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Donald Trump

Trump greenlights Keystone XL pipeline, but other obstacles loom

The approval reverses a decision by former president Barack Obama to reject the project

PUBLISHED : Friday, 24 March, 2017, 11:24pm
UPDATED : Friday, 24 March, 2017, 11:26pm

US President Donald Trump’s administration approved TransCanada Corp’s Keystone XL pipeline on Friday, cheering the oil industry and angering environmentalists who had sought for years to block it.

The approval reverses a decision by former President Barack Obama to reject the project, but fresh obstacles loom: To get built, TransCanada will need to win financing, acquire local permits, and fend off likely legal challenges.

“It’s not done yet,” said Michael Wojciechowski, vice president of Americas, oil and refining markets research at consultancy Wood Mackenzie.

Trump announced the presidential permit for Keystone XL at an event at the White House attended by TransCanada Chief Executive Officer Russell Girling and Sean McGarvey, president of North America’s Building Trades Unions.

“TransCanada will now be able to complete this long overdue pipeline with efficiency and speed,” Trump said, saying the decision was “part of a new era in America” to lower consumer fuel prices, create jobs and achieve energy independence.

TransCanada’s US-listed shares rose 0.77 per cent to US$46.62, after having surged as much as 7 per cent in pre-market trading.

The pipeline linking Canadian oil sands to US refiners had been blocked for years by former President Barack Obama, who said it would do nothing to reduce fuel prices for US motorists and would contribute to emissions linked to global warming.

Trump, however, campaigned on a promise to approve it, saying it would create thousands of jobs and help the oil industry. He signed an executive order soon after taking office in January to advance the project.

Trump has claimed the project would create 28,000 jobs in the United States. But a 2014 State Department study predicted just 3,900 construction jobs and 35 permanent jobs.

The White House has said the pipeline is exempt from a Trump executive order requiring new pipelines to be made from US steel, because much of the pipe for the project has already been built and stockpiled.

Environmental groups vowed to fight it. Greenpeace said it would pressure banks to withhold financing for the multibillion-dollar project, and others said they would fight the pipeline in court.

“We’ll use every tool in the kit,” said Rhea Suh, president of the Natural Resources Defence Council.

Since Obama had nixed the pipeline based on an environmental assessment commissioned by the State Department in early 2014, opponents will likely argue in court that Trump can’t reverse the decision without conducting a new assessment.

Fred Jauss, partner at the international law firm Dorsey & Whitney and a former attorney with the Federal Energy Regulatory Commission, said local permitting would also be a challenge.

“The Presidential Permit is only one part of a web of federal, state, and local permits that must be obtained prior to starting construction,” he said. “Other federal agencies, such as the Army Corps of Engineers, state regulatory commissions, and even local planning boards may have requirements that need to be fulfilled by Keystone prior to construction.”

“In addition, TransCanada may still need to reach deals with hundreds of potentially affected landowners on the pipeline’s route. There is a lot of work ahead for TransCanada.”

The multibillion-dollar Keystone XL pipeline would bring more than 800,000 barrels per day of heavy crude from Canada’s oil sands in Alberta into Nebraska, linking to an existing pipeline network feeding US refineries and ports along the Gulf of Mexico.

The project could be a boon for Canada, which has struggled to get its vast oil reserves to market.

“Our Government has always been supportive of the Keystone XL pipeline and we are pleased with the US decision,” a spokesman for Canada’s minister of natural resources said. “The importance of a common, continental energy market cannot be overstated.”

The president of the American Petroleum Institute, Jack Gerard, said the approval was “welcome news” and would bolster US energy security.

Expedited approval of projects is part of Trump’s approach to a 10-year, US$1 trillion infrastructure package he promised on the campaign trail. The White House is looking for ways to speed up approvals and permits for other infrastructure projects, which can sometimes take years to go through a regulatory maze.

TransCanada tried for more than five years to build the 1,897-km pipeline, until Obama rejected it in 2015. The company resubmitted its application for the project in January, after Trump signed the executive order smoothing its path.