By JIM SNYDER
The focus of the Keystone XL debate has shifted from a fierce
lobbying war in Washington to Lincoln, Nebraska, where the
state Supreme Court has been asked to weigh a legal challenge
to the pipeline.
The US State Department, which is responsible for reviewing
whether the project is in the nations interest, said
April 18 that it would delay making a recommendation until
legal questions about the way the route was approved through
the prairie state are resolved. That could spare President
Barack Obama from having to decide on a project
that splits supporters of
his in the environment
al and labor movements
before an important congressional election in November.
Once again, the administration is making a political
calculation instead of doing what is right for the
country, Terry OSullivan, general president of
the Laborers International Union of North America, said
in an e-mail. Its clear the administration needs
to grow a set of antlers, or perhaps take a lesson from
Popeye and eat some spinach.
If the seven-member state Supreme Court upholds a lower court
decision, TransCanada, the Calgary-based company that wants
to build Keystone, will need to apply to the Nebraska Public
Service Commission. The commission by law has seven months
for its pipeline reviews.
Effectively, this likely postpones the decision until
after the US mid-term elections, Robert Kwan, an
analyst with RBC Capital Markets, a subsidiary of Royal Bank
of Canada, said in a research note.
TransCanada fell 3.3 percent to C$49.62 as of 10:30 a.m. in
Toronto, the biggest drop in more than two years.
The State Department said the possibility of a new route
coming out of that process justified hitting the pause
button. The announcement drew a strong reaction from all
sides -- including pledges from congressional leaders to
force a decision sooner by legislation.
President Obama is going to try to prevent this project
from going forward, Senator John Hoeven, a North Dakota
Republican, said in an April 18 interview. Hes
trying to defeat it by delay.
Hoeven said a bill he authored to require Keystone approval
is about four votes shy of the 60 needed to advance
legislation in the Senate. The announcement may put pressure
on a half dozen colleagues who support the line but have
opposed his bill to give the administration time to reach a
Senate Democrats are trying to retain a slim majority in the
midterm elections and the list of incumbents at risk include
several in states where support for Keystone is strong,
including Senator Mary Landrieu, a Democrat from Louisiana
and chairman of the Energy and Natural Resources Committee.
Landrieu is among 11 Democrats who signed a letter earlier
this month that urged Obama to approve the pipeline by May
David Domina, an Omaha lawyer representing the landowners who
brought the lawsuit against the pipeline, said the case
wont be argued before the Nebraska high court until
September or October. After that, a decision wouldnt
come until months later, he said.
Its a case that involves some complexity,
Nebraska Attorney General Jon Brunings office
didnt respond to a request for comment on how quickly
the court could hear the case.
Pipeline opponent Jane Kleeb predicted the case will take at
least until January to be resolved and, if the landowners
win, the commissions decision wouldnt come until
July 2015 at the earliest because of the seven-month
requirement. Meanwhile, she said, a permit for the portion
that goes through South Dakota is due to expire in June and a
renewal could add more time to the clock.
Pipeline dies under its own weight, she said in
an e- mail.
Shawn Howard, a spokesman for TransCanada, said the permit
John Kilduff, partner at Again Capital, a New York- based
hedge fund that focuses on energy, predicted the project
would probably win the US
blessing -- though that could take awhile.
The Obama administration is probably looking for a way
to not approve it but, given the studies, it is going to get
approved, Kilduff said. Its just a matter
of timing it right with the elections to ease the wrath of
David McColl, an analyst at Morningstar, said the delay would
raise the costs to build the pipeline, though probably not to
a level that would kill it.
The cost could become prohibitive when the toll for the
pipeline equals the cost to move by rail," McColl said.
This would require a significant cost increase, likely
well north of $10 billion -- we dont think this is
likely to happen.
Without Keystone XL and other pipelines aimed at allowing
Canadian crude to earn world prices, Canadas economy is
losing about C$50 million a day, according to the Canadian
Chamber of Commerce. In addition, surging oil production from
Albertas oil sands region risks becoming a
significant issue as volumes quickly catch up to
transportation capacity in the next three to four years,
Albertas Finance Minister Doug Horner said in an April
Western Canada Select, the Canadian heavy crude benchmark, on
April 17 traded at an $18.25/bbl discount to West Texas
Intermediate. The discount has been as much as $42.50 in
In the meantime, railways have stepped in to help meet the
rising demand from Canadian oil producers to get their fuel
to the US Gulf Coast and other coastal regions of North
Companies including Cenovus Energy and MEG Energy are among
companies with expanding oil shipments by rail as they boost
production. Cenovus has shipped crude to California and even
Asia, while MEG Energy transports oil to the Gulf Coast.
Both TransCanada and Enbridge are proposing alternative
pipelines to Keystone XL. TransCanada is considering a C$12
billion pipeline from Alberta to Canadas Atlantic Coast
called Energy East, while Enbridge is awaiting a decision by
Prime Minister Stephen Harper for the companys
controversial C$6.5 billion Northern Gateway line from
Alberta to Canadas Pacific coast.
The Nebraska court is reviewing a case brought by three
landowners along the proposed route who challenged a state
law that gave Governor Dave Heineman the power to approve the
project. A lower court invalidated the law, saying such
decisions rest with a special commission established in 1885
to take politics out of the taking of land for railroads.
Until last week, the State Department said the court case
wouldnt affect its ongoing review to determine whether
Keystone was in the nations interest to build.
A senior State Department official, who spoke on a conference
call with reporters on the condition of anonymity, said the
delay was prudent given the route could change if it is
rejected in Nebraska. The governor and a majority of the
state legislature support the project, however.
Agencies need additional time based on the uncertainty
created by the ongoing litigation in the Nebraska Supreme
Court which could ultimately affect the pipeline route,
the State Department said in a statement.
Critics said the delay allows Obama, who has said he will
make the final call after the State Department review is
complete, to punt a politically difficult decision.
Its shameful that as we begin spring construction
season, that hundreds
of my constituents will be denied an opportunity to go to
work on a project that will help secure Americas energy
future solely because the president wants to placate his
political base in an election year, Representative Lee
Terry, a Nebraska Republican, said in a statement after the
State Department announcement.
The pipelines path in Nebraska, one of three states the
unbuilt northern leg of Keystone would cross, was thrown into
doubt in February when a state judge invalidated legislation
that let the Republican governor approve the path.
The judge said that only the state Public Service Commission
-- an agency created to take politics out of decisions
involving the taking of land for private projects -- had that
Critics of Keystone, a $5.4 billion project that was first
proposed by TransCanada in 2008, argue its a risk to the
climate because it would encourage production of
Albertas oil sands, which releases more greenhouse
gases than the production of more conventional types of
The State Department, which has jurisdiction because the
project crosses an international border, was completing its
review to decide if Keystone was in the national interest. It
was weighing the project
economic and diplomatic impacts. Eight federal agencies had
until about May 1 to weigh in -- a deadline that is now
indefinitely pushed back.
On Jan. 31, the department released an lengthy environment
al review that found
Keystone probably wouldnt significantly contribute to
climate change because the oil sands in Alberta would be
developed with or without the pipeline.
Environmentalists contend Keystone is a linchpin to oil sands
This decision is irresponsible, unnecessary and
unacceptable, Landrieu said in a statement that called
the move nothing short of an indefinite delay.