EPA Keystone Review Links Oil Sands to Carbon Emission Jump

(Bloomberg) — The U.S. Environmental Protection Agency

said developing Canadian oil sands would significantly increase

greenhouse gases, a conclusion environmental groups said gives

President Barack Obama reason to reject the proposed Keystone XL


“Until ongoing efforts to reduce greenhouse gas emissions

associated with the production of oil sands are more successful

and widespread,” developing the crude “represents a

significant increase in greenhouse gas emissions,” the EPA said

Tuesday in a letter to the State Department, which is reviewing

the project.

The proposed pipeline has pitted Obama’s allies in the

environmental movement against the U.S. energy industry. Obama

has said he’ll reject TransCanada Corp.’s Keystone if it would

lead to a significant increase in carbon pollution.

Proposed in 2008, Keystone would deliver Alberta oil sands

to U.S. Gulf Coast refineries. The Republican-led House next

week probably will pass a Senate bill to approve the pipeline

and circumvent the State Department review. Obama said he will

veto the measure and continue with his administration’s review.

Supporters don’t appear to have the votes to override a veto.

‘Taken Apart’

“The EPA, in polite, knife-sharp Washingtonese, has taken

apart the State Department on” Keystone “and shown it to be a

climate disaster,” Bill McKibben, who has led protests against

the project, said in a message on Twitter.

Shawn Howard, a TransCanada spokesman, didn’t return

telephone and e-mail messages seeking comment on the EPA report.

TransCanada rose as much as 2.8 percent in Toronto trading, to

C$59.05 ($47.53), after the letter was released.

The Natural Resources Defense Council said the assessment

means the pipeline fails the standard Obama has said he’ll use

to judge the $8 billion project.

“There should be no more doubt that President Obama must

reject the proposed pipeline once and for all,” Danielle

Droitsch, Canada project director for the NRDC, said in a


The State Department in an environmental impact statement

released a year ago said Keystone probably wouldn’t increase

emissions, even though oil sands are more carbon intensive,

because the crude would be produced with or without the project.

Lower Prices

The 11-volume analysis included a scenario under which

Keystone could play a larger role in spurring oil sands

development. If oil fell below $75 a barrel, the extra cost to

ship using alternatives such as rail may no longer be viable,

the 2014 report concluded.

The “low-price scenario” should be given “additional

weight during decision making, due to the potential implications

of lower oil prices on project impacts, especially greenhouse

gas emissions,” the EPA said. Benchmark U.S. crude last week

fell to $44.45, the lowest since March 2009.

The American Petroleum Institute, an industry lobbying

group based in Washington, said the EPA’s letter was just an

excuse to put off a decision.

“Suggesting that the drop in oil prices requires a re-evaluation of the environmental impact of the project is just

another attempt to prolong the KXL review,” Louis Finkel, API’s

executive vice president, said in a statement.

Emissions Increase

In the letter, EPA said the crude oil carried by Keystone

could lead to the release of more than 27 million metric tons of

carbon annually compared with other, less carbon-heavy crude.

That’s the equivalent of emissions from 7.8 coal plants,

the EPA said. But it’s just one-half of one percent of total

greenhouse gases released annually in the U.S., according to

government data.

The EPA letter “continues to give the president a

rationale if he wants to reject it,” Lowell Rothschild, a

Washington-based environmental litigator at Bracewell & Giuliani

LLP, said in a phone interview.

The EPA also calls the State Department analysis

comprehensive and says it responded to concerns the agency had

voiced to a draft.

Kevin Book, an analyst at Clear View Energy Partners LLC,

said in a note today that the general tenor of EPA’s comments

was positive.

“But the agency’s arguments could create additional

headwinds for the project,” Book wrote.

Book said that it’s possible the State Department could

take additional time to study the impact of low crude prices on

the project.

To contact the reporters on this story:

Jim Snyder in Washington at


Mark Drajem in Washington at


To contact the editors responsible for this story:

Jon Morgan at


Steve Geimann

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