Obama Administration To Decide Keystone XL

Pipeline pipe

By MarEx 2015-11-04 18:28:12

On November 4, the U.S. State Department formally denied a request from TransCanada to delay a review of the proposed Keystone XL pipeline. The Obama Administration can now be expected to make a final decision on the project before the next elections in 2016. 

The U.S. State Department found that it was most appropriate “to continue the review" without delay, spokesman John Kirby told a news conference on Wednesday.

TransCanada had requested a delay the federal review of the cross-border pipeline project pending results from a state-level permitting process. The Nebraska state review is expected to take considerable time, and waiting would push any final decision past the 2016 presidential elections.

“In order to allow time for certainty regarding the Nebraska route, TransCanada requests that the State Department pause in its review of the presidential permit application,” the company said in its filing.

In his daily briefing November 3, White House Press Secretary Josh Earnest characterized the request as “unusual” given how long TransCanada has been waiting for the completion of the federal process – a period of more than seven years.

Analysts have indicated that the request for delay could have been politically motivated. TransCanada has previously resisted the Nebraska permitting process, and many commentators believe that the request was made in hopes of gaining a favorable review from the next administration.

The Obama administration has expressed skepticism about the pipeline project and is widely expected to reject it once the State Department review is complete. All Republican contenders for the presidential nomination support its construction and all candidates for the Democratic nomination oppose it.

The review process timeline can be attributed in part to politics and in part to complexity of process. Secretary Earnest described its history as politicized, possibly more than “[any] infrastructure project in the history of the United States.”

For procedural delay the state level review in Nebraska has been noteworthy. The State Department waited several years while the Nebraska courts decided the fate of the pipeline's route. The final decision came on appeal in January 2015, giving a green light to the route and clearing TransCanada's way for a federal review. Additional lawsuits have recently forced the company to restart the state-level process, now with the Nebraska Public Service Commission; this is the source of delay referenced in TransCanada's recent letter. 

The pipeline is intended to carry Canadian oil sands crude across the border and through some six states to connect with existing pipelines at a terminal in Nebraska. TransCanada has already spent $2.5 billion on it, with the full cost projected to be in the range of $10 billion due to delays.

The bulk of the Keystone XL crude could be expected to go to refiners on the Gulf Coast, many of which export refined product to global markets, and there is considerable debate over what effect the extra crude supply would have on product prices. Additionally, in light of the recent drop in crude prices, uncertainty exists about the cost competitiveness of Canadian oil sands crude, a relatively capital- and energy-intensive product.

A decision on the pipeline could affect the future of foreign and domestic product shipment volumes from Gulf Coast refineries, domestic crude prices, and product prices for diesel and bunker fuels.