The Suncor tar-sands processing plant near Fort McMurray, Alberta, in September. In 1967, Suncor helped pioneer the commercial development of Canada's oil sands, one of the largest petroleum resource basins in the world.
You wouldn't have guessed it from some of the reporting, blog commentary and comment thread talk about President Obama's veto earlier this week, but the Keystone XL pipeline is far from dead.
Foreign Policy, for instance,
headlined its story on the subject "
Obama Kills the Keystone Pipeline to Nowhere."
No, he didn't.
What Obama did do on Tuesday was veto the bill Congress passed to circumvent executive authority for approving that pipeline originating in Alberta. Tellingly, that bill would not have taken away authority for deciding on other pipelines that cross international boundaries. Wouldn't want to remove executive authority from the next Republican president. So while there's been encouraging evidence in Obama's statements since June 2013 that he will nix a construction permit for the northern leg of the pipeline, that is not a sure thing. Keystone XL has not been killed.
Even though the veto was totally expected and had a precedent three years ago when Obama rejected the congressional attempt to get him to decide on Keystone XL within 60 days, the allied foes of the pipeline project were elated by Tuesday's move. "Re-energized" was the word used by Michael Brune, the executive director of the Sierra Club, one of the thousands of people who have been arrested for opposing KXL with civil disobedience. A quick celebration of the veto was organized outside the White House Tuesday by 350.org. The group's executive director, Matt Boeve, said the president's move was "conclusive proof that activism works."
Perhaps. As someone who has opposed KXL from the beginning, participated in numerous protests and signed the CREDO pledge to fight it with civil disobedience, I certainly want to believe that. But even if the project were not controversial, it's hard to imagine any president letting Congress override long-established executive authority to decide such matters. The veto and the decision on whether to let the pipeline be built are separate.
Since 1968, the process for deciding has been delegated to the State Department because of the international nature of cross-boundary pipelines (tunnels, bridges and conveyor belts). That process was upgraded but not materially altered by President George W. Bush in 2004. State is in the process of reviewing the environmental impact statement and the commentary of eight other federal departments and will recommend to the president whether Keystone XL is in the "national interest." That could happen soon.
More analysis can be found below the orange oil spill.
However, there's an obstacle. Land owners in Nebraska are suing over the eminent domain condemnation proceedings being employed by TransCanada, the pipeline's builder.
On Feb. 12, a Nebraska district court judge for Holt County issued a temporary injunction against property condemnations until the case is heard. On Thursday, a state district judge granted land owners in York County, Nebraska, a temporary injunction in their lawsuit as well.
That could mean 12-18 months of litigation. If the land owners were to win at the Nebraska Supreme Court, then TransCanada would have to reapply for a route change with the state's Public Service Commission and that process could take another 18 months.
This might mean another delay in the State Department's review and the president's decision, but that is uncertain.
Obama temporarily suspended the State Department's review early last year after a lawsuit challenged the way the state legislature transferred authority from the Public Service Commission to the governor's office for approving a new route for Keystone XL. While some critics said the suspension was a political maneuver to avoid announcing a decision on the pipeline before the November election, the administration's rationale behind the suspension was that no legitimate decision about the "national interest" could be made without knowing what the pipeline's entire route would be.
Five of the seven justices on the Nebraska Supreme Court were needed to overrule the transfer, but when the court's decision was announced last month, only four had objected. So the route stood. The current cases could wind up going to the high court, too, forcing a revisiting of its original decision.
Mark Hefflinger at Bold Nebraska writes:
The landowners filed suit against TransCanada on Jan. 16, challenging the constitutionality of the Canadian oil company’s authority to invoke eminent domain under LB 1161, the law passed by the Nebraska legislature that took power to grant eminent domain from the Public Service Commission and put it in the hands of then-Governor Dave Heineman.
Landowners’ attorneys with Domina Law Group believe there is a substantial likelihood that the Nebraska Supreme Court will in this new lawsuit revisit their previous challenge to the constitutionality of LB 1161 (Thompson v. Heineman).
Some critics
have said that low oil prices could kill the pipeline, which is dedicated to carrying petroleum in the form of bitumen from the Alberta tar sands to Texas refineries.
It's true that oil prices are pinching some players in the tar sands. Earlier this week, Royal Dutch Shell abandoned some long-delayed plans for a 200,000 barrel-a-day tar sands project near the Pierre River in Alberta. Some smaller operations are also suffering.
But Keystone XL is a long-term infrastructure project and decisions about building it do not depend solely on the price of oil today or tomorrow. Oil prices fluctuate greatly over time and unless they drop a lot lower than they are now—$48.17 a barrel for light sweet crude as of today—bitumen from existing tar sands projects will continue to need transportation. Existing operations are very unlikely to be shut down:
Existing oil sands surface mines can make money at about $30 a barrel, and the most efficient underground oil sands projects run by Cenovus Energy Inc., a big Canadian operator, can stay in the black at $35 a barrel. That is still above the break-even levels of many traditional oil wells, but below those of other unconventional sources of crude, including most production from the Bakken Shale formation in North Dakota.
“It’s not well understood just how robust the oil sands are. If you stopped expansion of the oil sands tomorrow, you would have no decline in the production base for decades,” Cenovus Chief Executive Brian Ferguson said. “What we do is design for 30-year flat production lives” at oil-sands fields, he said. [...]
Steve Williams, CEO of Canadian oil-sands giant Suncor Energy Inc., said on Nov. 27 that his company’s strong balance sheet would allow it to ride out the turbulence and stick with a bullish growth strategy. “Price volatility is a fact of life in our industry,” Mr. Williams said. “In evaluating any investment, Suncor takes a much longer-term view than days or months. We are able to take the perspective of pricing in decades.”
Three months after Williams said that, there are no signs that TransCanada is reconsidering building the pipeline.
If President Obama chooses to reject Keystone XL—as ever more of the pipeline's foes and advocates now believe—there could be more than just a storm of criticism from the oil industry, much of the media and Republicans and the four dozen or so Democrats in Congress who are eager to have it built.
There is, for instance, the potential of NAFTA coming into play. Tom Zeller Jr. reports:
Ottawa has reportedly discussed the idea of suing the U.S. for violations of the North American Free Trade Agreement (NAFTA), should an approval of the Keystone XL project not be forthcoming. Speaking to Politico on Wednesday, former Canadian ambassador to the U.S. Derek Burney suggested such a tack would have merit under the agreement. “If the pipeline is actually vetoed on so-called environmental grounds,” Burney was quoted as saying, “I think there is a very strong case for a NAFTA challenge.”
Thus, it appears at least possible that President Obama could leave the Oval Office before any final decision on giving a permit for building the northern leg of Keystone XL is announced.