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Keystone Review Delay Draws Angry Reaction From Backers

By Jim Snyder and Susan Decker
April 19, 2014 12:00 AM EDT 606 Comments
A mock oil pipeline is carried during a Keystone XL oil pipeline demonstration near the White House in Washington, D.C.
Photographer: Andrew Harrer/Bloomberg
A mock oil pipeline is carried during a Keystone XL oil pipeline demonstration near the White House in Washington, D.C.

The Obama administration’s announcement yesterday that it was delaying a ruling on the Keystone XL oil pipeline drew an angry reaction from supporters of the $5.4 billion project, including some who said it was designed to push the issue beyond the November election.

“This decision is irresponsible, unnecessary and unacceptable,” Senate Energy and Natural Resources Committee Chairman Mary Landrieu, a Louisiana Democrat, said in a statement that called the move “nothing short of an indefinite delay.”

Opponents of the pipeline applauded the move, saying TransCanada Corp. (TRP)’s proposed link between Canada’s oil sands and U.S. Gulf Coast refineries would worsen global warming.

The delay could push until after the November midterm elections an issue that pits President Barack Obama’s environmental supporters against labor backers who want the construction jobs. Senate Democrats are trying to retain a slim majority and the list of incumbents at risk include several in states where support for Keystone is strong, such as Landrieu’s.

Eight federal agencies that had until early May to comment on the proposed pipeline will now get more time, according to a statement from the State Department, which is conducting the review to determine whether Keystone is in the nation’s interest to build. The notice didn’t include a new deadline.

Route Dispute

“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,” according to the statement yesterday. “The permit process will conclude once factors that have a significant impact on determining the national interest of the proposed project have been evaluated.”

The pipeline’s path in Nebraska, one of three states the 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 power. The decision has been appealed to the Nebraska Supreme Court.

“The entire reason to have a Public Service Commission is to avoid public favors to carriers,” saidDave Domina, an Omaha lawyer who represents landowners opposing the pipeline. “It was created in 1885 to avoid political favors to railroads and the same idea applies here.”

Expedited Case

Both sides have agreed that the case should be expedited at the state’s high court, Domina said. Assuming no delays, the case could be argued before the court in September or October, he said, with a decision several months later.

Officials in the offices of Nebraska Governor Dave Heineman and Attorney GeneralJon Bruning didn’t respond to requests for comment.

Bold Nebraska, a group opposed to the project, said the state Supreme Court won’t decide the appeal until January, and if the lower court is upheld TransCanada will need to apply to the Nebraska Public Service Commission. The commission by law has seven months for its pipeline reviews

A senior State Department official said in a conference call with reporters the delay wasn’t to avoid a politically sensitive decision before the election that will determine control of Congress.

Prudent Delay

It was prudent to give the agencies more time to review the project given the uncertainty in Nebraska and the fact that the route could ultimately be changed, according to the official who requested anonymity to discuss the decision.

“We are extremely disappointed and frustrated with yet another delay,” said Russ Girling, chief executive officer of TransCanada. “American men and women will miss out on another construction season where they could have worked to build Keystone XL and provided for their families. We feel for them.”

Representative Lee Terry, a Nebraska Republican, criticized the move, saying Obama had “punted a tough decision in the name of political expediency.”

The delay may mean that Obama doesn’t have to decide on an issue that has split two Democratic constituencies prior to the November mid-term elections.

Environmental groups and some big Democratic donors such as investor Tom Steyer oppose the project, saying it would increase the release of global warming emissions by promoting the development of the carbon-heavy oil sands in Alberta.

`Rotten Eggs'

Steyer, who has pledged $50 million of his own fortune to promote candidates who support action to address the risks of climate change, said in a statement that the delay was “rotten eggs for TransCanada and good news on Good Friday for those who oppose Keystone,” referring to the timing of the State Department’s announcement two days before Easter.

Some labor groups back the line as a way to create thousands of construction jobs. The Canadian government has lobbied hard for the project, viewing it as a way to promote its energy resources and reduce a discount that Western Canada crude sells for compared with other benchmarks.

“We are disappointed that politics continue to delay a decision on Keystone XL,” Jason MacDonald, communications director, for Prime Minister Stephen Harper, said in a statement.

The State Department official said it will also take time to review the more than 2.5 million comments it received, and incorporate those views in its national interest determination recommendation made to Obama. The official said aspects of the review would continue.

Remaining Time

The eight agencies would have at least 14 days after the Nebraska route is settled to continue their assessment of the project. That’s the time remaining in the current 90-day review for the agencies.

TransCanada proposed Keystone XL in 2008. It was opposed by Nebraska state officials who said a spill might pollute a sensitive ecosystem and a major aquifer.

Obama rejected an earlier route in January 2012, and invited TransCanada to reapply with a new path that addressed concerns in Nebraska. The revised route won the support of the governor and the state legislature, though it is still opposed by some landowners and environmentalists in the state.

The American Petroleum Institute, a lobbying group for the oil and gas industry, said the delay after six years of review “is not in our national interest” and said studies support building the pipeline. The group said Congress should take action without waiting for Obama.

`Sad Day'

“It’s a sad day for America’s workers when politics trumps job creating policy at the White House,” said Jack Gerard, president of the group.

House Speaker John Boehner, an Ohio Republican, said the delay was “shameful” because Keystone would create jobs and improve U.S. energy security.

The Natural Resources Defense Council, an environmental group that’s garnered the support of 10 former Nobel Peace Prize laureates in opposing Keystone, said it’s the pipeline that isn’t in the public interest and called the delay “the most prudent course of action possible.”

“Getting this decision right includes being able to evaluate the yet-to-be determined route through Nebraska and continuing to listen to the many voices that have raised concerns about Keystone XL,” said Susan Casey-Lefkowitz, director of the International Program at the council.

Jim Murphy, a counsel at the National Wildlife Federation, said the decision “shows the problems with the proposed Keystone XL tar sands pipeline continue to grow.”

To contact the reporters on this story: Jim Snyder in Washington at jsnyder24@bloomberg.net; Susan Decker in Washington at sdecker1@bloomberg.net

To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net Steve Geimann

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