State Department's Delay on Canada-U.S. Oil Pipeline Costing Thousands of Jobs, Billions in Tax Revenue, Pipeline Advocates Say

By Penny Starr | March 17, 2011 | 5:00am EDT

Oil pipeline. (AP Photo)

( – Plans to build an oil pipeline stretching from Canada to U.S. refineries in the Gulf of Mexico have been put on hold again as the State Department considers the pipeline's environmental impact on U.S. lands – a step that is delaying job and economic growth and revenue growth through taxes on the project, say pipeline advocates.

The latest delay of the 1,700-mile XL Keystone pipeline – under consideration by Canada and the United States since 2008 – follows the Environmental Protection Agency’s demand that the State Department produce a second environmental impact statement (EIS) after deeming the first one “inadequate.”

In a Mar. 15 statement, the State Department said it would begin accepting public comments on a second EIS in mid-April, and it promised a decision on the pipeline project by the end of the year.

“Following issuance of a Final EIS, the State Department will solicit public comment and host a public meeting in Washington, D.C., before it makes a determination under Executive Order 13337 on whether issuance of this permit is in the U.S. national interest,” the statement says. “The U.S. Department of State expects to make a decision on whether to grant or deny the permit before the end of 2011.”

The move has sparked reaction from the oil and natural gas industry on both sides of the U.S. and Canadian border, particularly at a time when high gas prices and turmoil in the Middle East are putting pressure on the Obama administration to reduce dependency on foreign oil by developing domestic reserves and partnering with friendly oil resources.

The American Petroleum Institute (API) called the delay “new environmental hurdles” to block a “much-needed pipeline” that would transport Canadian oil sands crude. “It is past time for the administration to approve this important infrastructure investment,” Jack Gerard, president and CEO of API, said in a statement issued on the same day as the State Department’s.

TransCanada, the company in charge of the project, noted that Keystone XL "has been under review since 2008 and we are confident we have addressed the major questions raised by regulators and government agencies," Russ Girling, TransCanada's president and CEO, said in a statement. He said he “expected” to see the project, which is an expansion of TransCanada’s core Keystone pipeline, get under way by 2013.

(AP File Photo/Matt Rourke)

TransCanada said the new pipeline would bring more than $585 million in new taxes to states and cities located on its path through the American heartland. An additional $5.2 billion in property taxes would be paid over the proposed 50-year lifespan of the project and create jobs that would provide $6.5 billion in personal income to American workers.

"Keystone XL is a shovel-ready project that is funded completely by private sector investment at no cost to American taxpayers," Girling said. "It will be a safe, modern and leading-edge pipeline and we have provided the Department of State and other agencies with the facts regarding Keystone XL's design, safety, operating procedures and limited environmental impact."

According to the Canadian Energy Research Institute, development of Canadian oil sands could create 340,000 U.S. jobs.

Labor unions also support the project, saying it will directly create 20,000 "good jobs" for American workers.


In a March 15 statement, Teamsters President Jim Hoffa said he was pleased that the State Department is "moving forward" with the pipeline approval process: “In an ideal world, the United States wouldn’t need to import crude oil from oil sands. We’d much rather rely on clean, renewable resources for all our energy needs. But it will be many years before we’ve ended our dependence on petroleum."


Hoffa also noted TransCanada's "responsible construction practices," and he said allowing the approval process to move forward -- by launching a second EIS -- "was the right decision" for the State Department to make.

In July 2010, the EPA sent a letter to the State Department criticizing its original EIS as “inadequate.” The 18-page letter detailed a long list of concerns, including pollution from the refineries, problems with spillage containment in case of an accident, and environmental justice -- in particular “the potential for disproportionately high and adverse human health and environmental effects on minority, low-income and Tribal populations.”

The National Resources Defense Council (NRDC), a liberal group, also reacted to the State Department’s decision on Mar. 15, echoing the EPA’s concerns and adding how the pipeline might adversely have an effect on migratory birds and the American Burying Beetle.

“We trust that the State Department will allow the draft SEIS to dictate next steps, rather than impose artificial deadlines that might short change the very issues that convinced the State Department more analysis was needed,” NRDC staff member Liz Barratt-Brown wrote on the group’s Web site. “But for today, we are glad for all the people who live along the pipeline and in Alberta and Texas have made their voices heard.”

API’s Gerard cited in his statement that a preliminary report by the Canadian Association of Petroleum Producers claims that nearly 1,000 U.S. companies in 47 states currently support Canadian oil sands development and that it would be a boon to the economy, unless the State Department rules against it.

“Oil is a global commodity,” Gerard said. “It will go to where it is welcomed and the capital investments and jobs will go with it.”

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