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News Extra: US rejects Keystone XL pipeline and claims leadership on climate change

13 November 2015

On November 6, President Barack Obama announced that he would reject the $8 billion Keystone XL project, which would have involved the construction of a 1,200-mile pipeline to carry crude from the tar sands of Alberta to refineries on the Texas Gulf coast. This ends seven years of political arm-wrestling, is a significant victory for environmentalists and a serious blow to North American oil interests.

Stock image
Stock image

“America is now a global leader when it comes to taking serious action on climate change,” Obama said from the White House. “Frankly, approving that project would have undercut that global leadership, and that is the biggest risk we face: not acting.” He added: “Today, the United States is leading on climate change.”

TransCanada, the Canadian company behind the pipeline, said it was disappointed with Obama’s decision. “Today, misplaced symbolism was chosen over merit and science – rhetoric won out over reason,” Russ Girling, the chief executive of TransCanada, said in a statement.

He said Keystone’s rejection would be bad for jobs and the economy in Canada and the US and the project’s (mainly Republican) supporters in Congress vowed to continue fighting to take the decision out of Obama’s hands and force through approval of the project.

When TransCanada first proposed the project in 2008, Keystone XL was seen as one of just thousands of pipelines across North America but over the years, because of its size, it became a symbol of the fight against climate change.

The President said his decision followed the State Department’s assessment that the pipeline “would not serve the national interests of the United States”.

Obama said the State Department review, which sought public opinion and consultation with other agencies, concluded that the pipeline would “not make a meaningful long term contribution to our economy”, especially as lower oil prices and a recovering labour market had already helped boost job numbers and cut gasoline costs.

But the Canadian company published a lengthy statement disputing the findings and arguing that the pipeline would also carry domestic oil from North Dakota shale. TransCanada later said it would continue its efforts to push the project through.

The timing was also dictated by events in Canada, and the swearing-in earlier this week of a new Liberal prime minister, Justin Trudeau, who has moved swiftly to distance himself from the pro-oil stance of his predecessor, Stephen Harper, and commit to fighting climate change.

Trudeau, though ostensibly a supporter of Keystone, had opposed Harper’s aggressive lobbying for the project.

This decision comes at a time when North American pipeline projects are at a crossroads. Until recently the sector was expanding rapidly, but prospects have been undercut by a 50% slide in oil prices and tough environmental reviews. Also, oil producers are cutting back investments, so there is less crude to carry.

Other companies have also delayed pipeline projects. Sunoco Logistics, part of US pipeline giant Energy Transfer , is slowing development plans for an expansion project in West Texas, while Blueknight Energy Partners LP has delayed building one in East Texas.

Also, a day before Obama rejected its Keystone XL line, TransCanada said it was scaling back plans for its Energy East project, which would carry crude from Alberta to Canada's east coast, another project vocally opposed by environmental groups.

Its rival Enbridge saw its Northern Gateway project in British Columbia blocked by green and First Nation groups, and Trudeau’s election is likely to finally bury the project.

The difficulties facing the pipeline sector could provide some respite for railway transportation of crude and oil products in the USA and Canada. This transportation method has been in decline over the last two years since the July 2013 Lac Megantic disaster in Quebec when a crude train derailed and exploded in the town centre, killing 47.

Further oil train crashes have happened regularly since then, with the most recent on November 8 when a Canadian Pacific Railway train derailed at Watertown in Wisconsin, spilling an estimated 1,000 gallons of crude oil and causing local homes to be evacuated. The previous day, another crash in at Alma in Wisconsin led to tanker cars leaking more than 20,000 gallons of ethanol into the Mississippi River.

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