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Oil

Keystone veto all about retaining presidential authority

The only meaningful decision pits one U.S. agency - the EPA - against another - the State Department - By Kenneth P. Green

CALGARY - U.S. President Barack Obama veto of Senate Bill 1, a.k.a. "The Keystone XL Pipeline Approval Act," this week was not only predictable, it was virtually inevitable given a) the political polarization in the United States; b) unrelenting environmental opposition to the pipeline; and c) a certain amount of congressional overreach.

But the presidential veto, and the Senate bill itself for that matter, were more about political theatre than anything else. The real threat, as I'll explain, is the internecine spat that erupted recently between the U.S. Environmental Protection Agency (EPA) and the State Department, a battle akin to Godzilla vs. King Kong.

The president's rationale for rejecting the Keystone Approval Act is not actually based on an assessment of whether Keystone XL is in the U.S. national interest - that process is ongoing at the State Department. Rather, Obama's veto justification is that the Act "attempts to circumvent longstanding and proven processes for determining whether or not building and operating a cross-border pipeline serves the national interest." In other words, this particular veto was less a rejection of Keystone XL than it was an act to retain presidential authority over cross-border infrastructure, an authority that has developed over nearly 50 years, and that survived several legal challenges.

Presidential authority over cross-border oil pipelines was established in 1968 via Executive Order 11423 signed by President Lyndon Johnson. (An Executive Order is basically a presidential order to the executive branch that has the force of law). The order assigned approval of oil pipelines to the secretary of state, subject to the president's authority to issue a decision in the event of internal disagreement among agencies of the government, as well as to modify, amend, suspend, or revoke a permit as he sees fit.

As the Congressional Research Service points out, this authority has survived numerous court challenges, which have judged this authority as "legitimate exercises of the President's constitutional authority over foreign affairs as well as his authority as Commander in Chief." So the veto of Senate Bill 1 was essentially foreordained - no president cares to give up executive powers once they've become a prerogative of the office.

None of which helps to predict what will ultimately become of the pipeline. As things stand now, the State Department's final report on Keystone XL has been challenged by the EPA. That virtually guarantees another round of revisions that will take many months, regardless of the merits of the EPA's critique. Essentially, the EPA argues that the State Department underestimated the comparative greenhouse gas emissions of oil sand production with conventional production, and more importantly, challenges the State Department's contention that oil from the oil sands will be produced whether or not Keystone XL is built. The EPA now argues that this assumption fails if oil remains in the range of $65 to $75, leading to curtailed oil sand production.

Several things could now happen. The State Department could revise its environmental impact assessment to align with EPA criticism, unifying the government on the issue, but making it harder for the pipeline to pass the president's litmus test for the project. In a 2013 speech at Georgetown University, Obama stated his criteria explicitly: "Allowing the Keystone pipeline to be built requires a finding that doing so would be in our nation's interest. And our national interest will be served only if this project does not significantly exacerbate the problem of carbon pollution. The net effects of the pipeline's impact on our climate will be absolutely critical to determining whether this project is allowed to go forward."

The EPA's challenge is aimed straight at the heart of the president's make-or-break criterion of exacerbating climate change. If the State Department agrees with the EPA, the State report will likely come back with a conclusion that, indeed, oil sands' development would both exacerbate "carbon pollution," and that, given current oil prices, blocking the pipeline would curtail production, curtail emissions, and have less influence on the climate. If State rejects EPA's findings, then the president has another call on where the Keystone "ball" will land, and given his support of the EPA to date, it's hard to see him overriding their objections.

Obama's veto of the Keystone Approval Act has been slow motion Kabuki theatre. But the only meaningful decision still looms, pitting one U.S. agency against another. That will play out deep in the hallways and offices in Washington while the rest of us watch.

Kenneth P. Green is Senior Director, Natural Resource Studies at the Fraser Institute.

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