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Environmentalists hail another delay in Keystone XL pipeline, but TransCanada says it’s committed

November 11, 2018

LINCOLN — TransCanada says it remains committed to building the Keystone XL pipeline, but a federal judge’s ruling this week raised new questions about whether the $8 billion project will ever be built.

Officials with environmental groups said during a press conference Friday that Thursday’s ruling could delay the Keystone XL up to a year, and with prices for Canadian oil at record lows, investors and shippers might abandon the project.

“It becomes less likely as the days go by,” said Brian Jorde, an Omaha attorney who is handling a lawsuit against the project brought by some Nebraska landowners.

Doug Hayes, a senior attorney with the Sierra Club, said that the ruling wasn’t just a rebuke of efforts to roll back the nation’s environmental laws but that it also could signal the end of the Keystone XL. The world is shifting to cleaner sources of energy, he said, and tar sands oil is selling below the break-even point.

“Simply put, Keystone XL isn’t just a disaster for the environment, it doesn’t make economic sense,” Hayes said.

But an analyst with a firm that tracks the oil industry said the ruling will either inspire a legal appeal or another environmental review approved by President Donald Trump. The president resurrected the Keystone XL after it was rejected by the Obama administration.

“This is the world’s longest tug of war, with Western Canadian oil prices as the rope. While definitely a major setback in terms of timing, this is unlikely to be the nail in the coffin for Keystone XL,” said Zachary Rogers, an analyst with Wood MacKenzie.

Rogers said the ruling is more bad news for oil produced in Canada’s tar sands region, which has resorted to using rail cars and semitrailer trucks to transport oil because of a glut of oil there and a shortage of pipeline capacity.

Western Canadian crude oil has been trading at record low prices, about $20 a barrel, in recent weeks, forcing cutbacks in production in the region near Fort McMurray, Alberta, which is known as “Fort McMoney” because of the well-paying oil field jobs there.

Much has changed since the pipeline was first proposed a decade ago. Gasoline was selling for $4 per gallon back in 2008, and oil prices were peaking at more than $140 per barrel. Today’s standard price for a barrel of oil is about $60.

TransCanada officials have maintained that the Keystone XL has drawn enough shipper interest to make it economically viable, and in recent weeks, the company began moving pipe and lining up sites for work camps in anticipation of starting construction next year. But the corporation has yet to make the final determination to begin construction, a decision that is now put on hold by the judge’s ruling.

Terry Cunha, a spokesman for TransCanada, said Friday that the corporation was still reviewing the judge’s decision.

“We remain committed to building this important energy infrastructure project,” he said.

Trump on Friday called the ruling — by a judge appointed by President Barack Obama — a “political decision” and a “disgrace,” according to the Associated Press.

U.S. District Judge Brian Morris of Montana ruled that the U.S. State Department “simply discarded” its rejection of the Keystone XL in 2014 under the Obama administration without adequately explaining why it switched gears and approved the project after Trump took office.

A “reasoned explanation” is needed, Morris ruled. The judge said the State Department didn’t adequately explore the climate change concerns raised in 2014, nor did it review recent pipeline oil spills and the impact of low oil prices.

“The department instead simply discarded prior factual findings related to climate change to support its course reversal,” he wrote.

The ruling is the latest setback for the project first envisioned a decade ago as a way to enhance energy security in the United States.

TransCanada changed the pipeline’s proposed route through Nebraska in hopes of getting the green light for the 36-inch pipeline. After Trump resurrected the project, the Nebraska Public Service Commission approved the alternative route in a 3-2 vote a year ago. But that decision is being challenged in the Nebraska Supreme Court.

Meanwhile, the Keystone XL has continued to grow as a hot-button national environmental issue, with opponents arguing that the United States doesn’t need the “dirty oil” from Canada’s tar sands region and that the extensive process to extract the oil would increase greenhouse gases.

Representatives of environmental groups said a new, more extensive environmental review by the State Department could take six months to a year. It’s also possible that the Trump administration could appeal the ruling in Montana to a federal appeals court.

Also pending is a decision by the Nebraska Supreme Court, which is expected by the end of the year. If the court rules that TransCanada needs to reapply for a route across Nebraska, as some landowners maintain, it could pose another delay for the project.

And Jorde, who is representing landowners, said Thursday’s ruling could mean that another federal environmental review would be needed if the pipeline route is changed in the reapplication process.

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