After seven years of regulatory limbo, Obama administration says “no” to TransCanada application
President Obama announced today that he has rejected TransCanada’s (ticker: TRP) Keystone XL pipeline project after seven years of regulatory holdup. The decision comes as the president makes steps to solidify his environmental legacy during his final year in office. The 1,179-mile pipeline would have carried 800,000 barrels of crude from Canada’s oil sands from Hardisty, Alberta, to Steele City, Nebraska, where it would have been transported further to the Gulf Coast.
The Keystone XL pipeline became a political symbol amid a broader battle over environmental regulations. President Obama said that he would not approve the pipeline if it was found to negatively affect the environment. Even though the State Department’s study concluded that the Keystone XL project would not cause serious adverse effects to the environment, politics powered the decision to turn down the pipeline.
On Monday, TransCanada requested a pause in the review process of the pipeline while it awaited a decision from a Nebraska regulatory body, saying similar steps had been taken in the past. The State Department responded Wednesday that it would not pause the process, bringing the unusually long regulatory process surrounding the TransCanada application to build the Keystone XL to a head.
At a press conference given from the White House today, President Obama formally rejected the Keystone XL pipeline, saying that the arguments in favor of building the project – that it would create jobs and lower U.S. gasoline prices – were essentially moot, citing strong jobs numbers released today and citing lower gas prices nation-wide.
Jobs data released from the Bureau of Labor Statistics (BLS) showed the American economy created 271,000 jobs in the month of October, lowering unemployment by 0.1% to 5.0%. This comes in contrast to employment in the employment levels in the oil and gas industry, which were down another 1.92% month-over-month to 187,400, according to the BLS.
In rebuffing the argument that Keystone XL would lower gasoline prices, President Obama said that prices have already come down substantially, and that Keystone was not a necessary part of that process.
The president said that Keystone XL would not have substantially improved the U.S. economy in the way proponents claimed, and that it would not help in the transition to an energy economy that deemphasizes fossil fuels. “We must transition to a clean-energy economy,” Obama said during the White House press conference.
The decision to veto the Keystone XL project comes three weeks ahead of the 2015 United Nations Climate Change Conference in Paris. Obama hopes the U.S. will take a leading role in the development of global clean energy, and the timing of the decision to formally oppose Keystone might be viewed as a way of solidifying his position ahead of the UN Paris conference, set to take place November 30 – December 11.
Canadian investors: shift focus to an east-west pipeline across Canada to provide access for Canadian oil to reach all European and Asian markets; abandon the north-south pipeline concept
Some Canadian analysts and investment professionals have spoken out on BNN and other Canadian media, in the wake of today’s decision by Washington to reject the Keystone XL pipeline application. One theme that emerged from the point of view of a TransCanada institutional investor was to let Keystone go, and shift the focus to an east-west pipeline from Alberta to both coasts, giving access to multiple global markets, not staying locked tightly to one customer–the U.S. But other industry experts conjectured that the Keystone XL could come back to life under an energy-friendly new administration in Washington–if TransCanada wants to invest more time and capital in restarting the application process. One TransCanada investor said that the Keystone XL application should not be restarted unless the U.S. government requests the pipeline and is willing to pick up the tab for continued permitting costs for the pipeline.
TransCanada issues statement
TransCanada Corporation said it will review all of its options in light of a permit denial for Keystone XL. “Those options include filing a new application to receive a Presidential Permit for a cross border crude oil pipeline from Canada to the United States,” the company said via a press release.
“TransCanada and its shippers remain absolutely committed to building this important energy infrastructure project,” said Russ Girling, TransCanada’s president and chief executive officer. “We will review our options to potentially file a new application for border-crossing authority to ship our customer’s crude oil, and will now analyze the stated rationale for the denial.”
Girling pointed out that TransCanada continues to have the support of American and Canadian workers, labor organizations, industry and most of all, the American and Canadian people. He added with their continued support, the company believes that a pipeline will eventually be built as this is the safest, most economically efficient means of getting crude oil to market.
Other Canadian organizations weighed in. “While President Obama stated that the Keystone XL decision is not in the U.S. national interest, Canada’s oil and natural gas industry is clearly in the Canadian national interest,” Canadian Association of Petroleum Producers president and chief executive officer Tim McMillan said. “The Keystone XL pipeline deserved to be approved on the facts of its environmental, economic and energy security merits,” McMillan said. “Comprehensive US reviews found Keystone XL will cause no substantive change in global GHG emissions or other undue environmental impacts.”
Read an Oil & Gas 360® exclusive interview with TransCanada’s Keystone projects president Corey Goulet, entitled “What’s Next for Keystone XL,” here. The interview was conducted in March 2015.
