Subscribe to our newsletters & stay updated
On Jan. 24, President Donald Trump made good on two of his campaign promises by signing executive orders to revive the Dakota Access and Keystone XL pipelines.
Former President Barack Obama halted both projects, but President Trump has made supporting the oil and gas industry a key priority of his presidency.
U.S. crude imports have fallen dramatically in recent years as domestic production has boomed, but the country still relies heavily on imports. Meanwhile, the landscape of oil exploration has changed dramatically.
Both Canada and the U.S. have seen a boom in unconventional oil production. Forget about the gushing oil derricks of the past; at least with these two pipelines, production is over oil sands in Alberta, Canada and an increase in the use of fracking techniques in North Dakota.
And getting oil from Canada and North Dakota sounds much better than getting oil from, oh, I don’t know, Iran.
President Trump’s executive orders are designed to make it easier for TransCanada to construct the Keystone XL pipeline and for Energy Transfer Partners to build the final uncompleted portion of the Dakota Access pipeline.
So what’s ahead for the PVF industry? Despite the promise of expeditious reviews, work on either pipeline still faces many other issues that could take some time to resolve. Of the two, however, the completion of the remaining Dakota Access line looks like the most likely to move forward.
However, President Trump signed more than just two executive orders on that same day in January. While the pipeline orders made headlines, he had much more to say that could have even more impact for the larger PVF market.
An additional executive order, for example, wants all new and upgraded pipelines located within the U.S. to “use materials and equipment produced in the U.S., to the maximum extent possible and to the extent permitted by law.”
What’s more, two other orders speak largely on speeding up infrastructure projects.
Can President Trump order all this? Maybe. Maybe not. Read ahead, and take a look at each pipeline project followed by more on the other orders:
Dakota Access pipeline
While the 1,134-mile pipeline is already 85 percent finished, it’s that last leg that has been the most controversial.
A subsidiary of Texas-based Energy Transfer Partners first proposed the pipeline in 2014. Since the late-2000s, drillers using fracking techniques have extracted oil from North Dakota shale formations and turned the state into the epicenter of the U.S. oil boom. As a result, the state has had by far the lowest unemployment rate in the nation.
Of course, with oil booms being “booms,” this all happened very quickly; so quickly that there simply isn’t any pipeline to handle all this new oil. Most of the oil to date has been shipped by way of rail cars.
If completed, it would carry some 450,000 barrels of crude per day from North Dakota’s Bakken oil fields to a terminal in Illinois, where it would be shipped to refineries on the Gulf Coast.
The Army Corps of Engineers had originally approved the pipeline’s route years ago, but the pipeline drew public objection almost from the start. Iowa farmers, for example, were some of the first groups to raise concerns over leaks.
Ultimately it was a lawsuit and subsequent protests at North Dakota’s Standing Rock Reservation that made the Obama Administration order the Army Corps to reconsider the route.
The reservation is home to 8,250 of the Sioux tribe. Most of the protests have to do with two concerns:
The pipeline crosses under the Missouri River at Lake Oahe, a dammed reservoir and the main source of the reservation’s drinking water. In fact, there was an alternative path for the pipeline north of Bismark, NorthDakota, that was rejected due to concerns over the city’s drinking water supplies.
The pipeline would also run through burial and other sacred sites. Here the tribe’s concern is not as direct as it is over water quality matters. Look on a map, and you’ll see the proposed pipeline runs north of the reservation rather than through the actual reservation boundaries. While this land isn’t part of the reservation, the Sioux consider the area unjustly taken by the U.S. government over the past 150 years.
More to the point, the Sioux took the issue to federal court, arguing that under the law the federal government should have consulted with the tribe on this matter and didn’t.
Most of the reservation’s protests intensified beginning last fall when protesters began occupying portions of that privately owned land north of the reservation. By November, state and local authorities answered this with force and arrests.
Following former President Obama’s edict, the Army Corps announced last December that it would explore alternative pipeline routes farther away from the Indian reservation.
That review process, called an Environmental Impact Statement (EIS), entails not only exploring the different routes, but also soliciting public opinion — all of which is expected to take another year and likely more.
In his executive order, however, Trump told the Army Corps to “take all actions necessary and appropriate” to review and approve the pipeline “in an expedited manner ... to the extent permitted by law and as warranted.”
The next move appears to be largely in the Army Corps’ court. At press time, the Army Corps appears likely to give its approval. Regardless, there’s bound to be a lengthy legal challenge.
In 2008, the Canadian company TransCanada proposed an $8 billion, 1,790-mile pipeline expansion designed to carry 830,000 barrels of oil daily largely from Alberta’s oil sands in Hardisty, Canada to Steele City, Nebraska.
The energy company didn’t expect much trouble. Keep in mind, there’s already a Keystone pipeline that cuts through Canada, crosses into the U.S. at North Dakota and travels to Illinois and also to Port Arthur, Texas.
The Obama administration, for example, had publicly supported expediting construction of the southern leg of the pipeline in 2012, and had all but bragged about boosting U.S fossil-fuel capacity as part of its “all-of-the-above” energy strategy.
However, since Keystone XL crosses the U.S.-Canada border, the State Department has to approve it first. That review process included both an EIS and a national interest assessment.
But even after its extensive environmental report was concluded in late 2013, the State Department sounded upbeat. For one thing, there’s that nearby, reliable source of oil. For another, the department’s review estimated the pipeline construction would support 42,000 jobs over its two-year construction period and contribute roughly $3.4 billion to the economy.
What’s not to like?
Well, global warming for one. Environmentalist say that the bitumen dug up in Canada was 17 percent more carbon-intensive than regular crude oil. And there’s a lot of it, too — more than 167 billion recoverable barrels worth.
The oil that travels through the pipeline would certainly have an impact on emissions. The State Department concluded, however, that blocking or approving the pipeline would not have a “significant” impact on overall emissions because most of Alberta’s oil would likely find a way to get to market anyway, if not by pipeline, than by rail car.
“Approval or denial of any one crude oil transport project, including the proposed [Keystone XL pipeline], remains unlikely to significantly impact the rate of extraction in the oil sands, or the continued demand for heavy crude oil at refineries in the U.S.,” the report said.
At some point, the process that most thought would be trouble-free became anything but. For most of his second term, former President Obama dithered between good jobs and a dependable source of oil on one hand and increased global warming and the country’s continued dependence of fossil fuels on the other.
In the run-up to the presidential election, Hillary Clinton and Bernie Sanders had insisted they’d oppose the pipeline, while Ben Carson, Jeb Bush, and Marco Rubio said they’d approve it. At some point on the campaign trail, Donald Trump was asked what his position on the pipeline was and said he’d demand a “better deal” from TransCanada and get “10 percent, 15 percent, maybe 20 percent of the oil.”
Almost a full year before Election Day 2016, TransCanada asked the Obama Administration to postpone any final decision until after a new president took office.
The Obama Administration, however, rejected the TransCanada application in November 2015, ruling that the pipeline was not in the nation’s interest.
“For years, the Keystone pipeline has occupied what I’d consider an overinflated role in our discourse," Obama said in his press conference announcing his decision. “This would not be a silver bullet for the economy, nor the express train to climate disaster.”
That said, he added, the economic benefits appeared minimal, whereas building the pipeline would cut against the administration’s efforts to reduce carbon emissions and slow climate change.
President Trump has different opinions on all of the above.
His executive order very simply invites TransCanada to reapply to build the Keystone XL. He also ordered the State Department to “take all actions necessary and appropriate to facilitate its expeditious review” and to reach a conclusion in no later than 60 days.
TransCanda will still need to obtain additional permits for the Army Corps of Engineers and the Department of Interior to wrap up the pipeline.
Related PVF matters
However, President Trump added a twist when he also told reporters after he signed both pipeline executive orders that he would renegotiate the Keystone XL deal and insist that the Keystone XL pipeline be constructed with only American steel.
However, there is nothing in the Keystone XL executive order about renegotiating the deal. Meanwhile, if Trump does want to renegotiate, that might be a problem for TransCanada. Right now, about half of the Keystone pipe suppliers are, in fact, from the U.S. with the other 24 percent coming from its own country, 16 percent from Italy and 10 percent from India.
Finally, Trump signed three more executive orders in January, with one insisting that pipeline construction firms buy materials from U.S. companies for all new and upgrades to pipelines inside the U.S.
“I am very insistent that if we’re going to build pipelines in the United States, the pipe should be made in the United States,” President Trump said. “From now on, we’re going to be making pipeline in the United States. We build the pipelines, we want to build the pipe. We’re going to put a lot of workers, a lot of skilled workers, back to work. We will build our own pipeline, we will build our own pipes, like we used to in the old days.”
In the order, President Trump gave the Secretary of Commerce 180 days to submit a plan “under which all new pipelines, as well as retrofitted, repaired or expanded pipelines, inside the borders of the United States … use materials and equipment produced in the United States.”
Although the requirements apply to all materials, raw iron and steel and products made from them were specifically highlighted.
Whether even the President of United States can do that remains to be seen.
“The President’s desire for maximum discretion to strike advantageous deals on a case-by-case basis conflicts with the need of businesses for a stable rules-based system to plan their investment and operations,” wrote John Kemp, senior market analyst, commodities and energy at Thomson Reuters.
For the 70 years, countries around the world have traded under rules most recently codified under the World Trade Organization and its forerunner the General Agreement of Tariffs and Trade.
Finally, two other related orders both seek to expedite environmental reviews for “high priority infrastructure projects,” lamenting the existing “incredibly cumbersome, long, horrible, permitting process.”
As part of the order, the chair of the White House Council on Environmental Quality will decide whether a project should be given national priority within 30 days of a request, triggering an expedited approval process. If an agency fails to meet the deadline for review, an agency head will have to explain the tardiness to the chair.
It remains unclear, however, how President Trump’s executive order would expedite those environmental reviews. An executive order cannot sweep aside the legislation that created the reviews.
The largest hurdle to such rapid authorization is something called the National Environmental Policy Act (NEPA), which calls for extensive analysis of development to determine its impact to public health and the environment, including whether it might harm air quality or foul water. We’re back to the EIS.
“NEPA is the Magna Carta of the environmental world,” Scott Edwards, co-director of Food and Water Watch’s legal division told the Washington Post.