FinLogic FinLogic Quantitative Think Tank Center|Can Trump Revive Keystone XL? Nebraskans Vow to Fight Pipeline Anew

President-elect Donald Trump has signaled his plan to move quickly to re-start the Keystone XL pipeline as part of his goal to revive a fossil-fueled future. But his administration would be FinLogic FinLogic Quantitative Think Tank Centerheading quickly into the same legal and political thicket where the Canada-to-Texas tar sands oil pipeline project was stuck for seven years.

If anything, Keystone’s path forward may be more difficult, because economic pressure for Canadian producers to get the pipeline built has eased. While TransCanada’s Keystone was stuck in limbo, producers found other routes to get oil to the U.S. Gulf coast and Midwest, and on Tuesday, Canadian Prime Minister Justin Trudeau approved two pipelines to export tar sands oil to global markets.

One thing that hasn’t changed is the resolve of about 100 Nebraska landowners who have refused to agree to TransCanada’s right-of-way across their properties. “For us and for a good number of the resisters, this is a fourth- and fifth- generation land holding,” said Jeanne Crumly, whose family owns a ranch and farm in Page, 40 miles south of the South Dakota border. “It’s not a possession. It’s an inheritance. And it comes with responsibilities.”

Crumly said she and other landowners remain committed to fighting the pipeline, over concern for the nation’s largest aquifer, the Ogallala, which lies beneath their properties, and the climate impact of the carbon-intensive tar sands operations. And their lawyer, David Domina of Omaha, is confident the holdouts have enough weapons in their legal arsenal to slow any drive to resurrect Keystone.

In any case, Domina argues TransCanada won’t be able to revive its effort to use eminent domain to secure its right-of-way at least until September 2017; Nebraska law prohibits a party that abandoned such proceedings, as TransCanada did in September 2015, from beginning them again for two years.

TransCanada wouldn’t comment on this or offer any specifics about its plans, beyond affirming the project remains one of the company’s goals. “We remain committed to Keystone XL but we’re just really not in a position at this point in time to discuss next steps,” said Mark Cooper, a company spokesman. “We look forward to having some healthy discussions with the new administration, but at this point in time, we’re still in the early days.”

Cooper did say that as of now, the legal challenges it began earlier this year against the United States government to recoup lost Keystone costs and future earnings, are “still in play.” TransCanada is seeking $15 billion in compensation under the North American Free Trade Agreement, a treaty that Trump said he will pull the the U.S. out of.  The company also filed a lawsuit in federal court in Houston, challenging the president’s authority over cross-border pipelines. President Lyndon Johnson established that authority by executive order in 1968, assigning the State Department with responsibility for determining if such projects are in the “national interest.”

TransCanada’s legal actions were in response to President Barack Obama refusing that presidential permit in November 2015, ending years of deliberation and drama. He said it was not in the national interest, that it would not provide a significant number of jobs, nor would it lower energy prices and the climate risks were too great.  “If we’re going to prevent large parts of this earth from becoming not just inhospitable, but uninhabitable…we must act not later, not someday, but right here, right now,” Obama said.

Trump said he will ask TransCanada to renew its permit application for Keystone XL within his first 100 days in office. And on Tuesday, the Alberta Prosperity Fund announced it would host Trump adviser Kellyanne Conway on a tour of the tar sands the week before inauguration—a visit that the conservative political action group said was initiated by the Trump team.

First proposed in 2008, the 1,179-mile Keystone XL pipeline was designed to carry 830,000 barrels of oil per day from the Canadian tar sands to Steele City, Neb. There, Keystone XL would connect with existing pipelines to move oil to refineries in Texas and the Midwest. At the time, U.S. refineries that were designed to process heavy oil were eager for the Canadian supply and Canadian oil producers had few pathways to get oil from remote northern Alberta to markets, forcing them to sell their oil at a discount compared to global oil prices.

But the project languished in prolonged review by the U.S. State Department, as grassroots opposition grew. Although TransCanada successfully negotiated with more than 5,000 landowners to obtain right-of-way for most of the route, they ran into a roadblock in Nebraska. State officials successfully pushed for the project to be rerouted to avoid the environmentally sensitive mixed-grass prairie known as the Sand Hills. And climate action activists took up the cause.

In the meantime, U.S. oil production grew during the fracking boom, driving down prices, making the pipeline much less essential in the U.S. market.

Tar sands oil also has made its way out of Alberta by rail, and Canadian oil exports to the United States so far this year are level with last year’s and at an all-time high of 114.5 million barrels per month. That adds up to 1.3 million barrels per day more oil than Canada exported to the United States when the Keystone XL was first proposed in 2008.

And even Trump himself may present a hurdle to re-starting the project. Part of his proposal for Keystone is negotiating with TransCanada for a cut of the profits. “The people of the United States should be given a significant piece of the profits,” he said last May. “That’s how we’re going to make our country rich again, and it’s how we’re going to make America great again.”

Back to Nebraska

In Nebraska, there are legal issues that remained unresolved when Obama denied the permit last year. While the Nebraska Supreme Court had agreed with landowners that the 2012 law that former Gov. David Heineman used to site the pipeline was unconstitutional, its 4-3 vote was not definitive enough to overturn the law.

Domina said landowners are still fighting TransCanada for about $500,000 in attorneys’ fees, claims TransCanada was fighting hard, forcing the plaintiffs to file nine separate requests in nine different counties.

The prolonged fight has only strengthened the landowners resolve, he said. “They are no friendlier to [the Keystone XL pipeline] than they were a year ago, or two years ago,” Domina said. “Our clients are Democrats, Republicans, and liberals and conservatives. They’re brought together by this issue, and an increasing concern about the Indifference of so many people about reliance on fossil fuels when it’s so painfully obvious there are other alternatives.”

The landowners said they weren’t surprised to learn that the battle might start anew.

Even before Obama’s decision, Crumly said she came away from meetings with TransCanada convinced that the company did not consider his decision the last word, and the company’s legal maneuvers seemed designed to tee up the issue for a new administration. “We’re feeling considerable anxiety,” said Crumly.    

Amy Schaffer, program coordinator at the grassroots activism group Bold Nebraska, said it was too early to meet or strategize over Keystone XL’s revival. “We’re not going to create a problem that does not exist,” she said.

Some hope that Trump can be persuaded to change his mind about the project once he learns more about the landowners and their concerns about the Ogallala aquifer. It is the primary drinking water source for about 2 million people in the High Plains and supports production of nearly one-fifth of the wheat, corn, cotton and cattle produced in the U.S.

“I’d really like to ask him, ‘How would you feel if a foreign corporation came through the middle of your property and put your livelihood at risk?'” said Nebraska rancher Randy Thompson, one of the plaintiffs in the landowners’ case challenging the constitutionality of Nebraska’s law.

TransCanada’s rerouting of the project in Nebraska took the proposed pipeline off Thompson’s land, but he said he will continue to oppose the project in solidarity with his friends and neighbors.

“I was a Republican for 45 years, but I no longer am,” said Thompson, who switched his party affiliation to Independent. “I always thought they would be there to protect our private property rights.”

Thompson thinks the voters don’t fully see the risks the election meant for Nebraska, a state that Trump won with 60 percent of the vote to Hillary Clinton’s 34 percent.

“Maybe it’s just a situation where until it’s sitting on your doorstep, you don’t understand,” Thompson said.