U.S., in Reversal, Issues Permit for Keystone Oil Pipeline


The new secretary of state, Rex W. Tillerson, formerly the chief executive of Exxon Mobil, had recused himself from the decision. The announcement said the permit was signed by the under secretary of state for political affairs, Thomas A. Shannon Jr.

The pipeline still faces hurdles before it can be built. It needs the approval of the Nebraska Public Service Commission and local landowners who are concerned about their water and land rights. Protests are likely since the project has become an important symbol for the environmental movement, with the Canadian oil sands among the most carbon-intensive oil supplies. Mining the oil sands requires vast amounts of energy for extraction and processing.

In addition, interest among many oil companies in the oil sands is waning amid sluggish oil prices. Extraction from the oil sands, situated in the sub-Arctic boreal forest, is expensive. Statoil and Total, two European energy giants, have abandoned their production projects. In recent weeks, Royal Dutch Shell agreed to sell most of its oil sands assets for $8.5 billion. And Exxon Mobil wrote down 3.5 billion barrels of reserves, conceding the oil sands were not economically attractive enough to develop for the next few years at least.

Nevertheless, Canadian production continues to grow as projects that were conceived when prices were higher begin to operate. And the Keystone effort is central to the future of TransCanada, the pipeline builder and a major force in the Canadian oil patch.

The United States Chamber of Commerce and other business groups applauded the administration’s action. Jack Gerard, the president and chief executive of the American Petroleum Institute, the primary industry lobbying arm, said the decision was “welcome news” and was “critical to creating American jobs, growing the economy and making our nation more energy secure.’’

Opponents say the pipeline is unnecessary at a time when American oil production is soaring and future demand has been put in question by increasingly efficient cars, electric cars and growing concerns over climate change.

“The Keystone pipeline would be a straw running through the heart of America to transport the dirtiest oil in the world to the thirstiest foreign markets,” said Senator Edward J. Markey, a Massachusetts Democrat.

Originally planned to open in 2012, the Keystone XL would transport up to 830,000 barrels a day of Canadian and North Dakota crude to Steele City, Neb., where it would connect with existing pipelines to deliver the sludgy oil to refineries in Texas and Louisiana for processing. Most of the refined product would probably be exported, or it might enable domestic producers to export more oil produced in Texas, Louisiana and Oklahoma.

When the project was in the planning stages, the United States was highly dependent on oil from the Middle East. But in recent years, domestic production has nearly doubled, and the United States now exports increasing amounts of oil and natural gas. Oil prices have been slashed in half over the last three years, although many analysts predict that petroleum prices will rebound in the next decade, when the pipeline would begin to operate.

For Canada, and especially Prime Minister Justin Trudeau, the pipeline represents a mixed blessing. Mr. Trudeau publicly supports the pipeline as a tool to give Canada’s economy a boost, but an increase in oil sands production could undercut his commitment to reduce greenhouse gas emissions as promised in the 2015 Paris climate agreement.

Protests helped sway the Obama administration to reject the project, and environmentalists have been further emboldened by demonstrations last year in North Dakota, mostly by Native American groups, that have delayed another project, the Dakota Access Pipeline.

Environmental groups are already promising to aid local groups in blocking the Keystone pipeline’s construction. “We’ll use every tool in the kit to stop this dangerous tar sands oil pipeline project,” said Rhea Suh, president of the Natural Resources Defense Council.

The project would provide for thousands of construction jobs, and it has attracted the support of several labor unions.

President Trump has made infrastructure building a centerpiece of his efforts to spur economic growth. At the beginning of his term, he instructed the Commerce Department to establish a plan requiring that new pipelines be constructed with American-made materials like steel. But the White House has since suggested that the Keystone project would not be subjected to those rules because it is not a new project.

Continue reading the main story

Source link