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A Judicial Keystone Kop


President Donald Trump smiles after announcing a permit for TransCanada Corp's Keystone XL oil pipeline while TransCanada Chief Executive Officer Russell Girling (L), U.S. Commerce Secretary Wilbur Ross (C) and Energy Secretary Rick Perry (R) stand beside him in the Oval Office of the White House in Washington, U.S., March 24, 2017.

President Donald Trump smiles after announcing a permit for TransCanada Corp’s Keystone XL oil pipeline while TransCanada Chief Executive Officer Russell Girling (L), U.S. Commerce Secretary Wilbur Ross (C) and Energy Secretary Rick Perry (R) stand beside him in the Oval Office of the White House in Washington, U.S., March 24, 2017.


Photo:

kevin lamarque/Reuters

More and more liberal federal judges are posing as the front line of the anti-Trump resistance and subjugating the law to their political preferences. Consider the Obama appointee who last week blocked the Trump Administration’s permit for the Keystone XL pipeline.

The oil pipeline has already been stuck in regulatory quicksand for a decade. In 2008

TransCanada

applied for a permit to move up to 830,000 barrels of bitumen crude per day from the Alberta oil sands to Gulf Coast refineries. The State Department under a 2004 executive order must approve cross-border projects to ensure they serve the “national interest.”

Amid a drawn-out review, the Obama State Department issued five determinations that the pipeline would have no material impact on greenhouse gas emissions. Its final environmental impact statement in 2014 said bitumen would be extracted irrespective of the pipeline, and shipping the crude by rail or tanker instead would result in 28% to 42% greater CO2 emissions as well as more leaks.

Barack Obama ignored those findings and offered Keystone as a sacrifice to the 2016 Paris climate agreement. The U.S. government must “prioritize actions that are not perceived as enabling further GHG emissions globally,” the Obama Administration concluded.

TransCanada sued in federal court and under Nafta’s Chapter 11 investor-state arbitration, but it caught a break when Donald Trump was elected and his Administration granted the permit. Yet now it’s back to rolling the boulder uphill as environmentalists have sued.

Their argument is that the Trump Administration violated the National Environmental Policy Act and Administrative Procedure Act by relying on the State Department’s factual record that Mr. Obama ignored. Ergo, Mr. Trump’s reversal of his predecessor’s arbitrary decision was arbitrary. Federal Judge Brian Morris agreed and has ordered the Trump Administration to conduct yet another environmental review.

Although the judge found “no error” in the State Department’s 2014 review, he wants a new analysis because “lower-than-expected oil prices could affect the outlook for oil sand production.” But oil prices this year have remained within the range the 2014 review predicted was necessary for Keystone to break even, and producers make investment decisions based on pricing projections over decades, not a few years.

While an oil bottleneck in Alberta this year has caused bitumen to trade at a discount of about $40 to West Texas Intermediate, railroad companies are quickly adding capacity. Rail shipments of Canadian oil have doubled over the last year amid pipeline constraints. The judge cited more pipeline leaks since 2014, but rail accidents have also increased.

In any case, the biggest uncertainty oil producers in Alberta face is regulatory, not price. Environmentalists in Canada have sought to block other pipelines from Alberta including Kinder Morgan’s to British Columbia. Railroads prefer to lock in long-term contracts and need to be able to project demand from oil producers to determine how many terminals and locomotives to add.

TransCanada says it remains committed to Keystone XL which would also carry 100,000 barrels from the U.S. Bakken Shale. The segment between Cushing, Oklahoma, and the Gulf Coast has been up and running since 2014. But more permitting delays on the cross-border section will raise costs and could affect TransCanada’s investment calculus. The price of steel is up 20% or so this year thanks to Mr. Trump’s tariffs.

A new environmental impact statement could take another year or two to complete and will no doubt draw legal challenges. The earliest the Supreme Court would likely hear an appeal is 2020, at which point a Democratic President could be elected and issue another veto.

Yet as TransCanada argued in its mooted federal lawsuit, the 2004 executive order does not require a National Environmental Policy Act review. The 2004 executive order on cross-border approvals may also infringe on Congress’s power over trade. Mr. Trump could fix TransCanada’s legal jam by rescinding the order.

The lame-duck GOP Congress could vote to green-light the pipeline as Republicans did in 2015 before Mr. Obama’s veto. Congress and President Trump should use all of their constitutional powers to overrule this federal judge’s lawless interpretation of the law.



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