The Failure of Keystone XL

November 21, 2017

Facts

• On Monday, November 20, Nebraska’s Public Service Commission voted to authorize the construction of TransCanada’s Keystone XL pipeline through the state.
• The pipeline, which seeks to link Western Canadian oil sands and Bakken shale oil in North Dakota to Gulf Coast refineries in the United States, was first proposed nearly a decade ago but was blocked in 2015 by President Barack Obama, before President Donald Trump reversed that decision upon entering office in 2017.
• The decision by Nebraska regulators has been touted as the final major regulatory obstacle for the project to overcome before construction could commence; however, the commission’s approval for the pipeline was for an alternative route to that of TransCanada’s preferred option.
• An alternative route may lead to further delays by opening the possibility of additional local input and permit requirements. The State Department is also reviewing whether it must conduct additional analysis based on the alternative route proposed for the Nebraska portion.
• The project faces various ongoing court challenges likely to be energized by this decision and the fact that just last week TransCanada had to report a leak of 5,000 barrels of oil from the existing Keystone pipeline system.
• Finally, market conditions have changed since the project was initially proposed. TransCanada has yet to confirm whether the project is still commercially viable under these new conditions.

Opinion

The Keystone XL pipeline saga is a testament to how toxic the energy debate has become in the United States. In the decade since the pipeline was proposed, our failure to find common ground on which to build our energy future and tackle the major energy and climate challenges of our time has led to the process of holding midstream and other enabling infrastructure hostage.

When first proposed, Keystone was, like many other pipelines, controversial for those whose backyards it would traverse and for certain environmental organizations long opposed to Canadian oil sands operations. However, it should be noted that the U.S. government worked with Canadians over many years to support the development of this resource and ensure its delivery into the U.S. system, as a secure and long-term source of oil. With the failure to pass U.S. cap and trade legislation, the environmental community seized on the federal presidential permit process, through which the State Department works with other agencies to determine whether the pipeline is in the national interest, as a rallying point around which to organize pressure for the government to take more action to reduce emissions and reduce consumption of oil and other fossil-based energy resources. Both sides of the debate are firmly pitted against the other.

Pipeline opponents say that Canadian oil sands are more emissions intensive and more polluting than other sources of oil, that all the oil will be refined and then shipped outside the United States so the pipeline does nothing to help energy security, and that the oil transiting through the pipeline will increase U.S. vulnerability to spills and prolong our unhealthy dependence on oil in the transportation sector. Pipeline proponents say that Keystone is a vital creator of jobs and economic opportunity, a more reliable source of oil supply relative to oil imports from Venezuela, a better social investment than purchasing oil from other corrupt places, a safer way to move crude oil than by rail, and a much-needed source of energy, specifically suited to our refining sector and a valuable strategic asset in the event of an oil supply disruption.

The truth is that Keystone XL is just a pipeline and in and of itself a poor excuse for a productive conversation on how the United States intends to provide for its own energy security, seek economic opportunity in integration with its neighbors in Canada and Mexico, and tackle the growing challenges of climate change. It’s truly amazing to see how much has changed since the pipeline was first proposed: the United States produces a great deal more oil and gas; the Canadian federal government is pursuing more robust action on climate change than the U.S. federal government; the new U.S. administration has called into question the value of trade between the United States and Canada through the North American Free Trade Agreement (NAFTA) renegotiations; electric vehicles have made huge strides in commercial viability; and the market rationale for the pipeline may have eroded. Whether or not the Keystone XL pipeline is ever built, its real legacy is a hallmark of a wholly unproductive dialogue on energy.