Pipeline Update: Victories Pile Up, Delays Grow

Keystone XL faces another setback and NRDC and it's partners score another legal victory against this controversial tar sands project.

In another win for the climate, clean water, and frontline communities, the United States Court of Appeals for the Ninth Circuit today denied TransCanada’s latest attempt to subvert the rule of law and ram the Keystone XL through the American heartland. In denying TransCanada’s motion to begin construction pending its appeal of the District of Montana’s decision that blocked construction of this tar sands megaproject, the Ninth Circuit reaffirmed once again that TransCanada’s and the State Department’s failure to adhere to bedrock environmental laws justifies stopping nearly all activity on the controversial project.

Keystone XL remains just one of three major new pipelines proposed out of Alberta’s tar sands. Line 3, which crosses all of Northern Minnesota’s lake country, and the Trans Mountain Expansion, which opens the U.S. West Coast to a massive increase in tar sands imports, are also facing their own delays and growing resistance. Despite U.S. media’s obsession with Keystone XL and Canadian media’s obsession with Trans Mountain, remembering that there is a three-pronged threat from the tar sands is critical for the dogged water protectors, climate warriors, and campaigners in both countries. The reason: the expansion of the tar sands industry is riding on at least one of these projects being built.

This week, proof of just how necessary a new pipeline is for further expansion of this reckless industry came out in the form of multiple reports. First, the IEA released projections anticipating growth in the Canadian oil and gas sector by just 300,000 barrels per day (bpd) through 2024. In simpler terms this means growth over the next five years will equal the same amount the industry had been growing year over year for the past decade. Second, data from 2018 now shows that the observed trend in declining investment in the tar sands has continued for yet another year. All of this follows on the heels of the Alberta government’s announced policy of production curtailments, which are expected to extend at some level through the rest of 2019, if not longer. These year-after-year declines in investment create major barrier to future growth as the start up costs of new tar sands projects are extremely capital intensive and most investment in recent years has focused on small increases in capacity at existing production sites.

While pipeline delays are having a huge effect on investment interest, other factors like climate change mitigation policy and major changes in fuel standards are also sending strong signals that extreme fuels like tar sands are facing the same, imminent demise as coal. And that’s a reality that Canada is going to need to face: burning endless political capital to promote the production of ever more oil the world doesn’t need is setting the country on the wrong course and contributing to the acceleration of our climate catastrophe.

Today, it is increasingly clear that these trends in dampened outlook and declining investment in the tar sands will only continue. The three big new tar sands pipelines all face a long list of hurdles and a growing force of public opposition that is ready to fight tooth and nail every step of the way. Several of these process-related hurdles are highlighted below for each project:

Keystone XL

  • Motion to Resume Pre-Construction/Construction Denied: On March 15, TransCanada lost its motion to resume construction activities while it awaits the outcome of its appeal to the 9th Circuit. Per sworn affidavits from TransCanada employees, this may mean that the pipeline construction will be delayed by a full year, putting the earliest in-service date all the way out in 2022.
  • 9th Circuit Appeal: TransCanada and the State Department have appealed the District Court for the District of Montana’s ruling that the pipeline’s federal cross-border permit was issued illegally. Briefing on the merits will take place this spring.
  • Nebraska Supreme Court: Landowners and others have appealed the Nebraska Public Service Commission’s issuance of the route permit for the state. A ruling is imminent, and if the landowners prevail, TransCanada will be without a permit that would allow construction in Nebraska.
  • Outstanding permits: Despite the focus on the 9th Circuit motions and appeals process, TransCanada has yet to receive critical Clean Water Act permits. The Missouri River crossing permit, in particular, is likely to be a flash point, and several state-level water permits remain in process.

Line 3

  • Minnesota appeals: There are three concurrent appeals processes now taking place. One challenges the legal adequacy of the state’s Environmental Impact Statement. The second challenges the Public Utilities Commission’s issuance of the Certificate of Need. The third challenges the Public Utilities Commission’s issuance of a route permit. These initial appeals are expected to be considered by early summer, but could lead to further appeals.
  • State water permits: There are a number of water permits that Minnesota must issue under its designated Clean Water Act authority. The process of considering these permits was just announced and is not expected to conclude until late October 2018.
  • Federal water permits: Unlike other areas of the country, the rubber stamp Nationwide Permits” that have been used to ram through other oil pipelines like Dakota Access cannot be used in Minnesota, meaning federally controlled water crossings will need to go through a complete NEPA process prior to issuance or denial.

Trans Mountain

  • National Energy Board findings: After a Canadian federal appeals court struck down Trans Mountain’s federal route permit on a number of grounds last year, the federal government ordered the NEB to begin an expedited process for a new review of this beleaguered pipeline proposal. The NEB has now ruled that, despite significant environmental risks, the pipeline should once again be approved by federal ministers.
  • Potential legal appeals: Despite yet another regulatory review, the NEB’s credibility among First Nations and environmentally minded Canadians is at perhaps an all-time low and it is expected that if the government once again approves this project, it will face appeals in court with strong legal bases for overturning the permit once more.
  • Legislative changes: Washington’s governor, Jay Inslee, has come out very strongly against the Trans Mountain pipeline due to the significant threats it poses to U.S. and Washington waters. In response, Washington’s legislature passed updated spill response legislation, which includes provisions that should apply to the hundreds of tankers that would be loaded by the pipeline if it were ever built. California is also now considering similar legislation, which also includes significant expansions in tanker operator liability in the event of a spill of non-floating oil (which includes the diluted bitumen shipped from the tar sands).

At the end of the day, it would be extremely optimistic for the tar sands industry to bank on having a pipeline in service before 2021. And while NRDC believes that there is a strong likelihood that all three of these projects will never be built, a further question for these companies and their shareholders to ask is: how long can you really hold on to these projects before they become investments that don’t pay off or, as we’re seeing with other high-carbon infrastructure, stranded assets? It’s a real possibility, and one that seems to beg the bigger question of why the more than $20 billion price tag of these three projects isn’t being invested in the energy systems of our future.

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