Cautious Western insurers rebuild business ties with Iran
* Aviation, energy, political risk insurance under discussion
By John Kemp
LONDON, Sept 6 By submitting a revised route for its controversial Keystone XL pipeline with only minor modifications, TransCanada on Wednesday called the bluff of the Obama administration.
The company has offered small changes to meet the narrow objections cited by the president when he rejected the previous application in January - but otherwise left the route and the project unchanged.
Concerns about possible leaks from a section of pipeline crossing the Sand Hills region in Nebraska have become a symbol for a much bigger conflict about whether Canada's vast tar sands, and new resources like North Dakota's Bakken, should be developed to promote energy security, or locked away to prevent climate change.
Keystone has become the focal point for a proxy war which has drawn in environmental groups like the Natural Resources Defense Council (NRDC), as well as the American Petroleum Institute (API). It has sucked in the U.S. and Canadian governments, both major political parties in the United States, and now both the presidential campaigns, and will almost certainly feature prominently in the forthcoming presidential debates.
In January, President Barack Obama rejected the last application, claiming Congress had left him with insufficient time to evaluate all the impacts properly but left the door open to approving it eventually, after the election is over. In contrast, Republican challenger Mitt Romney has made approving Keystone one of the most prominent elements in his campaign plan for a stronger middle class.
The API's "Vote 4 Energy" campaign is now airing advertisements and campaigning in favour of Keystone and other pro-drilling policies in five swing states that could be crucial to the outcome of the presidential election.
Amid all this political activity, it is easy to forget the fight is supposed to be over just one relatively small section in a total route stretching from Canada to the Gulf of Mexico.
Using one small part of Keystone to shape broader energy strategy in this way is a misuse of the permitting and environmental impact process, and risks bringing both into disrepute. Romney has already made reforming the regulatory process one of his top five energy priorities.
It would be more honest to admit the proxy war has never really been about spills in the Sand Hills and is really about the sort of energy policy that the United States wants for the next decade.
THE SAND HILLS
In August 2011, the U.S. Department of State, which advises the president on all permits for pipelines crossing an international border, released a "final" environmental impact statement (FEIS) for the proposed pipeline as required by the National Environmental Policy Act (NEPA).
On November 10, however, the Department postponed a final decision, announcing "it was necessary to seek additional information regarding potential alternative routes around the Sand Hills in Nebraska to inform the determination regarding whether issuing a permit for the proposed Keystone XL pipeline is in the national interest."
On November 14, TransCanada reached agreement with Nebraska on some minor route modifications to reduce the pipeline's footprint in the Sand Hills.
On December 23, Congress rushed through, and the president signed, all in a single day, legislation requiring the president to issue a permit within 60 days, or make a determination that it was not in the national interest, and explain his reasons in a report to Congress.
Finally, on January 18, 2012, the president rejected the application. Acting on advice from the State Department, he announced 60 days was insufficient to obtain and assess all the extra information the department had sought in November. The project would therefore not serve the national interest.
"The Sand Hills areas possesses a combination of characteristics that are not present together elsewhere along the proposed route" the State Department explained in the required report to Congress. These include high value wetlands, risk of wind erosion and presence of shallow ground water in giant Ogallala aquifer used for drinking water and vital for farming.
Because of the earlier modifications agreed with Nebraska, there was not enough time in 60 days to redo the analysis on the section which had been moved. "In light of the reroute of the pipeline ... there is incomplete information regarding the potential environmental impacts ... (as well as socioeconomic, environmental justice and cultural impacts)" officials wrote.
If ever a company has been penalised for trying to do the right thing, and meet concerns expressed by objectors, then TransCanada must be it. Its application was turned down by the federal government because of last-minute modifications it had made to satisfy local communities and state regulators.
The Sand Hills has never been the sole objection for groups like the NRDC. But no one has ever been quite clear whether it is the only objection to for the Obama administration. Rejecting the application in January, the president emphasised that it was not "a judgement on the merits of the pipeline."
The White House has strongly implied it does not have a problem with other sections of the route or with the principal of the pipeline, without ever explicitly committing to approve it if the Nebraska section could be ironed out.
As part of his "all of the above" energy strategy, the president announced he was directing the administration to help expedite approvals TransCanada needs for the southern leg of the line from Cushing in Oklahoma to Port Arthur in Texas on the Gulf of Mexico. It was a somewhat empty gesture since that leg of the pipeline, which is wholly domestic, does not need presidential authorisation.
White House officials also confirmed they were encouraging TransCanada to submit a new application for the northern leg, though a decision could not be reached before 2013.
In May, TransCanada decided to test the administration's commitment by submitting a new application. The submission contained all the non-environmental information to support a permit. TransCanada promised to add environmental data once a route had been selected by the pipeline company in consultation with Nebraska state officials.
TransCanada noted, with just a hint of legal menace, the earlier rejection "was based solely on the rationale that the time provided for a decision was not adequate to complete the national interest review ... including specifically the assessment of potential alternative pipeline routes that avoid the Sand Hills region".
"The president's acceptance of the (State) Department's recommendation to deny the permit rested on the same reasoning."
On September 5, TransCanada announced it was formally submitting a supplemental environmental report (SER) to regulators in Nebraska for a new route designed to reduce the impact on local lands and sensitive resources, with simultaneous submission to the State Department ().
Nebraska's Department of Environmental Quality will now have to prepare an evaluation, hold a public hearing, and submit the final report to the state governor, who has 30 days to approve or reject it. Only then will the State Department have to make its own recommendations. All of which will ensure the president, whoever it is, will not have to make a decision until 2013 (ecmp.nebraska.gov/deq-seis/).
Route changes and a new supplemental environmental impact statement (SEIS) could provide Obama with the political cover needed to mount a climb down on the issue and allow the pipeline to go ahead after the election.
Certainly that's what TransCanada and others with an interest in fossil energy have been led to believe. But it would amount to a betrayal of the president's strongest supporters in the environmental movement, who have been led to believe he might continue to oppose it. Either way, someone is going to feel bitterly let down.
Opponents have made clear they oppose the pipeline on principal, regardless of route, because it would encourage development of tar sands in Canada as well as exploitation of U.S. resources like Bakken. Cheap oil and gas generates more emissions and undercuts the competitiveness of clean technologies.
For its part, the oil and gas industry has exploited the firestorm to step up pressure on the administration to take a more friendly approach to fossil fuels, and moderate its bias in favour of clean fuels.
The proxy war has been fought out through duelling environmental studies, with plenty of litigation and lobbying at both state and federal levels. It has kept a small army of busy. But NEPA is not meant to be a full-employment law for economists, lawyers and lobbyists. Nor is it meant to set to national energy policy.
Fake fights over small elements of an enormous infrastructure project are not really the best way to articulate the energy and environmental choices the United States faces over the next decade.
* Aviation, energy, political risk insurance under discussion
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