INSIGHT: US manufacturing renaissance keyed to Keystone project

18 April 2013 16:03 Source:ICIS News

By Joe Kamalick

Keystone XL pipeline seen as key to US manufacturingWASHINGTON (ICIS)--US manufacturers, refiners and petrochemical interests are urging the Obama administration to approve the Keystone XL pipeline project, saying the decision in large part will determine whether a domestic manufacturing renaissance can emerge.

Multiple industry players see the administration’s pending ruling on the Keystone XL pipeline project as a bellwether decision that, along with broader Obama White House energy policies, could put the US on course to reenergize domestic manufacturing – or cede that ground to China and other developing nations.

The public comment period for yet another US State Department evaluation of the Keystone XL project is to close next Monday, 22 April.

Ross Eisenberg, vice president for energy and resources policy at the National Association of Manufacturers (NAM), told the House Committee on Natural Resources this week that the US is indeed “on the cusp of a true manufacturing resurgence”.

However, he cautioned, “manufacturers will not continue our resurgence in this country without policies that make the US the best place in the world to manufacture”.

“In the case of the Keystone XL pipeline and the unending quest to obtain a [construction] permit, the US certainly does not look like a place that wants to create jobs through manufacturing,” Eisenberg said.

“Keystone XL is an example of Washington holding manufacturing back,” he added.

Pending since 2008, the 1,700-mile (2,735 km), $7bn (€5.4bn) Keystone XL project involves building a 36-inch (91 cm) pipeline across five US states, bringing crude to refineries in the US Midwest as well as Texas and providing refined products to another half-dozen states.

The project is subject to US State Department approval because it crosses the US-Canada international border, and it also falls under the jurisdiction of the Department of the Interior, the Environmental Protection Agency (EPA) and the US Army Corps of Engineers, among others.

In January last year, President Barack Obama rejected a Keystone XL approval mandate set by Congress, saying that the decision on whether to give final authorisation to the project needed full consideration.

But Keystone backers contend that the White House is stalling, with President Barack Obama loathe to alienate his environmental constituents by approving the project, which has been broadly condemned by the green community.

“Keystone XL should be a symbol of job creation, advanced manufacturing and North American energy security,” said Eisenberg.  “Instead, it has become synonymous with red tape and political gridlock.”

Although the State Department gave an earlier environmental go-ahead for the pipeline project, Eisenberg noted, the department “has begun another environmental review for the northern leg of the Keystone XL project”.

“It bears repeating that Keystone XL has been studied for five years,” Eisenberg said, noting that the average federal environmental review takes only 3.4 years.

The most recent State Department environmental impact statement for the project, he noted, “was an 8,000-page behemoth spanning eight volumes … that concluded that the project would have no significant impact and would actually be safer than any other typically constructed domestic oil pipeline system”.

Nevertheless, he said, “the State Department has commenced yet another comprehensive, multiagency review of the project, with a comment period ending 22 April, followed by many months of interagency review.”

“Despite almost five years of review, it appears Keystone XL is still not close to approval at the State Department’s current pace,” Eisenberg added.

Because of that protracted delay, Congress is considering legislation that would push past multiple federal regulatory procedures and allow the Keystone project to get started.

That bill, HR-3, the “Northern Route Approval Act” (NoRA), would authorise various US federal agencies with jurisdiction over the pipeline and its route to immediately approve existing environmental impact appraisals and other permits so that work on the project can begin.

HR-3 is essentially another effort by project-backers in Congress to get the pipeline approved and construction started.

US refining and petrochemical interests this week joined NAM and urged Congress to adopt HR-3 to fast-track federal permits for the Keystone XL pipeline, saying the project would strengthen US energy supplies and spur jobs growth.

Charles Drevna, president of the American Fuel & Petrochemical Manufacturers (AFPM) said the trade group “strongly urges approval of the Keystone XL pipeline and fully supports HR-3”.

Testifying in support of the bill before the Natural Resources Committee, Drevna said that AFPM and its members “strongly support and urge the immediate approval of the Keystone XL pipeline as a means to increasing our nation’s energy supply and enhancing national security”.

HR-3, said Drevna, “would clear any remaining roadblocks and approve construction of the pipeline that has been extensively studied and reviewed since 2008”.

He argued that completion of the Keystone XL project would bring an additional 830,000 bbls/day of crude oil capacity from Canada, making the US less dependent on less reliable foreign oil suppliers.

Drevna also said that the project would generate more than $20bn in pipeline-related capital investment and other spending in the US and create more than 20,000 manufacturing and construction jobs during the build-out. 

When the pipeline is completed, the additional supply of crude feedstock also would drive refining and petrochemical development that in turn would generate further jobs growth, he said.

The Keystone XL project is broadly opposed by environmentalists who contend that the pipeline will endanger wildlife along its course and greatly increase the risk of pipeline ruptures and oil spills.

HR-3 is likely to win approval by the Republican-controlled House of Representatives, and 17 Democrat senators joined 45 Republicans in the Senate last month to vote 62-37 in favour of the pipeline project.

While the House bill and the Senate approval vote would not be binding on Obama and the State Department, the two demonstrations of strong bipartisan congressional support for the pipeline project could help sway the White House.

($1 = €0.77)

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy

By Joe Kamalick