Trump Approves Keystone XL Pipeline, Making Good on Campaign Promise

By Jerri-Lynn Scofield, who has worked as a securities lawyer and a derivatives trader. She now spends most of her time in Asia and is currently researching a book about textile artisans. She also writes regularly about legal, political economy, and regulatory topics for various consulting clients and publications, as well as scribbles occasional travel pieces for The National.

Despite all the media sound and fury lamenting the chaos engulfing the new administration, one area in which Trump certainly delivers when he has the authority: making good on his campaign promises.

Today, as expected, Undersecretary of State for Political Affairs Thomas A. Shannon issued a presidential permit authorizing TransCanada to construct, connect, operate, and maintain pipeline facilities at the U.S.-Canadian border in Phillips County, Montana for the importation of crude oil:

In making his determination that issuance of this permit would serve the national interest, the Under Secretary considered a range of factors, including but not limited to foreign policy; energy security; environmental, cultural, and economic impacts; and compliance with applicable law and policy.

The project is more popularly known as the Keystone XL pipeline and would transport about 800,000 barrels of heavy crude per day from oil sands located in the Canadian province of Alberta to Nebraska, before linking to a pipeline system that leads into an existing network of refineries and export terminals along the Gulf of Mexico.

Trump announced the permit at a White House event attended by TransCanada’s CEO, Russell Girling; Sean McGarvey, the president of North America’s Building Trades Unions; various cabinet members; and other administration officials.

Route of Pipeline


Reversal of 2015 Decision

Today’s decision to approve the pipeline reverses a 2015 decision to scupper the project. That earlier decision was made over concerns that to do otherwise would undercut the apparent US leadership role in efforts to fight climate change, as reported in 2015 by The New York Times in Citing Climate Change, Obama Rejects Construction of Keystone XL Oil Pipeline:

“America is now a global leader when it comes to taking serious action to fight climate change,” Mr. Obama said in remarks from the White House. “And, frankly, approving this project would have undercut that global leadership.”

Despite those ostensible concerns, the previous administration allowed major expansion of US fossil fuel production via fracking (and withheld a key report on environmental consequences until well into lame-duck status, as I described in this December 2016  post, EPA Concludes: Fracking Harms Drinking Water).

The Trump administration, however, has abandoned even the pretense of concern over climate change.

Hurdles Ahead

Environmentalists have vowed to fight the project, with Greenpeace saying it would pressure banks to deny financing, according to a Reuters report, Trump greenlights Keystone XL pipeline, but other obstacles loom.

Inevitable lawsuits also lie ahead. Per Reuters:

Since Obama had nixed the pipeline based on an environmental assessment commissioned by the State Department in early 2014, opponents will likely argue in court that Trump can’t reverse the decision without conducting a new assessment.

Fred Jauss, partner at the international law firm Dorsey & Whitney and a former attorney with the Federal Energy Regulatory Commission, said local permitting would also be a challenge.

“The Presidential Permit is only one part of a web of federal, state, and local permits that must be obtained prior to starting construction,” he said. “Other federal agencies, such as the Army Corps of Engineers, state regulatory commissions, and even local planning boards may have requirements that need to be fulfilled by Keystone prior to construction.”

“In addition, TransCanada may still need to reach deals with hundreds of potentially affected landowners on the pipeline’s route. There is a lot of work ahead for TransCanada.”

The Nebraska Public Service Commission has yet to approve pipeline construction and  has promised a final decision by September 14, while Montana and South Dakota have already approved the pipeline, according to the Financial Times, in a piece headlined Trump approves Keystone XL oil pipeline.

Opposition from Native American groups is also expected. These groups succeeded in temporarily halting the Dakota Access pipeline via an effective protest strategy– although Trump has reversed that apparent victory. It is not clear how effective future protests would be faced with an administration that does not have to worry about alienating its base if it takes vigorous efforts to allow construction to proceed.

Creating US Jobs and Stimulating US Steel Production?

McGarvey’s presence at the signing ceremony evidences union support for the project– but the number of jobs the project might produce in the United States looks unlikely to reach the 28,000 claimed by Trump, as reported by Reuters. A 2014 State Department study instead predicted Keystone XL would create a mere 3,900 construction jobs (with an even more paltry 35 permanent jobs).

Although in January Trump issued a Presidential Memorandum Regarding Construction of American Pipelines that “use materials and equipment produced in the United States”– meaning steel– the White House has subsequently conceded that Keystone XL is exempt from that pledge, which would only apply to new pipelines or those being repaired, as the the Wall Street Journal reported in Keystone Pipeline Won’t Have to Use U.S. Steel Despite Trump Pledge. The Financial Times further reports that most of the necessary pipe was purchased years ago. The Arkansas operations of India’s Welspun would supply about half the necessary total pipe–and this figure includes an already-constructed US section– while the remainder would come from Canada, Italy and India.

Oil Price Wildcard?

One possible wild card is if weak oil prices cause TransCanada to reconsider the Keystone XL project. But at this point, as The New York Times reports in U.S., in Reversal, Issues Permit for Keystone Oil Pipeline, that looks unlikely:

In addition, interest among many oil companies in the oil sands is waning amid sluggish oil prices. Extraction from the oil sands, situated in the sub-Arctic boreal forest, is expensive. Statoil and Total, two European energy giants, have abandoned their production projects. In recent weeks, Royal Dutch Shell agreed to sell most of its oil sands assets for $8.5 billion. And Exxon Mobil wrote down 3.5 billion barrels of reserves, conceding the oil sands were not economically attractive enough to develop for the next few years at least.

Nevertheless, Canadian production continues to grow as projects that were conceived when prices were higher begin to operate. And the Keystone effort is central to the future of TransCanada, the pipeline builder and a major force in the Canadian oil patch.

Bottom Line

Although the Keystone XL project us still far from completion, today’s announcement allows the project to proceed, and to fulfill yet another Trump campaign pledge.

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  1. justanotherprogressive

    Oh, good! Now the Canadians don’t have to send that crappola tar sands oil over their land to their ports and deal with the contamination, they can now send it over our land to our ports…..

    1. Eric

      Got bad news for you, Canada exports 80% of all tar sands produced to the USA already. We’ve never produced more in our history.

      It’s already going over your land to your ports.

      This just expands the amount.

    2. R R Hayes

      And instead of riding on the rails, it will be managed and contained in a pipe. Ask those people who burned to death in Quebec if they’d want a pipe line or a rail car transporting the oil. Not only is it safer, but trains produce tons of emissions pulling all those oil cars. So pipelines end up being better for the environment.

      1. Katharine

        Only on a relative scale. Keeping it in the ground would be far better, however unlikely.

  2. Synapsid

    Jerri-Lynn Scofield,

    “…would transport about 800 000 tons of heavy crude…”

    Two questions:

    Is that “tons” or is it “barrels”?

    Is that per day?

    1. Jerri-Lynn Scofield Post author

      Good catch– it’s barrels per day, and I have fixed it. Thanks for reading my work so carefully and pointing out the error.

      1. Synapsid

        Jerri-Lynn Scofield,

        You’re welcome.

        Part of the fun about KXL right now is trying to figure out which will have the greater effect: trying to get permission to build through Nebraska without a horrendous public-relations loss; and coming to terms with Canada not really needing KXL anymore:

        30% of KXL’s capacity was to have been used to get Bakken crude to refineries, and DAPL is now supposed to do that; KinderMorgan’s TransMountain pipeline, from Alberta to near Vancouver BC, is set to have its capacity more than doubled, and that, combined with TransCanada’s Energy East pipeline to the Atlantic (if it ever gets built–KXL is TransCanada’s too) will more than accommodate even the optimistic estimates of future oil-sands production. Canada will have need to two of the three and it looks like the Albert-Vancouver pipeline doubling has a fair chance of going through, so TransCanada has got a decision to make.

  3. DH

    I generally don’t have an issue with the new pipelines. It is the old pipelines that leak. The regulators should be focusing on forcing aggressive monitoring and replacement of older pipelines (especially 50+ year old ones). Those are the ones that are just cash flow machines for the operators – cleaning up leaks is just a cost of business.

    1. Foppe

      Why do you think “old” ones “start” leaking, if not for lack of maintenance & what hope do you have that this or any admin will start demanding they maintain the things?

    2. Vatch

      The regulators won’t aggressively monitor and replace older pipelines, because they lack the funds, and they’re captured by industry billionaires such as the Kochs and Harold Hamm. The new pipelines will probably fail earlier than the old ones did, because so much that is manufactured these days is less robust than similar products 50 years ago. Like new appliances, which only last a third as long as older appliances did, the new pipelines will have similarly short life spans.

      1. George S

        Pipeline maintenance is one place the profit motive frequently fails. And now that the operators own the regulators…

  4. RUKidding

    I guess Trump figured he needed to get one “Win” in since the Ryan/Republican Don’t Care bill just went down in flames.

    I thought we didn’t need this pipeline anymore. Yet another boondoggle, which means the Trump Family is going ot make big buckeroonie$ offa this. That’s probably the PRIMARY reason why Trump wants it. CHA CHING!!!!!!!!!

    Guess all of Trump’s fanatical fans will enjoy the potential despoliation of their local environment.

    1. George S

      They will until their children get sick, which will happen well after the Trump administration is gone. Left unsaid in all of the political discussion for the last several months is what happens to communities whose soil, air, and water was polluted by legacy industrial operations. The situation was bad before the new administration took office–nobody talks about Superfund anymore–and now the problem will be totally buried. And these are communities full of Trump voters.

  5. Ed

    I think it’s possible we could see a wave of “ecoterrorism” under Trump because of his apparent contempt for the environment as something that needs protection.

    1. George S

      Remember that, according to Boehner, “ecoterrorism” included peaceful protest. I would expect the administration to milk this meme dry.

  6. sharonsj

    “A 2014 State Department study instead predicted Keystone XL would create a mere 3,900 construction jobs (with an even more paltry 35 permanent jobs).”

    I read the State Dept. study. The 3900 jobs are temporary, lasting as long as it take to build that section of pipeline (an estimated two years). Permanent jobs are between 20 and 35, according to it and three other independent studies..

    For years the Republicans have been lying about the number of jobs created and the Democrats have been too incompetent (perhaps deliberately) to call them out. The media is just as bad. Americans are blindingly stupid.

      1. sharonsj

        I blame people for remaining massively disinformed. If you have access to the internet (which most public libraries provide), then you can find plenty of factual articles and studies, and watch the Congressional hearings. Of course you have to be willing to give up “Dancing With the Stars” to make time….

        I also blame the Democratic pundits, who appear on national TV in opposition to the Republicans, for showing up as uninformed as the American public.

  7. rjs

    i’ve made the point that it’s uneconomical before…here’s what i wrote after oil prices crashed two weeks ago:

    it seems certain that oil prices at these levels make it extremely unlikely that Transcanada can continue to pursue the Keystone XL pipeline, simply because oil sands expansion is out of the question at these price levels…because they have to burn one barrel of oil to extract three, the breakeven cost for extracting oil from Canada’s tar sands is much higher than most other places around the world; most figures i’ve seen indicate they need $50 US oil prices just to operate the extraction facilities now in existence, without any expansion…Keystone was originally proposed at a time when oil prices were twice what they are now., but 64 of the tar sands projects that were on the drawing board when oil prices first started falling have since been cancelled, with many of of the oil companies involved taking large losses, so the oil that was to fill the Keystone will no longer be there if the pipeline were to be completed…about a year ago, IHS estimated that a new greenfield oil sands mine (without an upgrader) required a WTI price between $85 to $95 per barrel on average to breakeven…a month ago, petrogeologist and oil analyst Art Berman at also showed that it would take at least $85 oil prices for 10 years to develop enough new oil sand projects to fill the Keystone XL…furthermore, there are already two massive Canadian tar sands pipeline projects already approved, which would ship any new dilbit production to the west coast and to the east…the major oil companies see the writing on the wall; just this week, Shell decided to divest nearly all of its Canadian oil sands interests in exchange for $7.25 billion, and Marathon announced an agreement to sell its Canadian subsidiary, including their interest in the Athabasca Oil Sands, and use the proceeds to buy Permian basin assets in Texas…all the deep pocketed major oil companies are getting out of the oil sands, and the small companies left with an interest there do not have the capital wherewithal to expand…

    if they go ahead with the Keystone anyway at this point, it won’t be beause they can profit from delivering dilbit…it will be because they can take prime land on the cheep using eminent domain

    1. Susan

      Wow. Thanks. I hadn’t seen that 1:3 for tarsands. Because I’d heard Nicole Foss give this talk in 2009 (Nicole Foss aka Stoneleigh – A Century of Challenges – Peak Oil & Economic Crisis), I’ve been trying to keep up with the EROEI from time to time.

      You gotta wonder when so many oil companies are cancelling these pricey hard to access projects if they’re responding to pictures of polar bears or more likely the waning profitability. Keystone seems like a pretty big waste to me. If you build it, will there be something in it?

      I’m with Winona LaDuke on this pipeline business – we need pipes for water, but not for oil. The land grabs will be interesting this time round; as like in the southern portion, all of a sudden rural landowners got a bit testy when they spotted surveyors barging onto the land their families have owned for generations. And if it is, as you say, “because they can take prime land on the cheep using eminent domain,” what in the world might they do with that land? So much of that corner of Nebraska is likely degraded (thanks Monsanto) farmland that is probably running low on topsoil/fertility in a corn soy commodity market glut. Whaddaya think they’re growing out there? Ethanol?

  8. Paul Lebow

    These pipeline wins or losses are important symbolic events – a barometer of progressive effectiveness or lack thereof. Bear in mind however, that the impact on climate change is in the noise as compared to more fundamental causes, causes that involve personal culpability rather than invoking external demons. Animal agriculture generates more greenhouse gases, impacts deforestation and environmental destruction than the entire transportation sector – 15% to over 50% of GHG generation depending on the study.

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