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Guess What? Obama’s Keystone Pipeline Decision Can Be Reversed

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The saga of the Keystone XL pipeline seemed to come to an end earlier this month when U.S. President Barack Obama officially rejected TransCanada’s request by saying the oil pipeline from Canada to the Gulf Coast would “undercut” American leadership on climate change.

But the pipeline isn’t completely dead. Because of falling oil prices, it’s mostly a partisan issue. If Democrat Hillary Clinton is elected president in 2016, she won’t reverse Obama’s decision. But if a Republican is elected, he or she might well make the opposite call, and be supported by a Republican Congress.

Canada’s Oil Sands

So how much difference does Obama’s rejection make? How much harder would it be for a Republican to reverse the Obama decision than it would be to make a positive decision on a blank slate?

Politically, there might be some added cost to a Republican, because an official presidential kibosh stops the project’s momentum. Legally, however, the barrier to reversal probably isn’t very high.

The reason is that the administrative review process that led up to Obama’s decision initially came out in favor of the pipeline. The State Department’s environmental impact review concluded last year that the pipeline wouldn’t have a meaningful negative impact on carbon emissions.

Relying on this report, a Republican president could almost certainly reverse Obama’s decision by saying his or her political values and judgment dictated a different result. Secretary of State John Kerry, to whom the permit decision was delegated by executive order,concluded that the pipeline didn’t serve U.S. national interests. A future secretary of state could conclude the contrary.

If that happened, environmental groups would undoubtedly demand another environmental review process and argue that new circumstances demand it. But it seems likely that a court would reject that claim.

So if the State Department previously concluded that the pipeline wouldn’t have a negative environmental effect, how could the secretary of state and the president decide that the pipeline would be bad for climate change?

The answer reveals something significant about executive power and administrative decision-making.

Travel, if you will, back to the summer of 2013, when oil prices were high. Obama said then that he anticipated approving the pipeline if it wouldn’t “significantly exacerbate” emissions. This statement put a lot of weight on the State Department’s environmental analysis, which was then under way.

Issued in January 2014, the report acknowledged that the oil-sands crude that would be carried in the pipeline had higher greenhouse-gas emissions than the lighter, sweeter crude it might replace in the U.S. but it also said that “the proposed Project is not likely to impact the amount of crude oil produced from the oil sands,” because the Canadian oil would be exploited regardless of whether it went to market via the Keystone pipeline or by some other route.

This conclusion opened the door for Obama to approve the pipeline based on the criterion he’d publicly stated.

Then came the drop in oil prices. Now it’s conceivable that some of the oil-sands crude won’t be exploited if it must be exported by a more expensive means than Keystone. The environmental impact report’s conclusion, in other words, may not be accurate — at least until prices rise again, past $65 a barrel according to an Environmental Protection Agency report. Even though Kerry said, “The reality is that this decision could not be made solely on the numbers,” this change provides some analytic support to Kerry’s reasoning and Obama’s decision.

Now imagine that a Republican is elected president. What procedural hurdles would have to be jumped to reverse the decision?

A strong case could be made that no new environmental impact study by the State Department is required. The president and secretary of state could simply rely on the previous one.

Such environmental reports are supposed to be free of partisan politics. No one entirely believes it, and complex forms of bias can enter into even the most objective kinds of cost-benefit analysis. Yet, in this case, a Republican president would be on strong grounds in relying on a report produced by a Democratic administration.

Once the environmental impact statement was accepted by the new president, he or she could simply declare that Obama was wrong about the effect the pipeline would have on U.S. leadership with respect to emissions. The Republican wouldn’t even have to deny the importance or reality of climate change. The president could just say that his or her political values and judgment are different from Obama’s.

The constitutional theory of executive power is supposed to allow the president to make value judgments and political decisions different from a predecessor’s. In contrast, the administrative process is supposed to involve logical reasoning based on facts and figures.

That’s why Obama has the power to ignore the positive recommendation of the environmental impact statement, although it would’ve been extremely difficult to ignore a negative environmental impact statement.

No doubt environmental groups would still challenge a Republican presidential reversal in court. Their best argument would be that the 2014 environmental impact statement was based on the faulty assumption that the price of oil would be above $65 a barrel, so that refusing to build the pipeline wouldn’t affect total oil-sands-crude production.

To that a Republican president could answer that oil prices might go up and, in historical terms, almost certainly will. A full environmental review from scratch shouldn’t be needed to make that point.

The upshot is that, most probably, Obama’s decision can be reversed with a relatively low legal risk. The Keystone pipeline story might not be over yet.


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