Vol. 19, No. 6 Week of February 09, 2014
Providing coverage of Bakken oil and gas

One hurdle cleared

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But more could lie ahead as proponents continue to push for Keystone XL

Gary Park

For Petroleum News Bakken

Of all the reactions to the U.S. Department of State’s supportive concluding word on Keystone XL, the most upbeat came from TransCanada and the Canadian government which argued there is no longer reason for President Barack Obama to delay signing off the on project.

What isn’t clear is whether Obama is on the same wave-length as the XL backers.

His State of the Union address on Jan. 28 gave few insights into his thinking and nothing specific on XL.

However, he did avoid entering the fray on the pipeline beyond endorsing an “all of the above” energy strategy, with glowing praise for natural gas as the “bridge fuel that can power our economy with less of the carbon pollution that causes climate change.”

“Taken together, our energy policy is creating jobs and leading to a cleaner, safer planet,” Obama said.

What those remarks meant may become evident over the next 90 days — with many observers suggesting that timeline could easily be extended — when the Obama administration embarks on a consultation period with eight U.S. government agencies.

Girling looks for decision

TransCanada Chief Executive Officer Russ Girling said that after about 65 months of reviews by U.S. regulators he “would hope that everything that could possibly have been needed to review has been reviewed and that we could expeditiously get a decision” from the White House.

Girling suggested the State Department’s final supplemental environmental impact statement would allow the U.S. government agencies to “truncate significantly” the process of deciding XL’s fate and decide whether the project serves the U.S. national interest because much of the consultation among the agencies has already been done.

Alex Pourbaix, TransCanada’s president of energy and oil pipelines, said the State Department has acknowledged that XL will create “$3.4 billion of GDP and create 42,000 person years of employment.”

“We said this project is going to be safer than other alternatives for moving oil. The (State Department) document finds that, if the project goes ahead, we will see lower spills, less injuries and fewer fatalities,” he said.

Oliver: Conclusions reaffirmed

Canada’s Natural Resources Minister Joe Oliver offered a similar assessment.

“The State Department has reaffirmed its previous (four) conclusions. So, I think the time is ready for a decision, once (the administration) completes its 90-day review,” he said.

Oliver said his government would like to see Obama render his final determination by mid-2014, given the State Department’s view that Keystone XL would have no major impact on greenhouse gas emissions — a criterion Obama insisted must be met to gain his support.

“The report also stated that ‘approval or denial of any one crude oil transport project (including XL) remains unlikely to significantly impact the rate of extraction in the oil sands, or the continued demand for heavy crude oil at refineries’ in the United States,” he said.

Alberta Energy Minister Diana McQueen said Obama’s State of the Union views are aligned with those of her province in promoting energy production.

“The president does send good signals that all forms of energy are still part of his energy strategy,” she said.

Alberta Premier Alison Redford said the State Department’s findings were consistent “with the analysis Alberta has put on the table in our various face-to-face meetings with key decision-makers in Washington.”

Chorus against billionaires

Girling, joining a chorus against U.S. billionaires, said they “ignore the fact that U.S. companies are major players in the Canadian oil sands. ... When you’re a wealthy billionaire you can afford to kill jobs.”

Jack Gerard, president of the American Petroleum Institute, was emphatic that five federal reviews over five years, dozens of public meetings and more than a million comments have reached one conclusion — “the Keystone XL pipeline is safe for the environment. This final review puts to rest any credible concerns about the pipeline’s potential negative impact on the environment.”

U.S. House Speaker John Boehner said Obama is “out of excuses (on XL). The fact that he has let a final decision on the Keystone pipeline project — and the more than 100,000 jobs that come with it — languish for more than five years is economic malpractice.”

John Hoeven, Republican senator for North Dakota, said there is no longer any reason to withhold approval of XL.

“Although not explicit (the report’s findings) ... affirm the need to begin construction without delay.

“On the other hand the report is vague and provides no timeline for a final decision, giving the president broad room to further postpone a decision,” he said.

Kerry to get involved

The only word out of the White House came from Obama spokesman Jay Carney who cautioned that the report does not represent a final decision by the U.S. government.

More tellingly, a spokeswoman said Secretary of State John Kerry will get “involved in the (XL) process for the first time,” making the environment and climate change — two of Kerry’s overarching concerns — part of the process.

“There is no deadline for Secretary Kerry to make a decision,” she said.

Regardless of what the proponents think ought to happen and regardless of whether the State Department’s criteria have been met or exceeded, Keystone XL may yet face its most daunting barrier.

What matters is how the project measures up with Obama’s ambition to be seen as a global leader on climate change and how influential Kerry will be in steering Obama to the ultimate verdict.

For Obama the test is further complicated by the resistance to XL among many of his hard-core supporters — environmentalists, young voters and congressional Democrats whose seats are on the line in the mid-term elections — prompting many to forecast the XL verdict will be stalled until after the Nov. 4 vote.

“We do have to take (the State Department’s work) and look at it against the broader question about where this project fits into our national and international efforts to address climate change and foreign policy and energy security,” said Kerri Ann Jones, an assistant secretary of State for oceans and international environmental and scientific affairs.

“Given the priority that climate is (for Obama, Kerry) and the U.S. in general, that is certainly a key consideration,” she said, giving fresh motivation to the vast array of environmental opponents of XL, whose scope was reflected in the State Department report.

Almost 1.5 million comments

It said a 2013 invitation for public comment attracted 1,496,396 submissions, of which 99 percent were form letters sponsored by nongovernmental organizations, with only 16,583 “identified as unique submissions.”

One of the most formidable voices is the Sierra Club, whose executive director Michael Brune said Obama faces two choices: “Fighting climate disruption, or promoting energy policy that includes the expansion of dirty fossil fuels like tar sands. The Keystone XL tar sands pipeline fails the basic climate test and it’s not in the interest of the American people.”

The anti-Keystone factions — which have 30 days to comment on the final review — have also questioned whether the final State Department report is impartial, given alleged financial ties between TransCanada and the EMR Group, the contractor hired by the State Department to prepare the report.

Conservative party on offensive

The Canadian government of Prime Minister Stephen Harper, while insisting the State Department has demonstrated the “clear” benefits of XL to the U.S. and Canada, has conceded there are many battles ahead.

The ruling Conservative party wasted no time going on the offensive, launching an ad on its website slamming U.S. “billionaires who want to attack our oil industry,” led by wealthy businessman-turned-environmentalist Tom Steyer.

Oliver said the campaign is intended to counter the “distorted and inaccurate” message of Keystone opponents and provide Canadians with a “counterbalance setting of the facts.”

The State Department analysis delved into the impact of the $7 billion, 830,000 barrels per day pipeline on groundwater, air quality and greenhouse gas emissions.

It noted that pipelines from Canada already have capacity to deliver 3.4 million bpd to the U.S. and plans are in the works to expand those transmission systems to accommodate projects growth in oil sands output from 1.2 million bpd in 2012 to 2.3 million bpd in 2015 and 5.5 million bpd by 2030, plus 1.4 million bpd of conventional production.

The study noted that TransCanada has 550,000 bpd of firm commitments to ship Alberta heavy crude to market through XL, plus 65,000 bpd of Bakken crude, adding that the eventual crude mix and quantity will be “determined by market demand.”

It said that output from U.S. tight oil formations, such as the Bakken, was expected to grow from 5.5 million bpd n 2010 to 7.5 million bpd by mid-2013.

The report said the 180,000 bpd of crude currently being moved out of the Western Canada Sedimentary Basin by rail is undergoing rapid growth, with rail loading facilities in the region destined to have capacity of 1.1 million bpd by the end of 2014.

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