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U.S. decision on Keystone XL pipeline likely to slip into 2014

Demonstrators carry a replica of a pipeline during a march against the Keystone XL pipeline in Washington, February 17, 2013. REUTERS/Richar
Demonstrators carry a replica of a pipeline during a march against the Keystone XL pipeline in Washington, February 17, 2013. REUTERS/Richar

By Timothy Gardner

WASHINGTON (Reuters) - As the State Department drags out the approval of the Keystone XL pipeline, it is more likely President Barack Obama's final decision on the project to help link Canada's oil sands to U.S. refineries will slip into 2014, experts said.

The department has yet to finalize a controversial environmental review of more than 2,000 pages it issued on March 1 that it had been expected to complete by mid-summer. Instead, the department is reviewing and publishing in batches the more than 1.5 million public comments it received on the review. The first batch of comments was posted on May 23; the most recent batch went up about a week ago.

Many of the comments focus on one of the draft review's main conclusions: that TransCanada Corp's 830,000 barrel per day project would not result in higher levels of emissions linked to global warming because the oil would find its way to market whether or not the pipeline gets built.

Opponents say additional emissions from Keystone would make global warming worse as it would help lock in the United States crude oil dependence for decades. Supporters say there would be no boost in global warming and that the project would support construction jobs.

State Department officials have said there is no set timeline on the decision, and it will take as long as it needs to complete an analysis on the final review.

But the specific stages still to come in the approval process add up to at least three-and-a-half months, which would push the process into December even without additional delays.

After the environmental review is completed, eight federal agencies, including the Departments of Defense, Energy and Homeland Security, will have 90 days to comment on whether they believe the pipeline is in the national interest. Then the State Department will make a National Interest Determination (NID), which the agencies will have 15 days to appeal.

"When you take into account that the NID takes 90 days, it's hard to see how the decision could emerge before the first quarter of 2014," said David Goldwyn, who headed international energy affairs at the State Department until early 2011.

In another wrinkle, the State Department's independent inspector general said last month he would issue a review in January on conflict of interest allegations over Environmental Resources Management, the company that performed the environmental review for the State Department. ERM has not responded publicly to the inspector general's review.

The review is not a full blown investigation into the charges. But letting the Keystone XL decision slip into early 2014 would allow the inspector general to conclude his review before the State Department makes a recommendation to Obama on the project, said Kevin Book, an analyst at ClearView Energy Partners.

The shift in timing could protect the State Department from charges it had not taken everything into account before making a decision.

Robert Johnston, the director of global energy at the Eurasia Group, a risk consultancy, said in a note to clients on Monday that delays in finalizing the environmental review and other issues has led his group to lower its approval odds of Keystone XL from 80 percent by the end of 2013 to 70 percent in early 2014.

He said the pipeline approval could be delayed even further if the Obama administration decided to link the pipeline to a larger push on setting emissions limits on power plants and as other domestic and international issues take up much of the administration's time.

"With the administration focused on the Syria crisis, and the upcoming debt limit debate, further delays and slippage are quite possible," Johnston said in the note.

(Reporting by Timothy Gardner, editing by Ros Krasny and Leslie Gevirtz)

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