Keystone XL – Pipelines and polls

In a shock move US president Barack Obama has delayed the final decision on TransCanada’s “shovel ready” Keystone XL pipeline extension that would have sent Canadian oil sands oil south 2700km to eager oil refiners in the Gulf. The US Department of State (DOS) said that it would order a review so that the impact of the project on key ecosystems in Nebraska can be evaluated. Obama said that he supported the DOS’s decision.

And, there we have it, what looked to be a done deal ready to go ahead in 2012, will now have to wait until after the US presidential elections and may not get the final green light until the first quarter of 2013 perhaps adding another US$1bn in costs to the expected US$7bn project. “Given the concentration of concerns regarding the environmental sensitivities of the current proposed route through the Sand Hills area of Nebraska, the Department has determined it needs to undertake an in-depth assessment of potential alternative routes in Nebraska,” said the DOS in a statement. “Because this permit decision could affect the health and safety of the American people as well as the environment, and because a number of concerns have been raised through a public process, we should take the time to ensure that all questions are properly addressed and all the potential impacts are properly understood,” Obama said in his statement.

TransCanada simply has to bite the bullet for now and hope that the project will eventually get the go ahead. “We remain confident Keystone XL will ultimately be approved,” said Russ Girling, TransCanada’s president and CEO in a statement. “This project is too important to the US economy, the Canadian economy and the national interest of the United States for it not to proceed.” Girling went on to point out, however, that the decision to delay could have ramifications down the line, “Supplies of heavy crude from Venezuela and Mexico to US refineries will soon end,” said Girling. “If Keystone XL is continually delayed, these refiners may have to look for other ways of getting the oil they need. Oil sands producers face the same dilemma - how to get their crude oil to the Gulf Coast.” TransCanada says that it has been working with the DOE since 2008 and also says that Keystone could put 20,000 Americans to work and create another 118,000 spin-off jobs.

Alberta’s export needs
In Alberta, from where the Keystone extension would run, new premier Alison Redford does not sound happy, “It is disappointing that after more than three years of exhaustive analysis and consultation on this critical project, we find out that a decision will be delayed until early 2013,” said Redford in a statement. “Our position has always been clear that we respect and understand that approval of the pipeline is a US domestic matter, but the fact remains that Keystone XL is a key piece of infrastructure for our province. I sincerely hope that the State Department made this decision based on science and evidence and not rhetoric and hyperbole from very well-organised interest groups.” Redford said that Alberta is still committed to Keystone and that she would, “Seek immediate answers from US officials to determine why this decision was made and how the process will unfold going forward. Alberta is an export-based economy and today’s decision is a clear reminder about the strategic importance of diversifying our export markets. Our energy industry supports this province and our country and it is imperative that we can move our products to market.”

Alberta is landlocked but Redford’s last remark could well relate to Enbridge’s Gateway pipeline taking oil sands oil across the Rockies to the BC coast and on to Asian markets, notably China. Gateway is not “shovel ready” but given the political will and the way to negotiate with and appease protesters along the route, certainly could be. Alberta has been rankled with its inability to reach other markets for some time and the Keystone decision could just be the catalyst to make something happen.

The Canadian Prime Minister, Stephen Harper is disappointed and probably, if truth were told, irked at the US decision. Nonetheless, he is a hardened politician and will understand very well just what a dilemma Obama was in before an election year. There have been months of well-organised protests against Keystone from environmental groups, landowners and legislators and perhaps, the most important, potential donors to Obama’s re-election campaign that threatened to withhold funds if Keystone got the presidential nod.

Stuck between a rock and hard place
Obama stuck between a rock and hard place blinked and put off the decision on Keystone until after the election thus appeasing the protestors and his donors. After the election, should he win, he can approve Keystone knowing that he can’t serve another term. Or, should he lose, the new president can approve the project and Obama can hold up his hands and say it wasn’t my fault. Nevertheless, reading the comments on Obama’s decision one can’t help thinking that Obama has looked weak over the Keystone decision and looks to have angered Americans that are anxious for new jobs. The CEO of the American Petroleum Institute (API) did not hold back, “This decision is deeply disappointing and troubling,” said API president and CEO Jack Gerard in a statement.

“Whether it will help the president retain his job is unclear, but it will cost thousands of shovel-ready opportunities for American workers. There is no real issue about the environment that requires further investigation, as the president’s own State Department has recently concluded after extensive project reviews that go back more than three years,” said Gerard. “This is about politics and keeping a radical constituency opposed to any and all oil and gas development in the president’s camp in November 2012.”

It is a pity that what looks to be political expediency, which may be long remembered, has delayed, or perhaps even scuppered, as we don’t know what the next 12 months or so will bring, a project that was high on the agendas of two nations. And, surely with Keystone being discussed with the DOS since 2008 the Nebraska issues couldn’t have been, or still could, be worked around in short order if the will was there to do so.