What is at stake in the Keystone XL pipeline ruling?

WINNIPEG, Manitoba (Reuters) – A U.S. federal judge in Montana halted construction of TransCanada Corp’s Keystone XL oil pipeline on Thursday, saying a U.S. environmental analysis “fell short of a ‘hard look’” at the cumulative effects of greenhouse gas emissions and the impact on Native American land resources.

FILE PHOTO: A TransCanada Keystone Pipeline pump station operates outside Steele City, Nebraska March 10, 2014. REUTERS/Lane Hickenbottom/File Photo

The ruling is the latest delay to the project, a decade in planning, which was revived by U.S. President Donald Trump after being halted by his predecessor, Barack Obama.

WHAT IS KEYSTONE XL?

KXL, as it is known, is a proposed $8 billion, 1,180 mile (1,900 km) pipeline that would carry heavy crude to Steele City, Nebraska, from Canada’s oil sands in Alberta. Planned by Canada’s TransCanada, KXL would provide a shortcut to carry more Canadian oil to U.S. markets, complementing the existing Keystone line than runs from Alberta to Steele City and then Gulf Coast refineries.

WHY IS IT NEEDED?

Crude production in Alberta’s oil sands is expanding faster than pipeline capacity, creating a bottleneck that has driven down prices. Canada’s heavy crude now fetches a fraction of the benchmark U.S. light oil price, and some producers have curtailed production. The steep discount has stripped billions of dollars from the Canadian economy by some estimates.

WHAT IS THE NATURE OF OPPOSITION?

Environmental groups have campaigned against pipelines to carry crude from Canada’s oil sands, saying extraction methods used in the region harm the environment more than conventional oil drilling.

In Nebraska, landowners blasted what they saw as heavy-handed efforts by TransCanada to force the pipe through ecologically sensitive areas.

WHAT OTHER OBSTACLES HAS IT FACED?

Obama, a Democrat, axed the project in 2015, saying Canada would reap most of the economic benefits while the project would add to greenhouse gas emissions. President Donald Trump, a Republican, pushed to approve KXL soon after he took office, saying it would create U.S. jobs. In 2017, a presidential permit allowed the line to move forward, and several environmental groups sued the U.S. government.

The Nebraska Public Service Commission issued an approval late last year for an alternative route, a ruling that environmental groups are challenging.

WHAT ARE THE POLITICAL IMPLICATIONS?

In Washington, the judge’s ruling on Thursday was a blow to Trump, who critics say is trying to force an unpopular project on the American people.

In Ottawa, pressure is mounting on Canadian Prime Minister Justin Trudeau to get a pipeline built to help Canadian producers sell their oil at higher prices while building support for other steps to reduce greenhouse gas emissions before an election expected next year.

In summer, Trudeau’s government bought the floundering Trans Mountain pipeline project, hoping to get it built.

WHAT’S NEXT?

U.S. District Court Judge Brian Morris ordered the federal government to conduct a more thorough environmental analysis. Separately, TransCanada has said it expects a decision on routing from the Nebraska Supreme Court by the first quarter of 2019.

TransCanada has yet to make a final investment decision to proceed with the project, even though it had started construction. It said last week that it is also seeking partners to finance KXL’s construction.

Reporting by Rod Nickel in Winnipeg, Manitoba; Editing by David Gregorio

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