Procrastination over an Obama administration final decision on TransCanada’s Keystone XL shows no signs of abating.
In the latest delay, the U.S. State Department’s Office of Inspector General, OIG, said it will probe whether contracts tied to the pipeline review process were improperly awarded and regulatory safeguards were fully adopted.
The pipeline that was originally supposed to have started moving 830,000 barrels per day of Alberta oil sands crude and Bakken light crude to the U.S. Gulf Coast by 2012 and, most recently, was counting on a decision from President Barack Obama in 2012, now faces waiting for a verdict in 2014.
The OIG, under pressure from environmental groups, will try to determine whether it was appropriate for the government to hire Environmental Resources Management, a private contractor selected to prepare a draft environmental impact statement.
Environmental organizations accuse ERM of not disclosing it had previously done consulting work for TransCanada.
A spokesman for TransCanada said the company was not clear how the investigation might affect the timing of the State Department’s Keystone XL review.
Kevin Brook, an analyst with ClearView Energy partners, said there is “no reason to believe the approval process will be predicated upon the conclusions of the investigation.”
But even the hint of a further delay spreads unease through the Canadian government and Canadian oil producers, who are forced to seek other transportation options, including rail.
The State Department said it will “cooperate fully” with the OIG, adding it is “committed to a rigorous, transparent and efficient federal review of the Keystone XL application,” but did not say whether the audit will affect the timing of its final decision.
Southern leg 90% complete
Meanwhile, TransCanada said the southern leg of Keystone XL is 90 percent complete and should be in service by the end of 2013.
The company said testing and commissioning activities are under way for the Gulf Coast pipeline project, connecting Cushing, Okla., with Nederland, Texas.
On another issue, TransCanada, in answer to comments from the U.S. Department of Interior, said it has amply demonstrated how it will mitigate impacts of Keystone XL on wildlife and sensitive ecosystems.
The department’s comments were received in April but only posted in mid-August.
It accused the State Department of downplaying potential negative harm from the pipeline and asked for “some assessment of how the cumulative impacts, including climate change, may affect fish, wildlife and plat resources,” insisting there will be “several types of permanent impacts to wildlife that will result from this project.”
The report also urged the State Department to further analyze the impact of Keystone XL’s light and noise on nearby national parks as well as wildlife.
Pipeline says issues addressed
TransCanada insisted many of the concerns were addressed in the application for a presidential permit and outlined “detailed steps we have taken to mitigate impacts on the environment, sensitive areas, wildlife and communities.”
“There are already more than 12,000 pages of technical review that have been published on Keystone XL and they have stated that there will be minimal impact on environmental resources along the entire route,” said TransCanada in a barely disguised sign of its growing frustration.
The Natural Resources Defense Council has weighed in, accusing the Canadian government of Prime Minister Stephen Harper of refusing to cut greenhouse gas emissions in exchange for approval of Keystone XL.
“Canada’s climate policies are significantly weak and have no chance of improving under the current” Harper government, said Danielle Droitsch, Canada’s project director for the NRDC.
In 2009, Canada pledged to reduce emissions by 17 percent from a 2005 baseline by 2020, but is now expected to miss that objective by a wide margin due to a 62 percent increase since 2005 in oil sands production.
New study finds little impact
However, a new IHS CERA study said the pipeline would have “no material impact” on GHGs in the U.S., partly because a failure to ship that production to the Gulf Coast would be replaced by imports of Venezuelan heavy crude which have the same carbon footprint as the oil sands.
The study affirmed a State Department draft supplemental environmental impact statement for Keystone XL by arguing that even if XL is turned down, production from the northern Alberta resource will continue unabated.
Study authors Jackie Forrest and Aaron Brady said that if oil sands producers invested in improved rail efficiencies, the cost of transporting oil sands crude by those means would be within $6 per barrel compared with the pipeline.
The study also noted that the Gulf Coast refinery region, which represents about half of total U.S. refining capacity, now has a large capacity to process heavy crude, meaning crude of similar GHG intensity to that from the oil sands would continue to be refined.
“Venezuelan heavy oil — and Venezuela — would be the number one beneficiary of a negative decision on Keystone,” it said.
