EPA says Keystone XL could increase emissions as oil prices fall

Oil prices have dropped so low that the proposed Keystone XL pipeline could play a bigger role in the development of Canada's tar sands oil market and thus contribute to increased greenhouse gas emissions, the U.S. Environmental Protection Agency (EPA) told the State Department in a letter released to the public Tuesday.

The EPA’s remarks in the letter about the Keystone XL project could lend weight to President Barack Obama's view that the controversial pipeline should not be approved if it significantly increases carbon pollution.

In the letter, the EPA implied that falling oil prices — which have more than halved since the summer — mean that shipping Canadian oil to the United States will not be economical unless the pipeline is built.

The State Department is evaluating the project because the TransCanada Corp. pipeline would carry oil from a foreign country. The department is expected to make a recommendation to Obama on the project soon, after reviewing comments from the EPA and other federal agencies.

Obama will make the final decision on Keystone XL, which has been pending for more than six years. 

The EPA’s letter about the pipeline said more attention should be paid to the "potential implications of lower oil prices on project impacts, especially greenhouse gas emissions."

The recommendation is significant because Obama has said he would not give final approval to Keystone XL if the project would substantially raise carbon emissions linked to climate change. However, the White House had no comment on whether the EPA letter shows the project fails Obama's climate test, noting the State Department's approval process was ongoing.

Keystone XL would ship an estimated 800,000 barrels of petroleum per day from Alberta's oil sands to refineries and ports along the Gulf Coast.

The State Department concluded in a January 2014 environmental review that TransCanada Corp.'s Keystone XL project would not impact the rate of tar sands development, or significantly raise emissions, because railroads and other alternative forms of transportation would carry the oil to U.S. markets if the pipeline is not built.

Environmental groups had pointed that out to the State Department in a letter last July, asking the agency to revise its market analysis of Keystone.

"Rail hasn't proved a feasible substitute for pipelines for tar sands producers," Anthony Swift, a staff attorney for the Natural Resources Defense Council, said at the time in an emailed statement. "That's why we're seeing tar sands producers pulling the plug on new projects rather than pivot toward rail. Their costs are already too high and rail is too expensive."

Although the State Department is expected to soon make a recommendation to Obama on Keystone, many lawmakers are trying to push through the Keystone project on their own.

Next week, the House of Representatives will take up the Senate bill passed last week to approve Keystone. Obama is expected to veto the bill. Approval for the pipeline rests with the Obama administration, because the line would cross an international border.

Environmentalists on Tuesday seized on the EPA letter, saying it paves the way for Obama to reject the pipeline.

"America is diversifying our energy sources with renewables and Keystone XL continues to be a step backwards and simply does not make sense given low oil prices and the high carbon content of tar sands," said Jane Kleeb, president of the group Bold Nebraska.

Oil interests slammed the EPA comments, saying that the price drop was likely temporary. Louis Finkel, a vice president at the American Petroleum Institute, said the EPA letter was "another attempt to prolong the pipeline’s review.”

Al Jazeera and Reuters