The Trump administration's decision to downplay climate change considerations when it approved a permit for the Keystone XL oil pipeline project was unjustified, according to a court ruling that blocked construction on the project and required a redo of part of the federal review.
Under the Obama administration, the U.S. Department of State in 2015 denied the TransCanada Corp. project a presidential permit that would allow the pipeline to cross the U.S.-Canada border, relying heavily on a 2014 environmental impact statement and highlighting the U.S.'s role in decelerating climate change.
In 2017, President Donald Trump's State Department approved the permit. It put more weight on preserving energy security and economic development and offered limited analysis of the pipe's impact on climate change, mainly noting that other countries are now acting to address climate change.
The change in priorities was significant and needed a "reasoned explanation," a judge on the U.S. District Court for the District of Montana said in a Nov. 8 decision.
"An agency cannot simply disregard contrary or inconvenient factual determinations that it made in the past, any more than it can ignore inconvenient facts when it writes on a blank slate," Judge Brian Morris said in the order, citing precedent. "The department [in 2017] instead simply discarded prior factual findings related to climate change to support its course reversal."
The judge pointed out that the State Department's 2017 record of decision tracked the 2015 decision "nearly word-for-word" until it got to a section titled "Climate Change-Related Foreign Policy Considerations." The 2017 record omitted this section entirely "without explanation or acknowledgement," the order said.
The 2015 State Department record acknowledged science supporting a need to keep global temperature under a limit of 2 degrees Celsius above pre-industrial levels, recognized the scientific evidence that human activity represents a dominant cause of climate change, cited concerns such as storm surges and intense droughts, and noted the U.S.'s impact as the world's largest economy and second-largest greenhouse gas emitter, the judge said.
The order vacated the more recent record of decision and said the department will need to provide an updated environmental review addressing these concerns to satisfy obligations under the National Environmental Policy Act. In the meantime, TransCanada cannot begin construction on its project, the judge said.
The Northern Plains Resource Council, one of the parties that brought the suit, saw the court decision as a check on Trump administration policies that have promoted increased fossil fuel use.
"Today's ruling is a victory for the rule of law, and it's a victory for common sense stewardship of the land and water upon which we all depend," Dena Hoff, leader of the council, said in a Nov. 8 statement. "All Americans should be proud that our system of checks and balances can still function even in the face of enormous strains."
'A major roadblock for TransCanada'
As recently as Nov. 1, TransCanada executives spoke optimistically about Keystone XL's prospective earning potential and role in the energy marketplace.
"The demand for our existing system and for Keystone XL has never been greater," Russell Girling, TransCanada's president, CEO and director, said during an earnings conference call. "You can see by the differentials in the marketplace that producers want access to markets and they are willing to sign long-term contracts. ... What we're seeing [is that] both producers and refiners that want [to] contract on a 20-year basis."
Paul Miller, TransCanada's president of liquids pipelines, said at the time that the company was continuing its construction planning and preparation, expecting that the case in Montana and other legal hurdles would be resolved in time to begin construction in 2019. The company has planned for a two-year construction process.
Fred Jauss, partner at law firm Dorsey & Whitney, said the court order could dash TransCanada's hopes of moving forward with its long-awaited project.
"The order ... is a major roadblock for TransCanada," said Jauss, who specializes in energy issues, in a Nov. 9 emailed statement. "The order could also deal a significant blow to a signature item of the Trump administration's energy agenda. The State Department is likely to take a two-track approach, where it will appeal the court's order and simultaneously work on crafting a decision that satisfies the court's findings. However, a lengthy appellate process could delay TransCanada's goal of commencing construction in 2019."
Other missteps in approval, judge says
The U.S. District Court judge agreed with the plaintiffs — the Northern Plains Resource Council, Indigenous Environmental Network and North Coast River Alliance — that the State Department must consider information that was not available when the 2014 environmental impact statement was done. For instance, at least eight major oil spills happened between 2014 and 2017, including a major spill on a branch of the Keystone system.
Morris said these spills "qualify as significant" and their risks likely would affect the pipe's potential impact in a variety of ways, including risks to water and wildlife.
The State Department should also include analysis of research done since 2014 on the specific challenges of cleaning up oil sands crude, which is the kind of oil Keystone XL would move, the judge said. The pipeline project is part of a larger system and is designed to deliver about 830,000 barrels of oil per day from Alberta to Nebraska.
Another material factor has changed since the previous environmental review under the Obama administration: oil prices. The 2014 environmental impact statement suggested that crude oil would probably stay between $100 and $140 per barrel for the next two decades, concluding that Keystone would need the price to be at least between $65 and $75 per barrel to break even.
WTI crude oil prices averaged roughly $49 in 2015, $43 in 2016 and $51 in 2017, according to the U.S. Energy Information Administration, falling well outside of the expected range in the 2014 State Department analysis. Morris' order noted that the price impact analysis had been key in the agency's assessment of how Keystone XL would affect oil sands production and other factors.
