Environment

Keystone pipeline rejected: Is TransCanada out of options?

President Obama rejected the tar sands pipeline this week, but the company in charge of the project may still have options.

TransCanada's Keystone pipeline facilities in Hardisty, Alberta, Canada. Following the Obama administration’s rejection of the Keystone XL pipeline, the oil industry faces the tricky task of making sure the crude oil targeted for the pipeline still gets where oil executives say it needs to go.
Jeff McIntosh/The Canadian Press/AP
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  • Michael D. Regan
    Staff

This week, President Obama rejected the Keystone XL pipeline, a project that once was all but a certainty before environmentalists successfully cast it as a serious polluter, changing the political tide.

The White House said this week the Keystone project would not be in the United States best interest and would undermine his administrations' efforts to curb carbon emissions.

But that doesn’t mean TransCanada, the company trying to extend a pipeline nearly 1,200 miles through South Dakota, Montana, and Nebraska, is out of options. It may, however, have to change tactics.

Since 2008, TransCanada has been pushing Keystone as a means to the ease the transfer of the oil it produces in the tar sands of Alberta, Canada to the shipping ports of Texas. It claimed the project would reduce gas prices and be a cleaner way of transporting its wares. 

But as the topic became increasingly politicized, the relatively broad support it once had peeled away as petroleum prices dropped two-thirds to $50 a barrel. 

The company could immediately submit a new application, likely a futile maneuver, or wait out Obama’s term and try again in 2017 with the hope a Keystone-friendly Republican captures the presidency. Leading Democratic candidates, Hillary Clinton and Sen. Bernie Sanders, said they stand in opposition to the pipeline.

TransCanada could also potentially contest Obama’s rejection through the North American Free Trade Agreement, the Canadian Broadcast Corporation said.

The company’s Chief Executive Russ Girling called Obama's decision “misplaced symbolism,” but some are advising the TransCanada take a more muted approach until the 2016 elections come to an end.

"You don't just turn the light switch on again, they're grounded for a while," said Michael Moore, of Calgary's School of Public Policy, to CBC. 

Many analysts now say the company already has turned toward domestic production, such as bolstering its own Energy East pipeline project, set to send 1.1 million barrels each day to Canada’s east coast, Reuters said.

“Really their attention is diverted onto other projects,” said Julie Brough, an investment manager for a company owning stock in TransCanada. “There is more emphasis on Energy East.”

On Thursday, however, the company nixed a plan to build a second marine terminal for Energy East in Quebec. Difficulties entering US markets could open a door for TransCanada to broach expanding Energy East in Canada, though against an environmental movement that is newly emboldened.

“The victory with Keystone XL really energizes the already very substantial movement,” said Adam Smith, a program director at Environmental Defence Canada, to Reuters. “The arguments for rejecting Keystone XL apply to Energy East even more.”

TransCanada has invested $2 billion into Keystone XL with a pipeline already stretching from Calgary to Illinois. The Keystone extension could bring 800,000 barrels each day to production facilities in Texas.

The company nearly gained approval for the extension, but an outcry from environmental groups over its carbon footprint halted quick passage.

The Keystone project was further hampered when the Obama administration released a plan to reduce carbon dioxide emission by 32 percent during he next 15 years.