Keystone pipeline clears major hurdle

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The controversial Keystone XL oil pipeline cleared a major hurdle on Friday as the State Department ruled the project wouldn’t significantly increase greenhouse gas emissions.

The finding puts the pipeline one step closer to approval, and sets up a new battle between environmental groups and oil companies over whether the project is in the national interest.

The Environmental Impact Statement on the project reiterates key parts of a draft analysis released early last year, finding that oil sands extraction would continue regardless of whether the pipeline is built.

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"Approval or denial of any one crude oil transport project, including the proposed Project, is 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 based on expected oil prices, oil-sands supply costs, transport costs, and supply-demand scenarios," the report said.

The finding could be crucial, as President Obama has said he would only approve the pipeline if he was convinced it would not "significantly exacerbate carbon emissions."

The report also notes that a steep drop in oil prices, and "long-term constraints on any new pipeline capacity" -- and resulted in higher transportation costs of the oil -- then there could be a "substantial impact on oil sands production."

On the other had, the report states Keystone XL would transport 830,000 barrels of oil each day, adding an extra 1.3 million to 27.4 million metric tons of carbon dioxide to the atmosphere every year.

While the report doesn't make the claim that Keystone would drastically "exacerbate emissions," it does state the crude oil will make it to market either way -- as a result Obama will have to determine if that oil will be burned even if he denies the project.

The release marks the end of a five-year lobbying battle over the report on the environmental impact of Keystone, a project of TransCanada Corp. that would carry oil sands from Alberta to the Gulf Coast.

The oil industry hailed State's findings, arguing they should lay to rest concerns about the pipeline.

"Five years, five federal reviews, dozens of public meetings, over a million comments and one conclusion ─ the Keystone XL pipeline is safe for the environment," said Jack Gerard, president and CEO of the American Petroleum Institute.

"This final review puts to rest any credible concerns about the pipeline's potential negative impact on the environment. This long awaited project should now be swiftly approved. It's time to put thousands of Americans to work.”

Speaker John Boehner (R-Ohio), a Keystone backer, said Obama is "out of excuses."

“If President Obama wants to make this a ‘year of action’ he will stand up to the extreme Left in his own party, stand with the overwhelming majority of American people, and approve this critical project,” Boehner said in a statement.

But green groups, which are waging a national campaign to stop the pipeline, said the report bolsters their case by acknowledging that the pipeline could worsen climate change.

“Even though the State Department continues to downplay clear evidence that the Keystone XL pipeline would lead to tar sands expansion and significantly worsen carbon pollution, it has, for the first time, acknowledged that the proposed project could accelerate climate change," said Susan Casey-Lefkowitz of the Natural Resources Defense Council.

Liberals in Congress made a similar argument.

“While still flawed, this environmental review recognizes that the Keystone XL tar sands pipeline could have a significant effect on carbon pollution, depending on variables such as oil prices and transportation costs,” said Rep. Henry Waxman (D-Calif.).

“Keystone XL is the oil industry’s number one priority because it is critical to their plans to triple production of tar sands, the most carbon-polluting oil on the planet.”

Obama has made clear he will have the final say over whether the project goes forward, and is under intense pressure from green groups to reject it ahead of the midterm elections.

But Republicans, oil industry groups, the Canadian government, unions and some Democratic lawmakers are pushing Obama to approve the project, arguing it would create jobs and boost the economy.

Before the decision reaches Obama's desk, there will be an interagency review, lasting roughly 90 days, where administration officials will determine whether Keystone XL is in the nation's best interest.

In addition, State's Office of Inspector General is compiling a report into possible conflicts of interests with a contractor that worked on the environmental impact statement.

Environmentalists say the entire process was compromised, and are awaiting two separate reports into the matter that the IG office plans to release in early 2014.

On a call with reporters on Friday, State official Kerri Ann Jones said that she is confident the final environmental review followed procedures and was not tainted by a conflict of interest.

Jones said Secretary of State John Kerry will weigh the analysis against global markets, the country's energy security goals and broader national and international efforts to fight climate change.

She wouldn't commit to a hard timeline on when Kerry would make his determination on Keystone XL.

"It important for us to move forward in our process, and we wanted to get this document out and keep moving,” Jones said.

Still, some lawmakers who support Keystone are concerned Obama will find a way to delay the process again.

"The report is vague and provides no timeline for a final decision, giving the president broad room to postpone a decision further," said Sen. John Hoeven (R-N.D.) in a statement. "That would be consistent with his tactic over the past five years of trying to defeat the project through bureaucratic delay and deferral." 

— This story was updated at 4:34 p.m.