Keystone XL: U.S. Election Brings Pipeline's Future Back Into Spotlight

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KEYSTONE XL OBAMA
U.S. President Barack Obama speaks at the southern site of the Keystone XL pipeline on March 22, 2012 in Cushing, Oklahoma. Obama is pressing federal agencies to expedite the section of the Keystone XL pipeline between Oklahoma and the Gulf Coast (Photo by Tom Pennington/Getty Images) | Getty Images

WASHINGTON - The re-election of President Barack Obama has put TransCanada's Keystone XL pipeline back on the radar in the United States, particularly now that climate change is once again a hot topic of discussion in the aftermath of mega-storm Sandy.

The oil industry is optimistic that Obama will now approve the US$7 billion project he stalled in January, deferring a decision until after the presidential election.

Environmental groups, meantime, say they expect thousands to show up in downtown D.C. on Sunday for a march to the White House in a resumption of their high-profile battle against Keystone XL.

There wasn't much reason for them to cheer on Wednesday when Obama took to the podium in the White House for the first news conference since he was re-elected last week.

While the president said America has an obligation to future generations to address climate change, he acknowledged it's not a priority and added there's no consensus on how to tackle it.

"The American people right now have been so focused, and will continue to be focused, on our economy and jobs and growth that, you know, if the message is somehow we're going to ignore jobs and growth simply to address climate change, I don't think anybody's going to go for that," he said.

"I won't go for that."

He didn't comment specifically on Keystone during his remarks in the East Room.

TransCanada officials, meantime, expressed confidence that the pipeline will soon get the green light.

"We continue to believe that Keystone XL will be approved and the outcome of the U.S. election does not change our thinking," Alex Pourbaix, the company's president of energy and oil pipelines, told TransCanada's (TSX:TRP) annual investor conference on Wednesday.

"At the end of the day, it's very difficult for us to imagine how increased energy security, significant economic stimulus and job creation aren't in the best interest of the United States. The facts that support the approval of Keystone XL remain the same and the need for this pipeline grows stronger the longer its approval is delayed."

Obama rejected TransCanada's application 10 months ago, citing concerns about the risks posed to an environmentally sensitive area in Nebraska by the pipeline's original route.

The president invited TransCanada to submit another application after rerouting the pipeline around Nebraska's Sandhills, necessitating another State Department environmental review of the project. The State Department is involved because the pipeline crosses an international border.

After working closely with Nebraska officials to develop a new route, the company submitted another application in May.

Public hearings into the new route are scheduled for next month, and then Nebraska Gov. Dave Heineman will review it. TransCanada, consequently, could know the fate of Keystone XL in just a few months.

Environmentalists, meantime, are pointing to the devastation wrought by superstorm Sandy last month as reason to reject the pipeline once and for all.

Keystone XL would bring 700,000 barrels of carbon-intensive oilsands crude a day from Alberta, through six states and to Gulf Coast refineries.

"Here's what's changed since last year: the Arctic has melted disastrously," a group of prominent environmentalists wrote recently on the website of 350.org, one of the organizers of Sunday's march.

"Here's what hasn't changed: Keystone XL is still a crazy idea, a giant straw into the second biggest pool of carbon."

Al Gore, the former vice-president who's now a leading climate champion, has called on Obama to seize the moment and use his decisive re-election triumph to take serious action. Approving Keystone, he added, would be lunacy.

"The tar sands are just the dirtiest source of liquid fuel you can imagine," he said in an interview this week with Britain's The Guardian newspaper.

"At a time when we are desperately trying to bend the emissions curve downwards, it is quite literally insane to open up a whole new source that is much more carbon-intensive."

He also urged Obama to push for a carbon tax in negotiations with congressional Republicans over a looming budget crisis dubbed the "fiscal cliff."

"President Obama does have a mandate, should he choose to use it, to act boldly to solve the climate crisis, to begin solving it," Gore said.

Some conservative think tanks have recently raised the possibility of such a carbon tax, but Obama suggested there was little appetite for it during his White House news conference.

When asked if there's an absence of consensus on taxing emissions from fossil fuels, he replied: "That I am pretty certain of."

Climate change was barely mentioned during the recent presidential campaign until Sandy roared ashore in late October.

New York Mayor Michael Bloomberg, a former Republican who's now an independent, subsequently endorsed Obama for president because he said he trusted him to tackle climate change. Bloomberg had said previously he had no plans to endorse either Obama or Mitt Romney, the president's Republican rival for the White House.

Americans too have come around on climate change, perhaps influenced by the summer's near-calamitous drought in the West and record-breaking temperatures throughout much of the United States.

The Pew Research Center found recently that two-thirds of Americans believe climate change is real.

Bill McKibben, a leading American environmentalist, says Keystone offers Obama the ultimate opportunity to prove to Americans he's serious about climate change.

"It will be painfully easy to tell if President Barack Obama is going to take a serious stab at doing something about climate change in his second term: the purest, starkest test he faces will be the proposed Keystone XL pipeline from the tar sands of Canada to the Gulf of Mexico," he wrote earlier this week.

TransCanada, meantime, urged opponents of the pipeline to consider the alternative.

"To move the kind of crude volumes that Keystone XL will transport, it would take a constant line of tanker trucks — 4,000 trucks a day loading up and moving out every 20 seconds, 24 hours a day, seven days a week," Pourbaix said.

More than 1,000 standard tank rail cars would be needed to move the same amount of oil, he added.

"Both of these shipping methods have much higher risks than pipelines," he said. "Railways have roughly 25 times more accidents than pipelines and trucks have 3,000 more accidents."

Moody's Investor Service predicted this week that the White House will, indeed, reverse course and green-light Keystone XL while acknowledging the approval process could drag on.

"Still, even if Keystone XL went into operation in 2015 or 2016, Gulf Coast refining and marketing companies would benefit from wider light/heavy crude price differentials," Stuart Miller, Moody's vice president, said in a report published earlier this week.

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