Obama Blocks Proposed Canada-US Oil Pipeline

18 January 2012

US President Barack Obama has rejected a plan for the building of a multi-billion dollar pipeline that would have carried crude oil from Canada to the US state of Texas. The 18 January announcement came after weeks of debate over the economic and environmental implications of the proposed Canada-US oil sands pipeline, with an array of interested groups weighing in on the pros and cons of the massive infrastructure project.

In Canada, where environmental groups have long been at odds with the petroleum industry and Ottawa over the development of the country's oil sands, debate had reached a feverish pitch, with politicians accusing "radical" environmental groups of attempting to block Canada's trade and slow the economy. South of the border the pipeline issue has been a political hot potato, with groups of politicians in Washington fiercely at odds over the issue.

The pipeline - which aimed to provide a direct line of crude oil and bitumen from the Athabasca Oil Sands in Canada's western province of Alberta to a range of refineries in the US - has been a lightning rod for controversy since the idea was floated in 2005.

Environmental groups say the massive carbon footprint related to extracting and refining Canadian sand oil, plus the potential for a catastrophic breach of the pipeline in an environmentally sensitive area, made the project environmentally irresponsible. However, supporters say the pipeline offered safe and reliable access to oil with significant economic benefits for both countries.

According to official data, the US$7 billion project would transport 700,000 barrels of oil a day.

Controversy

Although the pipeline received Canadian approval in March 2010, its future became uncertain three months later when 50 members of the US Congress spoke out against it. In their letter to Secretary of State Hillary Clinton, they warned that "building this pipeline has the potential to undermine America's clean energy future and international leadership in climate change."

In early July 2010, House Energy and Commerce Committee chairman Henry Waxman urged the State Department to block the Keystone XL project.

"This pipeline is a multi-billion dollar investment to expand our reliance on the dirtiest source of transportation of fuel currently available," Waxman said.

The US Environmental Protection Agency further claimed that the draft environmental impact study for the pipeline was inadequate and should be revised, indicating that the State Department's original report was "unduly narrow" as it overlooked oil spill response plans, safety issues, and greenhouse gas concerns.

Pressured by environmental groups, a substantial section of Congress, and other detractors to the bill, US President Barack Obama delayed granting permission to begin construction of the project in November 2011, highlighting concerns over the potential environmental impact on fragile areas.

Obama had originally faced a 21 February deadline set by Congress to either allow TransCanada's pipeline plans or to block it. His announcement on Wednesday 18 January rejecting the pipeline blamed Republicans for imposing an "arbitrary" deadline on his review of the plan.
"This announcement is not a judgment on the merits of the pipeline, but the arbitrary nature of a deadline that prevented the State Department from gathering the information necessary to approve the project and protect the American people," Obama said, adding that he was disappointed that congressional Republicans had forced the decision.

Canadian industry rebuffs environmental opposition

TransCanada Corporation, which was behind the project, had insisted that it was not deterred by the environmental opposition to the Keystone XL plans. In June 2010, a TransCanada representative claimed that the development of oil sands will expand regardless of whether the crude oil is exported to the United States or, alternatively, to Asian markets.

Joe Oliver, Canada's Minister of Natural Resources, made headlines last week when he censured opponents to the country's proposed pipeline projects at the start of federal hearings that will debate the construction of the Northern Gateway pipeline - a separate pipeline project that would deliver crude petroleum and bitumen from Alberta to the west coast of Canada for shipment to Asia.

"Environmental and other ‘radical groups' are trying to block trade and undermine Canada's economy," he said. "Their goal is to stop any major project no matter what the cost to Canadian families in lost jobs and economic growth."

Canada's Conservative government, which enjoys strong support in petroleum-producing parts of Canada, has come under fire for its stance on environmental issues. Ottawa became the target of international criticism last month when it unilaterally withdrew the country from its obligations under the Kyoto Protocol.

Supporters of the Keystone XL project had said that successful construction of the pipeline would mean a reduction in the reliance on the Middle East for petroleum and the creation of 20,000 temporary construction and manufacturing jobs, with hundreds of thousands of indirect jobs to follow in the coming decades. However, environmental groups claim that these numbers are greatly exaggerated.

Nevertheless, supporters of the pipeline, which include many Republicans and US labour unions, had repeatedly criticised Obama's earlier postponement of the project. Senator John Hoeven of North Dakota criticised the delay recently, saying it is "unfortunate because it is private sector projects like Keystone XL that will get our nation working again."

Sand oil problematic for pipelines?

Environmental groups, including the Washington-based Natural Resources Defense Council (NRDC) say that diluted bitumen, a substance within Canada's crude oil sands, is more corrosive than lighter grades of oil, fuelling concerns about potential pipeline breaches.

However, a study done last year for the provincial government of Alberta found that diluted bitumen was no more corrosive to pipelines than conventional oil, but noted that there was no definitive and extensive research on the subject. A US safety regulator will examine this exact issue in a new study to be completed in July 2013.

The US State Department had agreed that that the now-rejected Keystone project called for closer investigation of the Canadian oil and stability of the pipelines. President Obama recently signed a new pipeline safety law earlier this month containing a provision for a study on diluted bitumen that may provide some clarity on the issue.

ICTSD reporting: "Canada to Withdraw from Kyoto Protocol," BBC NEWS US & CANADA, 13 December 2011; "Obama Cites Jobs Returning U.S. as Republican Pushes Pipeline," BLOOMBERG BUSINESSWEEK, 16 January 2012; "US Chamber: Obama Should Give Green Light to Keystone Oil Pipeline Now," THE HILL, 12 January 2012; "Jobs Take Center Stage in Keystone Fight," THE HILL, 15 January 2012; "New Study to Probe Corrosiveness of Canada Oil," PLANET ARK, 18 January 2012; "Expanding Oil Exports Top Priority: Canadian Minister," REUTERS, 2 December 2011; "Keystone Pipeline Project: What's All the Fuss About?," REUTERS, 22 December 2011; "White House: Keystone Pipeline Review Needs Time," REUTERS, 12 January 2012.

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