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The Keystone XL pipeline is dead. Here's why Obama rejected it.

The guessing game is over. On Friday, President Obama announced that he is rejecting the Keystone XL pipeline once and for all.

"The State Department has decided that the Keystone XL pipeline would not serve the national interest of the United States," Obama said. "I agree with that decision."

The pipeline, Obama argued, "would not would not make a meaningful long-term contribution to our economy" and would not significantly lower US gas prices or improve energy security. On the flip side, he said, approving the pipeline would undercut America's "global leadership" on climate change. So the administration's rejecting it. The pipeline's builder, TransCanada, will either have to start the permitting process from scratch under a new president or give up altogether.

Obama's decision to reject Keystone was years in the making

The decision puts an end (for now) to what had become the single most controversial piece of infrastructure in North America. And it's a striking shift for the Obama administration, which was initially inclined to approve the project.

The story started back in 2008, when TransCanada applied for a permit to expand its existing Keystone system. The new XL pipeline would carry 830,000 barrels of crude oil per day from Canada and North Dakota down to refineries on the Gulf Coast. Since the project would cross national borders, the State Department had to okay it first:

(Joe Posner/Vox)

At the time, the small handful of people paying attention figured approval would be a slam dunk. After all, the administration had been bragging about boosting US fossil-fuel capacity as part of its "all-of-the-above" energy strategy. ("We’ve added enough new oil and gas pipeline to encircle the Earth and then some," Obama boasted during his first term.) Why wouldn't they approve this pipeline?

But things changed radically after 2011. The environmental movement, reeling from Congress' failure to pass a climate bill, was casting about for a new fight. Writers like Bill McKibben began paying closer attention to Keystone XL, noting that the bitumen dug up in Canada's expanding oil-sands industry was 17 percent more carbon-intensive than regular crude oil. And Alberta had vast reserves of this stuff — 167 billion recoverable barrels worth — more than enough to fry the planet.

A cause was born. Activists began pleading with the White House to reject the pipeline, in noisy protests and sit-ins. Climate groups like 350.org made Keystone one of their top demands and pursued the issue relentlessly, hounding Obama at every public appearance. A broad coalition of ranchers, farmers, and Native Americans battled the pipeline in Nebraska, focusing on the prospect of spills. Green-minded donors like Tom Steyer started pressing White House on the issue. Slowly but inexorably, politicians began turning.

The Obama administration, which had rubber-stamped the southern leg of the Keystone system in 2012, felt increasing pressure to stop further approvals. An early sign of a shift came in 2013, when Obama cryptically suggested he might not endorse the final Keystone XL extension if doing so would "significantly exacerbate" carbon-dioxide emissions.

What followed was an endless series of Talmudic disputes about whether the construction of Keystone XL would really worsen global warming. Couldn't oil companies just ship the oil by rail if the pipeline failed? Couldn't they use other pipelines? But what if those pipelines got blocked? What if oil prices fell? The debate dragged on for years.

The pipeline also had powerful allies. Canada's government lobbied fiercely for approval. Republicans argued that the administration was putting much-needed construction jobs at risk. The pipeline's wonkier backers argued that so long as America was dependent on oil, the crude would find its way in anyway. The rise in Canadian imports couldn't be reversed by blocking a solitary pipeline:

(Energy Information Administration)

(Energy Information Administration)

So, facing pressure from all sides, Obama dithered, his every utterance picked over by the expanding ranks of Keystone Kremlinologists. In an ABC interview in November 2014, the president struck his most skeptical note yet: "Understand what this project is," he said. "It is providing the ability of Canada to pump their oil, send it through our land, down to the Gulf, where it will be sold everywhere else. It doesn't have an impact on US gas prices."

Over time, conditions on the ground started tilting against the pipeline. Global oil prices crashed in mid-2014, which scuttled a great many plans to expand Alberta's oil sands industry. Gasoline prices also tumbled, which made rejecting the pipeline an easier political sell. Then, in October 2015, Canada ousted its strongly pro-Keystone leader, Stephen Harper. The new prime minister, Justin Trudeau, took a softer stance: he still wanted the pipeline approved, but he didn't want it to dominate his relationship with Obama.

Finally, this past week, sensing a rejection in the air, TransCanada begged the Obama administration to postpone any final decision until after the 2016 election. Even that was a spin of the roulette wheel: Hillary Clinton and Bernie Sanders had already insisted they'd oppose the pipeline, while Ben Carson, Jeb Bush, and Marco Rubio said they'd approve it. (Donald Trump's position was, uh, Trumpesque.)

In the end, TransCanada's gambit failed. Obama wanted to settle this himself. And, on Friday, his State Department decided to reject the pipeline proposal for good. TransCanada will either have to start the costly and difficult permitting process all over again with a new president — or just give up altogether.

In his press conference, Obama argued that Keystone XL was never as indispensable as both its boosters and detractors made it seem. "For years, the Keystone pipeline has occupied what I'd consider an overinflated role in our discourse," he said. "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. So, in the end, the pipeline got nixed.

Now that Keystone's dead, what happens next?

Oil's still flowing, but a bit more vulnerable. (Shutterstock)

Oil's still flowing, but a bit more vulnerable. (Shutterstock)

Keystone XL was always just a lone pipeline. On its own, this rejection won't lead to tectonic shifts in either oil markets or climate-change policy. There are at least 70 other oil pipelines across the US-Canadian border, and companies like Enbridge and TransCanada have been bolstering that capacity while everyone was focused on Keystone.

Even so, as a potent symbol, the death of Keystone does prefigure a few important trends that are now unfolding:

The rise of supply-side environmentalism: Environmentalists are quite obviously cheering this decision. They had made Keystone XL a signature issue and won a decisive, knock-out victory. But they're also unlikely to stop here. The next step will be to press Obama to limit other major sources of fossil fuels.

In recent years, climate activists have been focusing more time and attention on restricting supplies of fossil fuels, as a complement to promoting policies that boost clean energy. (David Roberts wrote an incisive post on the pros and cons of this "supply-side" strategy.)

Keystone XL was their top target. But other items on the wish-list include an end to coal leasing on federal lands, as well as a halt to further oil and gas drilling in key areas. In the Pacific Northwest, activists are trying to block infrastructure to export coal. Expect the Keystone victory to embolden further efforts.

Canada's oil sands industry is getting squeezed: As for the oil sands industry in Alberta, it's still grinding along, putting out more than 2 million barrels of crude per day. But the prospects for further growth look much weaker than they did just a few years back.

The crash in global oil prices have put a halt to many plans for expansion. And growing opposition to pipelines is now a further headache for the industry. Keystone XL was one wished-for option to bring crude to market; that's now closed off. Other proposed alternatives, including Energy East, which would stretch all the way to Quebec, have also been bogged down by local protests. Companies will still ship crude by rail, but that's a more expensive option and less convenient.

Some momentum for global climate talks: This December, Obama is traveling to Paris, where the world's nations are hashing out a global agreement on climate change. This treaty is unlikely to solve global warming once and for all, but leaders are at least hoping for significant progress in restraining emissions. The administration's hope is that the Keystone rejection, in its own way, will help generate a decent bit of momentum toward that goal.

Further reading

-- Our Keystone XL explainer will walk you through the history of the controversy.

-- Ben Adler has a longer history of the movement that eventually persuaded Obama to kill the pipeline.


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