House approves Keystone bill, as court ruling delivers win to pipeline backers

House approves Keystone bill, as court ruling delivers win to pipeline backers

Published January 09, 2015 FoxNews.com

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The House easily approved a bill on Friday to authorize construction of the Keystone pipeline, just hours after Nebraska's highest court tossed a lawsuit challenging the route -- increasing pressure on President Obama to authorize the long-delayed project.

The House approved the bill on a 266-153 vote, with 28 Democrats joining majority Republicans in voting for it.The Senate is set to consider the legislation next week, and sponsors say it has more than enough support to pass.

But the White House has said Obama will veto the bill. And even though the Nebraska court case was one of the reasons the administration was reluctant to act, the ruling earlier Friday did little to change the president's position.

Spokesman Eric Schultz said the State Department will review the court's decision, but "as we have made clear, we are going to let that process play out." He said regardless of the ruling, the House bill still conflicts with presidential authority and the review process.

"If presented to the president, he will veto the bill," Schultz said.

The developments Friday set Congress on a collision course with the White House in a matter of days, with pipeline supporters only more energized thanks to the Nebraska ruling.

"President Obama is out of excuses for deciding whether or not to allow thousands of Americans to get back to work," Senate Majority Leader Mitch McConnell, R-Ky., said in a statement, urging Obama to reverse his veto threat in light of the court decision.

House Speaker John Boehner made the same appeal, saying "a presidential veto would put [Obama's] own political interests ahead of the needs and priorities of the American people."

Earlier, in a victory for pipeline backers, the Nebraska Supreme Court ruled that three landowners who sued failed to show they had legal standing to bring their case.

The closely watched Nebraska Supreme Court decision could remove a major roadblock for the $7 billion cross-continental project, which would run from Canada to Texas. Obama has long resisted moving forward on the project, citing both the Nebraska lawsuit and a State Department review process.

While the White House made clear Friday they would continue to wait for the State Department review, the Nebraska court decision left pro-pipeline lawmakers quickly losing patience with the administration given the years-long delay.

"The president has been hiding behind the Nebraska court case to block this critical jobs project. With that contrived roadblock cleared, the White House is now out of excuses, and out of time," House Energy and Commerce Committee Chairman Fred Upton, R-Mich., said.

Industry groups and the Canadian government also cast the decision as an opening for the State Department and the president to move forward.

"President Obama has no more excuses left to delay or deny the Keystone XL pipeline," American Petroleum Institute President Jack Gerard said in a statement.

The ruling Friday was a split decision. Four judges on the seven-judge court agreed that the plaintiffs did have legal standing, but because the case raised a constitutional question, a super-majority of five judges was needed.

"The legislation must stand by default," the court said in the opinion.
The lawsuit challenged a 2012 state law that allowed the governor to empower Calgary-based TransCanada to force eastern Nebraska landowners to sell their property for the project. A lower court had sided with the landowners, who said that power resided with the Nebraska Public Service Commission, which regulates pipelines and other utilities.

The proposed 1,179-mile pipeline would carry more than 800,000 barrels of crude oil a day from Canada to refineries along the Texas Gulf Coast, passing through Montana, South Dakota, Nebraska, Kansas, Nebraska and Oklahoma along the way.

The pipeline needs presidential approval because it would cross the U.S.-Canada border.

While the new GOP-controlled Congress has made approving the pipeline a first order of business, a presidential veto on their legislation would leave Republicans scrambling to either muster a bipartisan, two-thirds majority to override -- or take a different approach by attaching the Keystone measure to some other piece of legislation.

Senate sponsors made clear that, at this stage, they don't yet have a veto-proof majority. And on the House side, Democratic leader Nancy Pelosi claimed her caucus could sustain a presidential veto.

Indeed, the lawmakers voting for the Keystone bill in the House on Friday did not constitute a veto-proof majority.

The $5.4 billion project, which would move tar sands oil from Canada to Gulf Coast refineries, was first proposed in 2008.

Environmentalists and other opponents argue that any leaks could contaminate water supplies, and that the project would increase air pollution around refineries and harm wildlife. But the GOP, oil industry and other backers say those fears are exaggerated, and that the pipeline would create jobs and ease American dependence on oil from the Middle East. They note a U.S. State Department report raised no major environmental objections.

Nebraska Gov. Dave Heineman opposed TransCanada's original proposed route that crossed the environmentally sensitive Sandhills region, but he approved the project in 2012 after the company altered the pipeline's path to avoid the Sandhills. Heineman noted that the proposal was reviewed by the Department of Environmental Quality, which is part of his administration.

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I think that with oil demand world-wide down presently to a point that may make this oil recovered from tar sands unprofitable. Are we authorizing the building of a pipeline already obsolete?

Wild Card: Will Low Oil Prices Impact Obama's Decision on Keystone XL?

Opponents of the controversial extension hope low oil prices will derail the project.

Analysts say that theory is flawed.

http://www.usnews.com/dims4/USNEWS/0...-editorial.jpgPipe is stacked at the southern site of the Keystone XL pipeline on March 22, 2012, in Cushing, Okla. The northern portion, from Western Canada to the U.S., requires a signoff from the president.

By Alan NeuhauserJan. 9, 2015 | 3:25 p.m. EST+ More

The most famous proposed pipeline in the world is back in the spotlight – but its star power may have faded.

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SEE PHOTOS
The Keystone Pipeline's Journey


A Republican-led Senate committee approved the controversial Keystone XL pipeline extension Thursday, overcoming vigorous environmental opposition and a veto threat by the Obama administration to send a bill allowing the project's construction to the full Senate next week. The GOP-led House easily approved a similar measure early Friday afternoon, just hours after theNebraska Supreme Court tossed a legal challenge to Keystone XL's proposed route through the state.

Building the 1,179-mile pipeline, which requires a signoff from President Barack Obama, will provide thousands of construction jobs, ease U.S. reliance on overseas oil, boost the energy sector and strengthen ties with Canada, supporters say.

Environmental groups and opponents in Congress, however, say the $5.4 billion project – stretching from tar sands in Alberta, Canada, to refineries in the U.S. – would merely enable energy companies to expand their development of the tar sands, where extraction emits far more greenhouse gases than conventional oil development. More tar sands development, they say, could prove disastrous for the world's climate.

[READ: House Overwhelmingly Passes Keystone XL Bill]

In the past five months, crude oil prices also have dropped to their lowest points since April 2009, arming Keystone opponents with a new argument. With benchmark Brent and WTI crude oil now selling for about $50 or so a barrel, they say Keystone XL flunks Obama's sole test for the pipeline, which he described in a June 2013 speech: that it "not significantly exacerbate the problem of carbon pollution."

To understand that argument, it's important first to distinguish between new oil wells and wells that are already producing.

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President Barack Obama speaks at the southern site of the Keystone XL pipeline in March 2012 in Cushing, Okla. White House press secretary Josh Earnest said Tuesday that Obama will veto a bill approving the $5.4 billion, 1,200-mile pipeline.

"Keystone XL is and has always been not about existing tar sands production – which for the most part is locked in – but whether we enable the expansion of tar sands production, whether we build a major pipeline that will enable new tar sands production projects to move forward and be locked in for the future," says Anthony Swift, a staff attorney with the Natural Resources Defense Council.

When it comes to developing the tar sands, most of the costs are upfront during the drilling phase; once a well is producing, operating it is pretty cheap. In Canada's tar sands in particular, extracting oil is especially expensive, meaning for companies to break even on any new wells there, they need not only a higher market price for oil but also minimal expenses.

"Oil prices really have an impact on drilling rather than production, because the cost to get it out of the ground is pretty low," says Michael Webber, deputy director of The Energy Institute at the University of Texas-Austin. "You might not drill if it’s $50 a barrel, but you probably will produce – you’ve already sunk the money."

[ALSO: Nebraska Supreme Court OKs Keystone XL Pipeline, Overturns Lower Court]

That means that for companies hoping to develop new wells, they need a cheap way to blend the stuff they extract,which makes it easier to ship, and – most critical for the Keystone XL debate – an inexpensive way to send the blend from the tar sands to refineries.

In July, a report from the Canadian Energy Research Institute estimated the break-even oil price for tar-sands sites to be $84.99 a barrel for the cheapest form of development, known as steam-assisted gravity drilling. The price was $105.54 for a stand-alone mine and $109.50 for an integrated mining and processing facility.

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TransCanada president and CEO Russ Girling takes questions March 5 at a pipe yard in Mont Belvieu, Texas.

At these prices, the institute found, "the only project that would be economic is a [steam-assisted gravity drainage] in situproject" – that is, the cheapest kind of tar sands expansion project.

"Lower oil prices have made it impossible to correctly argue that Keystone XL won't impact tar sands expansion," Swift says. "What the drop in oil prices has done is it’s made it absolutely impossible for anyone to argue that tar sands expansion is possible without the cheapest transportation projects available."

Industry analysts – not to mention TransCanada – are not so sure. The average length of a TransCanada pipeline contract is 18 to 20 years, a company spokesman says, and a tar sands oil well is expected to operate an average of 30 to 40 years. Oil producers, in other words, know they'll have to weather big changes in oil prices over those decades.

“People who build oil pipelines are certainly well aware of the gyrations of oil prices through the year," says Jim Burkhard, vice president at IHS Energy, a consulting firm. "Yes, prices are low now, they’re going to be low through the rest of the year. But pipeline projects in general are looking at a very long time frame.”

[MORE: White House Vows to Veto Keystone XL Pipeline Bill]

And as Keystone XL has languished for six years since being proposed in 2008, producers in the tar sands have been sending huge quantities of oil by rail. As early as 2013, trains were bearing about 200,000 barrels of oil per day from Western Canada. By 2016, that number is expected to more than triple to 700,000 barrels a day, according to a June 2014 forecast by the Canadian Association of Petroleum Producers.

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GOP Senate Majority Leader Mitch McConnell of Ky., second from left, has made Keystone XL a top priority.


This, analysts and Keystone XL supporters say, shows that the tar sands are going to be developed with or without the pipeline: Even though moving oil by rail is more than twice as expensive than moving it by pipeline – per the Canadian Energy Research Institute – there's enough money to be made that all those millions of tons of greenhouse gases are going to be released regardless of whether the project gets approved.

Hence, the pipeline will not "significantly exacerbate the problem of carbon pollution," supporters and analysts argue, because the carbon's coming out of the ground one way or another. Tar sand development spews up to 22 percent more carbon into the atmosphere than conventional oil development, according to a 2011 Stanford study.

“You can envision some slowdown of production [without Keystone XL],” says Julie Carey, an energy economist at the consulting firm Navigant. “But I don’t think Western Canada is shutting down its oil sands operation anytime soon. That's wishful thinking on their part.”

In fact, when TransCanada first proposed Keystone XL in 2008, oil prices were just $40 a barrel. In the years since, TransCanada hasn't lost any contracts from companies hoping to send oil through its proposed pipeline, spokesman Shawn Howard says.

[KEYSTONE XL: The County-by-County Rundown]

"Nobody has walked away from Keystone," Howard says. "We have a waiting list. So while there's all kinds of speculation some people like to make of whether it's needed or not, our customers are the ones who vote with their contracts."

Still, recent market developments may suggest a dimmer outlook.

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Natural Resources Defense Council staff attorney Anthony Swift has helped lead efforts opposing Keystone XL.

Southern Pacific Resources – the first tar sands oil producer to announce it would start moving its oil by rail – missed a loan payment last month, raising the possibility that the company would default. In October, rail company Canexus lost a major contract with an oil services firm serving tar sands producers, leaving just 40 percent of its planned tar sands capacity under contract.

Major energy companies like Shell, Statoil and Total, meanwhile, canceled tar sands expansion projects last year – and did so when prices were still above $100 a barrel.

These incidents, Swift says, are evidence that trains simply won't work over the long term, and ultimately bring him back to Obama's so-called carbon test. With only trains available to move oil from the tar sands and with oil prices fetching far below what producers need to break even, he argues expanding development of the tar sands simply is not economically viable.

The approval of Keystone XL could suddenly make the tar sands an attractive investment by slashing transportation costs. But if companies start expanding development in the tar sands again, huge amounts of greenhouse gases would make their way into the air, greatly contributing to climate change.

"The tar sands industry was already being constrained by a lack of affordable transportation options," Swift says. "What the drop in oil prices has done is it’s made it absolutely impossible for anyone to argue that tar sands expansion is possible without the cheapest transportation projects available."

Burkhard, of IHS, was more skeptical, urging caution "about linking a company's difficulties to the lack of progress" on Keystone XL.

“One lesson we see over and over in the oil market is if you get fixated that the price will remain at a certain level for a long, long time, you’re going to be proven wrong," he says. "Prices will go up, prices will go down. Obviously we’re in a down cycle now; the question is how long is it going to last."

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Forget Keystone! TransCanada To Build Pipeline To Quebec’s Coast

Daily Caller

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