New bid for Keystone pipeline seen as political ‘ammunition’

BLOOMBERG — A fresh application from TransCanada Corp. to build the Keystone XL oil pipeline assures that the project, strongly opposed by environmental groups, will remain an issue through the November U.S. presidential election.

TransCanada today re-applied for a U.S. permit to build the $5.3 billion pipeline that stalled in November when President Barack Obama delayed the project. Last month, House Republicans sought to advance the pipeline, which crosses the Canadian border, by adding language to a highway spending bill that would set a 30-day deadline to issue a permit.

Republicans have said Obama’s decision cost jobs and led to higher gasoline prices. The new permit application gives Republicans ammunition to try and force Obama’s hand on the issue, said Kevin Book, managing director at ClearView Energy Partners LLC, a Washington-based policy-analysis firm.

“It gives ammunition to the Republicans who want to include language in any bill they can pass,” Book said in an interview. “It may create pressure on Obama.”

Obama rejected the pipeline after Nebraska state officials and environmental groups objected to the route that crosses the Ogallala aquifer, a drinking-water source for 1.5 million people. The new application uses already-reviewed routes through Montana and South Dakota and will add an “alternative” path through Nebraska determined by the state’s Department of Environmental Quality, according to a statement from the Calgary-based TransCanada today (May 4).

SIGNIFICANT ENVIRONMENTAL FIGHT
Obama “cited a need for a new application from TransCanada and a new route in Nebraska,” Senate Republican Leader Mitch McConnell said in a statement. “Now that he has both, what will his excuse be?”

The company initially applied for a permit in 2008.

The U.S. State Department, which has jurisdiction over the project because it crosses an international border, said it will conduct a review to determine if the project is in the national interest. That will include hiring an outside consultant to evaluate potential environmental impacts, the department said.

“This remains the most significant environmental fight of the Obama years,” Bill McKibben, founder of 350.org, an organization that advocates for reducing climate change, said in an interview.

U.S. Sen. Bernie Sanders, a Vermont independent, and 13 other lawmakers last year sought an investigation into whether the department’s original contractor, Cardno Entrix, had a conflict of interest. A February report from the State Department’s inspector general recommended a revised contractor selection process to avoid the appearance of improper influence.

Cardno Entrix, which had described TransCanada as a major client, is a subsidiary of Cardno Ltd. of Brisbane, Australia.

The environmental review will take at least six months, according to Susan Casey-Lefkowitz, director of the international program at the Natural Resources Defense Council.

“All we’ve heard from this administration is that they are committed to doing a thorough review of this northern segment of the Keystone XL pipeline,” Casey-Lefkowitz said in an interview. “The slate is clean. They need to start from scratch.”

‘OUT OF EXCUSES’
As originally envisioned, the $7.6 billion project would’ve expanded TransCanada’s existing Keystone pipeline to carry as much as 830,000 barrels a day from Canada’s oil sands and North Dakota’s Bakken Shale along a 1,661-mile path to Gulf Coast refineries. The scaled-back proposal covers a segment from the Canadian border to Steele City, Neb.

Obama is now “out of excuses for blocking this job- creating energy project any longer,” House Speaker John Boehner, an Ohio Republican, said in a statement.

TransCanada expects to start construction of this portion of Keystone XL in the first quarter of next year and finish by late 2014 or early 2015, the company said. It anticipates it will begin construction as soon as June on a pipeline from Cushing, Okla., to Texas refineries that was part of the original Keystone XL proposal.

“The president will let the State Department complete its review of the new application,” Michael Levi, a senior fellow at the Council on Foreign Relations, said in an interview. “I can’t imagine that the pipeline backers would want a legally ambiguous effort to push the pipeline through that could then land them in court.”

While a Senate-House conference committee is scheduled to take up the highway spending bill next week, it’s unlikely that the Democrats would go along with the House version that sets a deadline for the Federal Energy Regulatory Commission to approve the oil pipeline, Book said. Many Democrats have already voted for Keystone XL in other bills, giving them political cover.

“As we get closer to an election, the Senate Democrats are not going to give the Republicans an enormous victory,” he said. “The White House is obviously not going to change their mind.”

Nebraska Senator Ben Nelson, a Democrat who isn’t seeking re-election, said in a statement that he hoped, “Congress will avoid further political meddling in the review process” while Nebraska officials “work with TransCanada on a route that is acceptable to Nebraskans.”

OPINION POLL
In a telephone poll of 1,000 likely voters conducted April 6 though April 13, 79% said they favor construction of the pipeline and 86% said they would rather import oil from Canada then from members of the Organization of Petroleum Exporting Countries, according to Mike McKenna, an oil industry lobbyist and president of MWR Strategies Inc. in Washington.

TransCanada “is going to give the president the opportunity to approve the project before the election,” McKenna said in an interview. “It’s been out enough in the public consciousness that its beginning to cost him votes.”

The survey, conducted by the American Energy Alliance, a Washington-based industry group, shows that Obama may pay a political price for continuing to block the project, McKenna said. The poll has a margin of error of plus or minus 3.1%.