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Keystone XL Final Supplemental Environmental Impact Statement: GHG Analysis & Next Steps

James Coleman's picture
Associate Professor SMU Dedman School of Law

James Coleman is an associate professor at Southern Methodist University’s Dedman School of Law. His scholarship addresses regulation of international energy companies, focusing on how countries...

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Keystone XL Analysis

The Final Supplemental Environmental Impact Statement & Next Steps

On January 31, the United States State Department issued its Final Supplemental Environmental Impact Statement (EIS) on the Keystone XL pipeline, which is designed to transport oil sands bitumen from Hardisty, Alberta to Steele City, Nebraska.  The environmental impact statement was issued to comply with the National Environmental Policy Act, 42 U.S.C. 4321 et seq., which requires agencies to consider the environmental impact of major federal actions.

As noted in a previous post on Ablawg, President Obama raised the stakes for this environmental impact statement in June when he stated that he would only approve the pipeline if it would “not significantly exacerbate the problem of carbon pollution.”  As described below, the final EIS suggests that Keystone XL meets this standard, but does not entirely rule out a contrary decision. 

Now President Obama must decide whether the pipeline is in the “national interest” under Executive Order 13337, which governs cross-border pipelines.  But first there will be 105 days of comment periods for federal agencies and the public.  A further wildcard is that the State Department’s Inspector General is imminently expected to issue a report on whether the independent contractors that performed the environmental impact assessment on Keystone XL had a conflict of interest.

The President’s decision on the pipeline is delegated to Secretary of State John Kerry.  If other US federal agencies object to his decision, then the President will have to decide himself whether to overrule Secretary Kerry’s decision.  If the pipeline is approved, environmental groups will challenge this decision in U.S. court.

State Department’s Analysis of the Greenhouse Gas Impact of Keystone XL

The State Department concludes that Keystone XL, like “any one crude transport project . . . is unlikely to significantly impact the rate of extraction in the oil sands” and thus unlikely to increase greenhouse gas emissions.  State Department, Final Supplemental Environmental Impact Statement at ES-16.  And it goes further, stating that even if “new east-west and cross-border pipelines were both completely constrained, oil sands crude could reach U.S. and Canadian refineries by rail.”  State Department, Final Supplemental Environmental Impact Statement at ES-12.  As a result, the State Department estimates that rejecting the pipeline would actually lead to higher greenhouse gas emissions than approving it, due to the higher energy requirements of shipping crude by rail—“28 to 42 percent” higher.   State Department, Final Supplemental Environmental Impact Statement at ES-34 &Table ES-6

The State Department’s estimate that rejecting the pipeline would mean 28 to 42 percent higher emissions due to rail is a significant increase from its earlier assessment that rejecting the pipeline would increase emissions by “about eight percent.”  State Department, Draft Supplemental Environmental Impact Statement 5.1-26.  That being said, the State Department’s conclusion that the pipeline is “unlikely to significantly impact” oil sands extraction is a slight retreat from its Draft report, which concluded there would be “no substantive change in global GHG emissions.”  State Department, Draft Supplemental Environmental Impact Statement 4.15-107.  And the State Department also acknowledged that, if global oil prices fell significantly (West Texas Intermediate under $75 a barrel), then rejecting the pipeline could decrease greenhouse gas emissions because “higher transportation costs could have a substantial impact on oil sands production levels.”  State Department, Final Supplemental Environmental Impact Statement at ES-34 &Table ES-12.

Moving forward, a crucial question will be if other U.S. federal agencies support the State Department’s analysis.  When the State Department released its draft environmental impact statement, the U.S. Environmental Protection Agency critiqued its treatment of crude-by-rail.  It requested “a more careful review of . . . rail transport options,” because it thought that, if the pipeline was not approved, high crude-by-rail costs might slow oil sands production and thus, greenhouse gas emissions.  U.S. EPA Keystone XL Project Comment Letter (Apr. 22, 2013).  In response, the State Department expanded its climate change, oil market, and rail transport analysis.  State Department, Final Supplemental Environmental Impact Statement at ES-34 &Table ES-1.  It remains to be seen whether agencies like the Environmental Protection Agency will be satisfied with the expanded analysis or remain skeptical of the State Department’s mostly unaltered conclusions.

Photo Credit: Keystone XL Analysis/shutterstock

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Bob Meinetz's picture
Bob Meinetz on Feb 22, 2014

James, the final EIS completely ignores the influence America’s decision will have on other countries and global climate negotiations. If the most powerful nation on Earth takes a business-as-usual approach to fossil fuel extraction, we  will essentially abandon the right to any kind of leadership role in addressing climate change.

Additionally, with proof of State Dept. internal bias and conflict of interest, Obama would be wise not to assign much importance to its report.

The E.P.A. is correct in concluding that the idea that tar sands oil “will get to market anyway” is a straw man. Tar sands oil is already getting to market by rail – it just costs more. That makes it less saleable, attracts less investment, and leads to less extraction and destruction of pristine Albertan forest. The oil industry itself admits the E.P.A. is essentially correct in its analysis:

“Of the 864 industry executives who responded to the think tank’s [Fraser Institute] 2013 Global Petroleum Survey, 62 per cent said their assessment of Western Canada as an investment venue would deteriorate if pipeline bottlenecks continue to constrain movement of oil to Eastern Canada, export markets overseas, and U.S. refiners. One respondent described pipeline constraints as ‘the single biggest risk to the industry today in Western Canada.’

James Coleman's picture
James Coleman on Feb 24, 2014

Thanks for your comments, Bob. I agree that US agencies do not yet have any handle on how to assess whether US actions will help or hinder other countries’ climate regulations. To be fair, that is an extremely difficult and complex question, which is why some have suggested that it may not even be possible to calculate the benefit of domestic climate action (or the social cost of carbon) given that the real intent of domestic actions is to spur international efforts. I have a forthcoming article in the Harvard Environmental Law Review that discusses ways that domestic action can be calibrated to encourage action in other countries. 

You also note the interesting disconnect between the industry’s focus on pipeline capacity and State’s conclusion that even if all pipelines are constrained, oil sands production will be unaffected. For what it’s worth, I think State would acknoweldge that pipeline constraints are a *risk* for the oil sands: after all, if oil prices fall *and* pipelines are constrained, State says there would be a substantial affect on the oil sands.  But State would say that, despite that risk, the *most likely* scenario is that oil sands production is not affected, producers just pay a bit more for transport and earn a bit less profit. That being said, I agree that it’s hard to imagine that increased profitability won’t have some impact on future investment, at least on the margin, but that’s how State would square the circle, I believe.

Steven Scannell's picture
Steven Scannell on Feb 28, 2014

Looking at the photo it seems to me quite like my track pipe monorail design.  But of course we’re looking at just a nice steel oil pipe.   My pipe would service wind mills on the great plains that produce hydrogen and compressed air.  The infrastructure we need is on www.environmentalfisherman.com.   Be warned: I’m a fisherman and not an engineer, although I did work on a few boats as the “engineer”.   Please look at the concept and not so much at the quality of the presentation.   Thanks.   

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