Obama Vetoes Keystone Pipeline Legislation

26 February 2015

US President Barack Obama vetoed legislation on Tuesday that would have required the approval and construction of the Keystone XL oil pipeline, citing excessive intervention by the US legislative branch in the executive process.

The move, while expected, is likely to add fuel to both the controversy specific to this pipeline as well as the broader debate over balancing economic competitiveness and energy independence concerns with environmental priorities.

“Through this bill, the United States Congress attempts to circumvent longstanding and proven processes for determining whether or not building and operating a cross-border pipeline serves the national interest,” Obama said in his veto message to the Senate on Tuesday.

“Because this act of Congress conflicts with established executive branch procedures and cuts short thorough consideration of issues that could bear on our national interest – including our security, safety, and environment – it has earned my veto,” the US president explained, without referring to or ruling out the possibility that the pipeline could be approved later down the road.

The proposed pipeline would bring crude oil and bitumen from the Athabasca tar sands in Canada’s western province of Alberta to the US Gulf Coast, and was first tabled by the TransCanada energy company in 2008.

Unlike pipelines built entirely on US soil, this one requires review and approval by the US State Department – which falls under Obama’s authority – given that it involves a transnational boundary, thus raising the profile of the project.

The current version of the proposal, submitted in May 2012 with a revised route for the pipeline in order to avoid the environmentally sensitive Sand Hills region of the US state of Nebraska, would aim to transport 830,000 barrels of oil per day from the Canadian tar sands.

This route is also shorter than previous versions, as it would connect to existing pipelines in the US rather than requiring the building of an entirely new pipeline.

Little “fanfare”

Tuesday’s veto came as no surprise, having already been promised by the White House in January after lawmakers in both chambers advanced earlier versions of the Keystone XL bill. (See Bridges Weekly, 15 January 2015)

The Senate and the House of Representatives had passed a final version of the bill, known formally as the Keystone XL Pipeline Approval Act, on 11 February, which was then transmitted to the White House for Obama this Tuesday to approve or reject.

The day before Obama issued his veto, White House Press Secretary Josh Earnest acknowledged the move would likely be made quickly and without much ceremony.

“I wouldn’t anticipate a lengthy delay.  Everybody is acutely aware of the administration’s position on this, so I wouldn’t anticipate a lot of fanfare or drama,” Earnest told reporters on Monday.

Just over three years ago, Obama had vetoed an earlier bill that would have similarly forced his hand on the Keystone XL decision, explaining at the time that Congress had set an arbitrary deadline that would not have allowed the relevant US agencies to continue their reviews of the project’s merits on several levels. (See Bridges Weekly, 18 January 2012)

Before Tuesday’s veto even took place, Senate Majority Leader Mitch McConnell and Speaker of the House John Boehner, both Republicans, jointly published an op-ed in USA Today calling the expected White House decision “political,” particularly over a “no-brainer” issue like Keystone.

Noting that the Keystone process has drawn out “2,300 days” since the project was first tabled, the leaders called the extent of this delay “extreme, even for Washington,” while arguing that pipeline approval used to be “routine.”

The two Republican officials also criticised so-called liberal extremists for making the Keystone project an “environmental litmus test for the president,” and one that he has sought to pass.

Following the veto announcement, both Boehner and McConnell were quick to pledge additional legislative action. The Speaker of the House referred to the decision as a “national embarrassment,” noting that Russia and China are moving ahead with major pipeline projects of their own.

The Senate Majority Leader, in turn, has promised to attempt a veto override in his chamber on 3 March.

While a presidential veto can be overridden if there are enough votes in Congress, analysts say that there are not sufficient numbers to ensure the needed two-thirds majority in both chambers.

Jobs, climate impact?

Supporters of the bill have touted the potential of the pipeline to create new jobs and reduce dependence on oil from other countries. Opponents note, however, that while the State Department currently places the number of jobs generated by the construction of the pipeline at 42,100 per year, the same review finds that the actual operation of the pipeline after its completion would only yield 50 jobs – 35 permanent ones and 15 temporary contractors.

Meanwhile, the US economy is on the upswing and domestic oil production is at its highest level in decades, raising further questions about the need for the project. The North American country also holds the title of largest natural gas producer in the world.

Obama had famously pledged in a 2013 climate policy speech that he would only approve the Keystone XL pipeline if it was clear that the project would not lead to a net increase in carbon emissions. (See Bridges Weekly, 27 June 2013)

The Environmental Protection Agency (EPA), the US government body tasked with regulating health and environment issues, released in early February a letter outlining its review of a previous State Department assessment of the Keystone project.

While agreeing overall with the main points of the US State Department’s Final Supplemental Environmental Impact Statement (SEIS), the EPA said that the fall in oil prices since that report was released meant that the conclusions regarding greenhouse gas emissions deserved a second look.

“While the overall effect of the [Keystone] Project on oil sands production will be driven by long-term movements in the price of oil and not short term volatility, recent large declines in oil prices (oil was trading at below US$50 per barrel last week) highlight the variability of oil prices,” the 2 February letter said.

The EPA specifically raised a “low-cost scenario” that had been outlined by the State Department, where oil prices were sustained at US$65 to $US75 per barrel, with a resulting increase in transportation costs for rail shipment.

“In other words, the Final SEIS found that at sustained oil prices within this range, construction of the pipeline is projected to change the economics of oil sands development and result in increased oil sands production, and the accompanying greenhouse gas emissions, over what would otherwise occur,” the letter said, adding that this possibility should be accorded additional weight during the decision making process.

The continued fall in oil prices has shaken up international markets. Last month, the price nearly hit US$45 a barrel, one of the lowest levels it has reached in six years.

In light of the oil price volatility, members of the OPEC oil cartel raised the prospect this week of holding an emergency meeting to coordinate a response. The countries involved in the group are already limiting their production levels at 30 million barrels per day, in an effort to avoid losing market share.

ICTSD reporting; “Oil fall may trigger Opec emergency meeting,” FINANCIAL TIMES, 23 February 2015; “Obama expresses scepticism over Keystone pipeline,” THE GUARDIAN, 19 December 2014; “Obama vetoes Keystone XL pipeline, leaving it in limbo,” REUTERS, 24 February 2014.

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