Early Friday evening, just hours before $85 billion in automatic federal spending cuts went into effect, the State Department released its 2,000-page draft environmental review of the Keystone XL pipeline.
Fundamentally, the pipeline and the sequester have little in common outside of the controversy and bipartisan vitriol they have attracted, but the fate of one issue may ultimately influence the other.
In theory, and I should stress that this is only a theory, the sequester could further delay the already-delayed decision to approve the Keystone XL pipeline, or at least give the Obama administration, facing staunch opposition from environmental groups, a reason to put it off.
President Obama hinted at this during a news conference Friday after a meeting with congressional leaders failed to avert the sequester.
“The longer these cuts remain in place, the greater the damage to our economy, a slow grind that will intensify with each passing day,” Obama said. “So every time that we get a piece of economic news over the next month, next two months, next six months, as long as the sequester’s in place we’ll know that that economic news could have been better if Congress had not failed to act.”
Could Obama be foreshadowing a news conference early this summer detailing that his administration lacked the resources to make the Keystone XL decision, or a decision on liquefied natural gas exports or an expansion of oil or gas drilling on federal lands or in federal waters, because Congress failed reverse the sequester’s cuts? Republicans certainly believe it’s possible.
“I think sequestration is just the most recent excuse to slow things down,” Senator David Vitter, a Louisiana Republican, told reporters last week while unveiling new pro-drilling legislation which, among other elements, mandates the approval of the Keystone XL pipeline.
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Departing Interior Secretary Ken Salazar has warned that the federal permitting process for oil, gas and coal development on federal lands and waters will slow to a crawl due to the sequester, delaying environmental reviews and inspections that energy projects need to go forward. He has also claimed that leasing for future development on federal land would also be delayed, with fewer resources available for agencies to prepare for and conduct lease sales.
He has warned that the mandatory cuts would halt work on about 550 exploration plans or development coordination documents that are pending before Interior’s Bureau of Ocean Energy Management and delay permitting and environmental analyses for oil and gas drilling in Alaska. The cuts will also force Interior to issue about 300 fewer oil and gas leases in Western states, particularly Wyoming, Utah, Colorado and New Mexico, Salazar said.
Vitter, the ranking Republican on the Environment and Public Works Committee, said the Obama administration’s claims that the automatic budget cuts would stall permitting for energy projects is just part of a “general scare strategy that the world is ending because of sequestration.”
Shortly after the State Department released its draft environmental review , Vitter called it “another excuse in the long line of delays in the Keystone XL pipeline.” The draft report claimed there would be no significant environmental impact to most resources along the proposed route from western Canada to refineries in Texas. “The hurdles to permit Keystone XL have all been cleared, some of them multiple times, but the administration continues to put up new ones,” Vitter said.
Representative Rob Bishop of Utah, the Republican chairman of the House Public Lands and Environmental Regulation Subcommittee, told reporters last week that the Obama administration could not slow down the federal permitting process for energy projects any more than they have in recent years “unless they cut their hands off.”
“To have this administration be slower in the permitting process is a mind-boggling concept,” said Bishop, who argued that the process is already plagued by a “massive amount of redundancy and regulation.”
Senator John Hoeven, a Republican from the oil-rich state of North Dakota, agreed. “Right now, we have too much regulation, too much bureaucracy, too much redundancy,” said Hoeven, a member of the Energy and Natural Resources Committee.
The industry, thus far, has taken a far more measured approach to the sequester’s cuts. In a half dozen interviews, industry groups said it remains a mystery what the impact may be since the effect of the cuts could be months away.
“The sequester’s potential impact on industry activity remains unclear,” said Brian Straessle, a spokesman for the Washington-based American Petroleum Institute. “However, any reductions in permitting, production and trade could shrink the oil and natural gas industry’s $86 million-per-day contribution to federal revenue. If the goal is to reduce the deficit, it makes no sense to cut in areas that actually generate revenue.”