Keystone pipeline clears big hurdle

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WASHINGTON -- The State Department concluded in its final environmental assessment issued Friday that the proposed Keystone XL pipeline would be unlikely to alter global greenhouse gas emissions, but officials cautioned they were still weighing whether or not the project would meet the test of President Barack Obama's broader climate strategy.

Though the report acknowledged that tapping the Canadian oil sands for the pipeline would produce more greenhouse gases, the assessment also said blocking the project would not prevent development of those resources.

The report "is not a decision document," said Kerri-Ann Jones, assistant secretary of state for oceans and international environmental and scientific affairs. "This document is only one factor that will be coming into the review process for this permit" sought by TransCanada, an energy giant based in Calgary, Alberta.

The $5.4 billion pipeline, which would transport heavy crude from Canadian oil sands in Alberta into the heart of the U.S. pipeline network, has become the focus of intense controversy. Foes say it will contribute to climate change; supporters say it will secure U.S. oil supplies from a friendly neighbor and create U.S. construction jobs.

The release of the long-awaited Final Environmental Impact Statement is certain to trigger an avalanche of lobbying aimed at Secretary of State John Kerry, who has made climate change a central focus of his career and will now begin preparing a decision.

Mr. Obama said in June that he would sign off on the proposal only if it "does not significantly exacerbate the climate problem."

The decision remains politically fraught for Democrats. Environmental activists fiercely oppose it, arguing that the pipeline could leak, would accelerate development of the greenhouse gas-intensive oil sands in Alberta and increase U.S. dependence on fossil fuels.

Wendy Abrams, founder of the Chicago-based nonprofit group Cool Globes and a major Democratic campaign contributor, said she felt a "gut-wrenching pain for my kids" when she read the report. She said it made her question her past support for Mr. Obama and Mr. Kerry.

The State Department's report includes 11 volumes of analysis on how the proposed pipeline would affect heavy-crude extraction in Canada's oil sands and reaches the same conclusion as its draft report did in March: No single infrastructure project will alter the course of oil development in Alberta. The report said "the proposed project is unlikely to significantly affect the rate of extraction in oil sands areas (based on expected oil prices, oil-sands supply costs, transport costs and supply-demand scenarios)."

Last week, TransCanada began shipping oil through the southern leg of the Keystone pipeline, which runs from Cushing, Okla., to Port Arthur, Texas. But the company is still waiting for a State Department permit for the 1,179-mile northern leg that would carry heavy crude from Canada into Montana and run to the small town of Steele City, Neb.

"We're very pleased with the release and about being able to move to this next stage of the process," said Russ Girling, chief executive of TransCanada. He said it would take about two years to construct the northern leg, but he cautioned that a long permit process could further delay the project.

The State Department's Ms. Jones said the report does not answer how this pipeline decision fits into the "broader national and international efforts to address climate change, or other questions of foreign policy or energy security." She added that the study relied on assumptions about pipeline capacity, oil prices and transportation and development costs that were "uncertain and changeable."

Oil industry officials welcomed the fact that the department had affirmed the idea that the pipeline decision did not have a major climate impact. "Time and time again, State reaches the same conclusion despite the unprecedented and thorough environmental review," said Cindy Schild, the American Petroleum Institute's senior manager for oil sands policy.

The report estimated that the project would generate about 1,950 annual construction jobs in Montana, South Dakota, Nebraska and Kansas over a two-year period and contribute about $3.4 billion to the U.S. gross domestic product. It would generate about 50 jobs once in operation.

In an interview this week, AFL-CIO President Richard Trumka said members of his labor federation back the project.



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