsands crude to Quebec and New Brunswick. If approved, Energy East could result in lower transportation costs for oilsands producers, at least lower than the rail alternative.
3. The Keystone XL price tag
TransCanada reported its third-quarter earnings on Nov. 4 and that included the information that the projected cost of Keystone XL has gone from an initial $5.4 billion US to $8 billion US. Executives cited approval delays — they had expected it would take two years and now they’re at six years and counting — and “a lot tighter market.”
That’s still cheaper than the $12-billion price tag for Energy East. But that pipeline could also move 1.1 million barrels per day, versus Keystone’s 830,000. Shipping the oil with Keystone XL will cost less than Energy East, TransCanada says.
TransCanada CEO Russ Girling said the company has already spent $2.4 billion US on Keystone XL.
By prior agreement, at $8 billion, project costs go from where shippers cover 25 per cent and TransCanada covers 75 per cent to each party covering half the cost. Nevertheless, Girling says the shippers “remain solidly behind Keystone XL.”
4. The Nebraska court case
The Obama administration had been claiming they had to await the result of a Nebraska court case. That excuse is pretty much over after the Nebraska Supreme Court brought down their ruling on Jan. 9.
But not completely. The landowners who brought the original suit may be able to appeal or launch a new case because the court didn’t answer a constitutional question at the centre of the case, according to the Wall Street Journal.
After a Nebraska state court ruled in early 2014 that a hastily passed state law, which gave former Republican governor Dave Heinemanpower to approve a new route for the pipeline, is unconstitutional, the case went to the Nebraska Supreme Court.
That was the court case that in April the U.S. State Department said made it necessary for them to put on hold their process for reviewing the project, since the ruling could have led to re-routing the pipeline.
That didn’t happen in a ruling that the Associated Press called bizarre. None of the seven judges expressed agreement with what the Nebraska government had done and four judges called it unconstitutional. But in Nebraska, five judges must favour declaring a state law unconstitutional for that to happen and three of the judges sat out the decision. “So the pipeline lost 4-0 — and still won,” AP wrote.
5. Public opposition
Keystone XL has become a focus of the U.S. environmental movement and some Native American groups, with the support of a number of celebrities, including Neil Young, Robert Redford and Robert Kennedy Jr.
Their view is backed by a large part of Obama’s political base. However, labour unions are also part of that base and they say Keystone XL will create jobs.
Some Nebraska landowners also don’t support the pipeline’s route. TransCanada says it has deals with 84 per cent of the Nebraska landowners along the route and is now trying to reach deals with the rest. If not, that controversial Nebraska law gives the company what is called eminent domain rights to force a deal.