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Politics vs. Jobs – EPA and Keystone XL Edition

Mark Green

Mark Green
Posted February 6, 2015

EPA’s 13th-hour ambush of the Keystone XL pipeline and the project’s environmental reviews by the U.S. State Department looks like more of the political gamesmanship the Obama administration has used to keep the pipeline on hold for more than six years. But perhaps EPA overplayed its hand.

farmerAs we pointed out, EPA’s letter urging officials to “revisit” the State Department’s Keystone XL conclusions is awkwardly and perhaps suspiciously late. State has done five separate environmental reviews, with the last one completed more than a year ago. This week, while other involved federal agencies weighed in on the pipeline’s merits from a national-interest standpoint, EPA lobbied to revisit established science

Second, the agency’s assertion that the current global price of oil affects the State Department’s environmental conclusion – that Keystone XL would have no significant impact – is oddly at odds with the agency’s position that the current global price of oil has no effect on EPA’s own policymaking decisions.   

Third, EPA did some manipulating of what State said about Keystone XL’s impact on greenhouse gas emissions – its letter citing only the largest numbers in State’s range of possible effects. A reasonable conclusion is that there’s a whiff of politics, for strategic effect, in EPA’s doings.

Shawn Howard of TransCanada, Keystone XL’s builder, responded in an open letter. Some highlights:

  • The types of crude oil Keystone XL deliveries would displace with oil sands and U.S. oils produce similar or often lower greenhouse gas emissions. Sean Hackbarth with the U.S. Chamber of Commerce has a good blog post on that, here.
  • Emissions intensity for oil sands crudes is going down, while emissions intensity for other sources of heavy oil that the U.S. relies on is going up – a trend the State Department said would continue (see here and here).
  • EPA didn’t acknowledge that Keystone XL will deliver a substantial amount of oil from the U.S. Bakken region. The existing Keystone Pipeline already is delivering oil from Canada and the U.S. to refineries in the U.S. Midwest and Gulf Coast.


Howard writes that the economics of the Keystone XL are unchanged by the current global price of oil. When TransCanada originally submitted its application to Washington, crude oil prices were in a free fall, headed to below $40 a barrel, and no one suggested the project wasn’t economically feasible then:

“Since then, oil prices have both gone well above and below $100 per barrel. This isn’t new and our customers are guided by a long-term view because they will pay for a significant part of the cost of building infrastructure like Keystone XL, regardless of the commodity price. … Those who know the true costs of developing and operating these larger projects are the producers themselves, and none of them have ended their contracts for shipping oil on Keystone XL and we continue to have a waiting list if additional capacity became available. … The market continues to speak about the need for Keystone XL, and while low oil prices may slow new or unannounced projects from coming online for a period of time, no one is announcing plans to reduce production or the amount of oil they are supplying to U.S. refineries.”

Howard writes that no other company has agreed operate with the number of additional safety requirements that TransCanada has agreed to operate with Keystone XL:

“Every aspect of this project has been exhaustively reviewed – community impacts, environmental, engineering, energy security and the economic benefits that a project like this will produce. … We have a deep care for the environment and all of the unique habitats and resources along all of our energy infrastructure corridors and we work tirelessly to minimize the impact of our operations on all of them. No single entity or group has a monopoly on caring for the environment, and our track record speaks for itself: we have one of the best safety and operating records in the industry and just last year invested more than $1 billion in proactive pipeline integrity and maintenance efforts to make sure that our infrastructure operates safely and delivers the critical products we all need every day.”

Ultimately, Keystone XL is about where the United States will import oil from, and the U.S. federal government’s appropriate role in a privately funded, major piece of energy infrastructure. Howard on the first point:

“Do Americans want to send money overseas to regions that do not share its interests or values, or from American and Canadian oil fields that are subject to strong environmental oversight, protection of workers and where the money invested in developing these energy resources goes back to companies and communities right here?”

And Ed Morse, Citi Research’s global head of commodities, on the second point (during this week’s National Association of State Energy Officials annual policy outlook conference):

“The argument is, what’s the role of the government vs. the private sector, when the government is not taking capital risk (and) the private sector is – when you have, as was the case in the U.S. last year, a really significant build-out of pipelines (that) were not judged by the same standards that we’re putting on the Keystone pipeline, but are based on market issues. The world built 3,000 miles of pipeline for oil last year, and roughly 2,500 of that 3,000 miles was built in the U.S. So that’s the context of making the valuation of the Keystone pipeline and what the criteria the government ought to be using under the law to make a judgment on that pipeline … not a judgment based on interest-group politics.”

ABOUT THE AUTHOR

Mark Green joined API after a career in newspaper journalism, including 16 years as national editorial writer for The Oklahoman in the paper’s Washington bureau. Mark also was a reporter, copy editor and sports editor. He earned his journalism degree from the University of Oklahoma and master’s in journalism and public affairs from American University. He and his wife Pamela live in Occoquan, Va., where they enjoy their four grandchildren.