Energy & Environment

Keystone XL: Not dead yet?

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President Obama’s rejection of the Keystone XL oil pipeline might not be the end of the road for the controversial project.

TransCanada Corp. has pledged to explore its remaining options for building the Canada-to-Texas pipeline, including filing a new application with the State Department.

{mosads}“There is a chance it’s not dead,” said Steven Paget, an analyst at FirstEnergy Capital in Calgary, Alberta.

In a Friday statement, TransCanada declined to offer specifics about its next steps. But observers say the main options are filing an international challenge under the North American Free Trade Agreement (NAFTA), seeking an act of Congress to override Obama or waiting until a new president takes office in January 2017 to file for a new permit.

“I don’t know what their next steps will be, and whether they will prepare a NAFTA challenge or not,” Paget said.

But keeping Keystone alive is likely to be difficult, with opinions of the project having hardened during seven years of intense political warfare.

Environmentalists had made Keystone their public enemy No. 1 in a campaign to prevent the growth of oil sands petroleum and fight the use of fossil fuels.

But Keystone’s supporters also put up a significant fight, and they don’t want TransCanada to back down.

Freshman Rep. Brian Babin (R-Texas) is asking his colleagues in Congress to sign a letter to Canadian Prime Minister Justin Trudeau, urging him to hold off any efforts to stop Keystone, reroute it away from the United States or otherwise change it.

“After President Obama leaves office, decisions such as approval of the Keystone XL pipeline will fall upon his successor,” the letter says. “Simply put, if the American people choose a president who supports building Keystone XL, that president can reverse this misguided decision and authorize the project the day he or she takes office.

Reps. John Fleming (R-La.), Bob Gibbs (R-Ohio), Ted Poe (R-Texas) and Jeff Duncan (R-S.C.) have so far endorsed the letter, though Babin is waiting a week for any other members to jump on board before sending the letter to Ottawa.

Paget noted that TransCanada has a big financial stake in what happens to Keystone next; the developer has already sunk $2.6 billion into the project through permit preparations, buying property and other actions.

“One of the hard parts is, how much of the costs do they have to write off?” he said. “I think they will do what their accountants tell them is the right thing. They may have to write off all of their invested capital, or some of it. We don’t know.”

The Canadian Press reported in August that TransCanada was actively exploring its rights under NAFTA if Obama rejected the proposal.

The company has certain economic rights under the 1994 treaty, and it could ask a tribunal to mandate compensation from the United States for rejecting the pipeline, or even require that the project be approved.

But the United States has won every challenge it has faced under NAFTA, making victory there a long shot.

Trudeau, Canada’s recently elected prime minister, supports Keystone but not nearly as strongly as his predecessor Stephen Harper. He is unlikely to back TransCanada in a NAFTA challenge.

Rep. Kevin Cramer (R-N.D.), who sponsored legislation earlier this year to approve Keystone, said congressional action is unlikely. Though the bill passed the Republican Congress, Obama vetoed it.

“We didn’t have a veto-proof majority before. I don’t see that we have one now in terms of stand-alone efforts,” Cramer said.

Keystone is also taking a backseat to other issues on Capitol Hill, Cramer said.

“In terms of my priorities for energy security, while Keystone is symbolic … it pales in comparison to the high priority for me, which is lifting the crude oil export ban,” he said.

Cramer said his focus is finding a way before the end of the year to lift the export ban, which would likely be attached to other legislation.

With Congress unlikely to act, hoping for the election of a Republican president might be TransCanada’s best bet. Although the application would be treated as new, all of the GOP candidates have pledged to approve Keystone quickly.

Environmental groups would surely fight back, and in some areas, such as Nebraska, there are still local problems standing in TransCanada’s way. But the presidential permit has always been the most significant obstacle for Keystone.

Environmental advocates, on the other hand, think the book is closed on the Keystone pipeline following Obama’s rejection on Friday.

“This pipeline is dead. This pipeline will not be built. The president is the final authority,” Michael Brune, executive director of the Sierra Club, told reporters.

“It is true that TransCanada or another company, could propose a pipeline,” he said. “That won’t happen. The price of oil is too low.”

Tags John Fleming Ted Poe

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