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The Climate Post: U.S. Rejects Tar Sands Pipeline From Canada -- For Now

Posted: 01/19/2012 6:05 pm

Under pressure from Congress to make a decision on the Keystone XL pipeline, planned to connect Canada's tar sands region with the U.S. Gulf Coast, the Obama administration has decided to reject the pipeline proposal.

"This announcement is not a judgment on the merits of the pipeline, but the arbitrary nature of a deadline" that did not allow enough time to finish the environmental impact assessment, said President Obama. Republicans who supported the pipeline say they will continue to fight for it, and have asked Secretary of State Hillary Clinton to testify before Congress on the decision.

The company that wanted to build the pipeline, TransCanada, said earlier this week it was moving ahead with its plans despite the political wrangling. Also, the government of Alberta, the province at the center of Canada's tar sands activity, had been urging the U.S. Environmental Protection Agency to ignore greenhouse gas emissions and climate change impacts when evaluating the pipeline, according to newly released documents.

But with the decision issued by the U.S. State Department, now the company will have to start over and reapply, and the government might not offer an expedited review. TransCanada may reapply within weeks proposing a new route avoiding Nebraska's ecologically sensitive Sand Hills region, above a portion of the vast Ogallala Aquifer.

Obama reportedly called Canadian Prime Minister Stephen Harper to explain his decision, and Harper said he hoped the pipeline would eventually be approved. Harper is also supporting another pipeline to Canada's Pacific coast that would facilitate exports to Asia, in particular to China. However, pipeline approval is more difficult in Canada than the U.S., and there is considerable opposition to a Pacific pipeline, a Reuters analyst said.

The decision was a "brave" call, said Bill McKibben, branded in the Boston Globe as "the man who crushed the Keystone XL pipeline."

However other commentators -- even those who took the decision as good news -- argued it won't stop Canada's tar sands from flowing, and thus won't reduce greenhouse gas emissions. Others called the decision "a gift" to the GOP.

Shale Gas Versus Alternatives

Although world oil prices and U.S. gasoline prices were at all-time highs in 2011, in the U.S. natural gas prices have been plummeting, reaching their lowest in a decade in a "classic case of oversupply." The price has dropped lately because of a mild winter requiring less heating, a boon to consumers and businesses; the longer trend has been driven by the advent of shale gas drilling techniques, which now account for about a quarter of U.S. natural gas production.

There has been limited shale gas development outside the U.S., and prices in most of the rest of the world have remained much higher.

Although several years ago the U.S. was planning to import large amounts of liquefied natural gas and built ports to receive it in tankers, now the country is considering exporting natural gas. But such a move would have wide-ranging impacts that are difficult to unravel, according to a new report from the Brookings Institution; the U.S. Energy Information Administration said exporting natural gas would likely push domestic prices up.

And an MIT study simulated the impacts a steady supply of cheap shale gas would likely have on the U.S. economy and found it would in many ways benefit the economy over the next couple of decades, but that it could boost greenhouse gas emissions and stunt the growth of renewable energy and other alternatives.

Renewables Reach New High

Global investment in renewable energy hit a new record in 2011, reaching $260 billion, up 5 percent from 2010. Wind investment fell 17 percent from 2010, while solar investment grew by a third, so spending on solar was twice the spending on wind. The growth of solar was attributed in large part to plummeting photovoltaic panel prices.

Meanwhile, manufacturers of both solar panels and wind turbines are being squeezed by oversupply, leaving them with low profit margins.

In the U.S., renewables investment grew by a third, to $56 billion, helping the U.S. to reclaim the title of world's biggest clean energy investor. However, in 2011 the country also saw the end of "green stimulus" money and federal loan guarantees, and its Production Tax Credit will end at the close of 2012, so future investment onward may drop unless new support for renewables is brought in.

With the drop in wind energy investment, Vestas, the world's largest turbine manufacturer, is laying off more than 2,000 employees globally, about 10 percent of its workforce. It said it may layoff another 1,600 in the U.S. if the Production Tax Credit is not extended.

The Climate Post offers a rundown of the week in climate and energy news. It is produced each Thursday by Duke University's Nicholas Institute for Environmental Policy Solutions.