A bill to approve the Keystone XL Pipeline failed to pass the Senate Monday, once again delaying the controversial project. It is unlikely a vote will happen before midterm elections in November. The pipeline’s approval was tied to a bill on energy efficiency, but it did not receive the required 60 votes to proceed.

Although the first three phases of the Keystone Pipeline system are already in operation, the Keystone XL extension has been mired in conflict. The controversial project’s latest obstacle began in February when a lower court invalidated a state law that let Nebraska Governor Dave Heineman approve the pipeline’s path through the state. The judge said that only the State’s Public Service Commission had that power. This looks like a delay that could stretch for months or years, as the Nebraska Supreme Court isn’t expected to hear arguments until at least September or October and probably wouldn’t issue a decision until several months after that. If the lower court’s decision is affirmed, then the Public Service Commission would have up to 7 months to make its decision about any portion of the proposed pipeline route running through Nebraska.

Keystone-Cushing Pipeline

Truck hauling 36-inch pipe to build the Keystone-Cushing Pipeline, courtesy of Steve Meirowsky.

On April 18, the U.S. State Department, which is responsible for determining whether the project is in the nation’s interest, announced that it would delay making a recommendation to allow more time for agency review and consideration of public comments. No new deadline has been announced yet, and with midterm elections just around the corner, many political analysts say they don’t expect an announcement from President Obama until at least the end of the year. The delay has drawn criticism from all sides, with critics claiming that the delay allows Obama, who has said he will make the final decision on the project after the State Department review is complete, to avoid having to make a politically difficult decision that divides even his supporters.

We’ve been closely watching this case for a while now, if you would like to read our previous analysis. The decision to build the pipeline extension has many different facets. Whichever way the government moves on this project, there will be environmental, political, and economic repercussions.

The decision isn’t just being eagerly awaited here in the United States. Delays increase project expenses, and project owner TransCanada, whose shares fell 3.3% after the State Department’s announcement,[1] expressed frustration and disappointment about the delay. Insufficient capacity to transport oil to international markets may also be hurting Canada’s economy.

Two Canadian cabinet ministers recently spoke out about the pipeline and expressed confidence that the project would be back on track. Greg Rickford, the Canadian Minister of Natural Resources, said, “Obviously we hope sooner rather than later that this is depoliticized, if you will, and that the communities along the pipeline, which include Canada and the United States, can reap the tremendous economic benefits of Keystone.” Minister of Finance Joe Oliver vowed that the Canadian government would “continue to advocate for Keystone until it is approved, as we will advocate for other environmentally responsible projects in the national interest.”[2]

1. Jim Snyder. “Keystone Pipeline Fate Now in Hands of Nebraskan Jurists.” Bloomberg, April 21, 2014. Accessed at http://www.bloomberg.com/news/2014-04-21/keystone-pipeline-fate-now-in-hands-of-nebraskan-jurists.html.
2. Euan Rocha. “Canada still betting the U.S. will approve Keystone XL.” Reuters, April 25, 2014. Accessed at http://www.reuters.com/article/2014/04/25/us-usa-keystone-rickford-idUSBREA3O19M20140425.