(Bloomberg) — The U.S. Environmental Protection Agency
said developing Canadian oil sands would significantly increase
greenhouse gases, a conclusion environmental groups said gives
President Barack Obama reason to reject the proposed Keystone XL
pipeline.
“Until ongoing efforts to reduce greenhouse gas emissions
associated with the production of oil sands are more successful
and widespread,” developing the crude “represents a
significant increase in greenhouse gas emissions,” the EPA said
Tuesday in a letter to the State Department, which is reviewing
the project.
The proposed pipeline has pitted Obama’s allies in the
environmental movement against the U.S. energy industry. Obama
has said he’ll reject TransCanada Corp.’s Keystone if it would
lead to a significant increase in carbon pollution.
Proposed in 2008, Keystone would deliver Alberta oil sands
to U.S. Gulf Coast refineries. The Republican-led House next
week probably will pass a Senate bill to approve the pipeline
and circumvent the State Department review. Obama said he will
veto the measure and continue with his administration’s review.
Supporters don’t appear to have the votes to override a veto.
‘Taken Apart’
“The EPA, in polite, knife-sharp Washingtonese, has taken
apart the State Department on” Keystone “and shown it to be a
climate disaster,” Bill McKibben, who has led protests against
the project, said in a message on Twitter.
Shawn Howard, a TransCanada spokesman, didn’t return
telephone and e-mail messages seeking comment on the EPA report.
TransCanada rose as much as 2.8 percent in Toronto trading, to
C$59.05 ($47.53), after the letter was released.
The Natural Resources Defense Council said the assessment
means the pipeline fails the standard Obama has said he’ll use
to judge the $8 billion project.
“There should be no more doubt that President Obama must
reject the proposed pipeline once and for all,” Danielle
Droitsch, Canada project director for the NRDC, said in a
statement.
The State Department in an environmental impact statement
released a year ago said Keystone probably wouldn’t increase
emissions, even though oil sands are more carbon intensive,
because the crude would be produced with or without the project.
Lower Prices
The 11-volume analysis included a scenario under which
Keystone could play a larger role in spurring oil sands
development. If oil fell below $75 a barrel, the extra cost to
ship using alternatives such as rail may no longer be viable,
the 2014 report concluded.
The “low-price scenario” should be given “additional
weight during decision making, due to the potential implications
of lower oil prices on project impacts, especially greenhouse
gas emissions,” the EPA said. Benchmark U.S. crude last week
fell to $44.45, the lowest since March 2009.
The American Petroleum Institute, an industry lobbying
group based in Washington, said the EPA’s letter was just an
excuse to put off a decision.
“Suggesting that the drop in oil prices requires a re-evaluation of the environmental impact of the project is just
another attempt to prolong the KXL review,” Louis Finkel, API’s
executive vice president, said in a statement.
Emissions Increase
In the letter, EPA said the crude oil carried by Keystone
could lead to the release of more than 27 million metric tons of
carbon annually compared with other, less carbon-heavy crude.
That’s the equivalent of emissions from 7.8 coal plants,
the EPA said. But it’s just one-half of one percent of total
greenhouse gases released annually in the U.S., according to
government data.
The EPA letter “continues to give the president a
rationale if he wants to reject it,” Lowell Rothschild, a
Washington-based environmental litigator at Bracewell & Giuliani
LLP, said in a phone interview.
The EPA also calls the State Department analysis
comprehensive and says it responded to concerns the agency had
voiced to a draft.
Kevin Book, an analyst at Clear View Energy Partners LLC,
said in a note today that the general tenor of EPA’s comments
was positive.
“But the agency’s arguments could create additional
headwinds for the project,” Book wrote.
Book said that it’s possible the State Department could
take additional time to study the impact of low crude prices on
the project.
To contact the reporters on this story:
Jim Snyder in Washington at
Mark Drajem in Washington at
To contact the editors responsible for this story:
Jon Morgan at
Steve Geimann