Nebraska Decision Delivers Ambiguous ‘Win’ For Keystone XL
Calgary’s TransCanada Corporation, the rest of the Alberta oilpatch, and the carbon resistance were all recalibrating their outlooks this week after the Nebraska Public Service Commission approved the company’s least-desired alternative route for completing the portion of its revived, $10-billion Keystone XL (KXL) pipeline that crosses the state.
The PSC’s Monday decision split the panel 3-2. Dissenting commissioner Crystal Rhoades recited numerous concerns over the pipeline, ranging from the number of landowners along its route who are unaware that it might affect their properties, to the risk of disturbing the state’s fragile Sandhill soils, to the absence of evident benefits for the state.
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The panel was prevented by state law from considering the implications of a 210,000-gallon crude oil spill in North Dakota last week from the company’s existing Keystone 1 pipeline, which the KXL application seeks to replace and expand. As InsideClimate News notes, it was the older line’s third South Dakota spill this year.
In response to some of Rhoades’ concerns, the route the panel approved would move the pipeline east from TransCanada’s preferred line of deployment, avoiding some environmentally sensitive areas, and following the original line’s route more closely.
The Canadian company had directed millions of dollars in so-called “dark money” through local front groups to influence the state’s decision, CBC News revealed earlier this month. But in the end, it was a muted win at best for both TransCanada and its oil sector cheerleaders.
“The decision clears the pipeline’s route through Nebraska and marks the final major hurdle in the project’s long regulatory path,” enthused Rigzone, a fossil industry news outlet. The Canadian Energy Pipeline Association called the approval “a long-awaited step forward for this critical project”.
But Calgary-based money manager Rafi Tahmazian told CBC News the Nebraska ruling “literally did not move the dial” for TransCanada’s pipeline hopes, while the Sierra Club asserted that “it remains unlikely the project will move forward”.
The company itself issued a cautious acknowledgement, with President and CEO Russ Girling stating that “we will conduct a careful review of the Public Service Commission’s ruling while assessing how the decision would impact the cost and schedule of the project.” TransCanada’s common shares climbed $2.50 (about 4%) in trading in the 24 hours following the decision, before beginning to drift down again later yesterday.
The absence of enthusiasm reflected the new unknowns the mandated rerouting injects into TransCanada’s long-troubled project to pipe diluted tar sands/oil sands bitumen 1,700 kilometres to U.S refineries along the Gulf of Mexico coastline that are equipped to process it, and to Gulf ports from which it could be shipped to world markets.
“This decision today throws the entire project into a huge legal question mark,” Jane Kleeb of Bold Nebraska told Politico. “TransCanada will have to go back to the State Department, because that route has never been reviewed by the feds.”
And although the company proposed the longer alternate corridor in its submission to the state commission, it apparently had not secured the necessary land easements—or even advised landowners along the way that their properties might soon be subject to eminent domain proceedings to allow a pipeline to pass beneath them. Neither has it secured federal approvals that it will require for the new route, including water crossings permits from the Army Corps of Engineers, and rights-of-way from the Bureau of Land Management.
All of that will take time, which opponents of the line promised to use to make every step along the way more difficult for the Canadian company.
“The fight to stop the Keystone XL pipeline is not over,” declared Friends of the Earth senior political strategist Ben Schreiber. “We will see them in court.”
At a minimum, environmentalists are likely to argue that the new route requires a federal supplemental environmental impact statement (SEIS).
“NEPA (National Environmental Policy Act) regulations require that if there are any changes to the project, an agency has to prepare an SEIS, and this would certainly be a change of the project, so we would push for that,” Sierra Club attorney Doug Hayes told E&E News [subs req’d].
Meanwhile Harold Frazier, chairman of the Cheyenne River Sioux Tribe, which continues to resist the Dakota Access pipeline, called the decision “another treaty transgression”.
The KXL line would cross 800 kilometres of Sioux territory, Frazier said in a statement. “We have not asked for this danger to our way of life, yet today it is being forced upon us again. The Cheyenne River Sioux Tribe will fight this treaty violation with any means necessary.”
Court challenges to the decision—by either the company or its antagonists—must be filed within 30 days.
The TransCanada-allied Association of Oil Pipe Lines promoted the project with the improbable claim that it would create more than 42,000 U.S. construction jobs, with a US$2.1-billion payroll, during construction. That remains nominally planned to start in 2019, with completion early in the next decade to take advantage of an anticipated uptick in oil prices and expanded output from Alberta’s tar sands/oil sands.
But many observers saw as many new hurdles raised—or left in place—by the Nebraska decision as it cleared aside.
“Many in the industry believe the project is unnecessary given a lack of market demand for more tar sands. TransCanada has struggled to line up customers for the pipeline and though they now claim they have support for the project, they still do not have any firm commitments,” the Sierra Club observed in a statement. “During their testimony in the PSC’s public hearings, TransCanada argued that building along [the] alternative route would be unworkable.”
“The pipeline may struggle to succeed,” Politico agreed. “Though prices for oil have rebounded moderately in recent months, and TransCanada has said demand for space on the pipeline is strong, it’s not yet clear that enough companies will commit to the 20-year contracts required to reserve space on it.”
“Energy markets have made the Alberta oil sands less attractive, with ExxonMobil, ConocoPhillips and others pulling out of the region to concentrate on U.S. oil shale development in Texas. Meanwhile, rival pipeline company Enbridge has expanded its pipeline system delivering Canadian crude to the U.S.,” the paper continued. “Many in the oil industry no longer see the Keystone XL pipeline as crucial to the U.S. refineries as they once did, especially since the railroad sector stepped in to offer a more flexible—though more expensive—way to ship the oil.”
The company revealed its own doubts on that score when it recently asked the residents of Alberta through their government to buy irrevocable, “take or pay” contracts for some of its capacity—an obvious effort to hedge the line’s dubious commercial viability at taxpayers’ expense.
“There’s going to be appeals, there’s likely going to be significant legal battles that are going to get thrown at this still to come,” pipeline backer Tim Pickering, of Calgary’s Auspice Capital, told CBC News. “So it’s not over yet, unfortunately.”