The EPA has slowed down the approval process of a permit for a new Canada-to-Texas oil pipeline that a few months ago looked like a shoo-in for a State Department rubber stamp by the fall.
The EPA gave the State department's draft environmental impact statement  for the 2000 mile pipeline that will cut across the nation's heartland the worst rating possible, noting that if differences between the agencies can't be resolved, the matter could get referred to the White House for resolution.
In response, the State department announced it intended to add 90 days to the process of making a decision on the pipeline permit to allow the final environmental impact statement to be reviewed by other federal agencies. Observers think that means there will be no decision until sometime next year.
Last year, a similar pipeline received approval with far less scrutiny. Is environmental security rising to become a matter of primary national interest in the wake of the Gulf oil disaster?
"We're not BP, I'm not sure what that means for TransCanada," Terry Cunha, a spokesperson for the company that wants to build the pipeline said, referring to the Gulf oil disaster. "The incident that took place with BP is unfortunate, but we don't drill offshore, we're a pipeline company and we have a strong safety record."
The proposed TransCanada pipeline will carry crude from Alberta's oil sands to refineries in Texas. Known as the Keystone XL, it would increase the flow of a far more polluting form of oil from the north by 900,000 barrels a day and double US consumption.
"I think it reflects a growing recognition that Canada has mismanaged oil sands development," Simon Dyer told SolveClimate News. He is the the oilsands program director of the Pembina Institute, a Canadian sustainable energy think tank. "The U.S. EPA is an agency that is actually doing its job as compared to regulatory agencies in Canada that are not providing this kind of scrutiny."
The EPA has asked the State Department to consider the national security implications of expanding the nation's commitment to a relatively high-carbon source of oil, which EPA says has a well-to-tank carbon footprint 82 percent larger than conventional oil.
Also of concern is what would happen if a pipeline accident caused a serious spill above the Ogallala aquifer which millions of Americans in the Midwest rely on for fresh drinking water as well as irrigation, but many other long-standing environmental impacts are also giving EPA pause.
"We don't agree with it," Cunha of TransCanada  said, referring to the EPA's poor rating of the draft environmental impact statement. "We've been working with the State Department since November 2008 and we think they did a thorough and complete job."
Energy and Environmental Security on an Equal Footing
Through the lens of energy security, Canadian oil looks more attractive than oil tainted by unfriendly foreign regimes, but since April 20th, when the Deepwater Horizon exploded, the sheen of that perceived advantage has faded.
It has become painfully clear that with one environmental catastrophe, the economy and social fabric of a whole region can be destroyed as effectively as with a terrorist attack.
It puts oil thirsty Americans between Iraq and a hard place, and the search for a proper balance between energy and environmental security is now up for grabs in the inter-agency tussle.
Ask average Americans where to find the biggest and dirtiest industrial project known to man, and chances are that only a few will point to a leading contender just across the northern border in Alberta, Canada.
Alberta is ground zero of an oil bonanza booming on North American soil, where vast deposits of oil sands sitting beneath pristine boreal forests are being unearthed, causing severe and far-reaching environmental impacts.
To extract the oil from the sand requires three barrels of fresh water for every barrel of oil produced; it leaves behind toxic liquid tailings that are collected in ponds lethal enough to kill birds that land on them, which now sprawl over more than 150 square kilometers of territory; and extraction by itself produces three times more greenhouse gases than conventional oil pumped up from a well.
The yield from the messy mining process is a tarry crude that can be turned into gasoline. Even though the biggest customers are Americans in their guzzling autos, the tar sands, as they are also known, have remained largely outside popular awareness and media attention in U.S. It looks like that is starting to change.
Not worth mining at any great scale until recent decades, the inferior grade fuel has now come to provide the largest portion of oil entering the U.S. from Canada, America's largest foreign supplier since 2004. It is projected to provide 30% of US needs by 2030 -- all from a friendly, mostly English-speaking neighbor. It is a welcome prospect inside the State Department, wrestling with terror and responsible for keeping the nation supplied with oil as a matter of national interest.
Expected Rubber Stamp Now Up in the Air
At the start of the year, most observers thought approval would be rubber-stamped by the State Department, which has jurisdiction over issuing the trans-border permit for the pipeline. Secretary of State Hillary Clinton did not hesitate to give approval for another oil sands pipeline, known as the Alberta Clipper, in August 2009, which the EPA had also reviewed more favorably . There was no reason to believe that anything would be different with the new pipeline.
The April 20th Deepwater Horizon explosion and three months of oil leaking into the Gulf has unquestionably changed the rules of engagement.
In the face of the ongoing Gulf catastrophe and under pressure from environmentalists, the State department announced  in mid-June that it would extend the public comment period on the proposed pipeline by two weeks until July 2nd, and added two public hearings scheduled for this month. It will use the public input to develop a final Environmental Impact Statement (EIS), but the process is suddenly no longer in for smooth sailing.
First, 50 members of Congress  sent a letter to Secretary Clinton urging her to carefully scrutinize the significant environmental impact of the pipeline and grabbed some headlines, unusual for the oil sands, which rarely get U.S. attention
Then in mid-July, the EPA sent the State Department a lengthy critique of the Draft Environmental Impact Statement (DEIS) of the Keystone XL project, and gave it the lowest possible rating -- Inadequate Information. It suggested that the matter might be worth kicking upstairs to the White House and its Council on Environmental Quality (CEQ), headed by Nancy Sutley.
"As with all projects that have not addressed potentially significant impacts," the EPA letter from Cynthia Giles to the State Department said, "this proposal is a potential candidate for referral to CEQ."
Powerful Environmental Provision
According to a CEQ source, who spoke with SolveClimate News without authorization and so cannot be identified, noting the possibility of a referral to the White House is something routinely done whenever an environmental impact statement receives an adverse review, which happens only about once a year.
The process of referring a federal decision to CEQ  is a long-standing but seldom used mechanism established by the National Environmental Policy Act of 1969. It has been used only 27 times over the last 41 years, the last time in 2001 in the first year of George W. Bush's presidency.
It is a surprisingly powerful environmental provision that allows any federal agency, concerned about the environmental effects of a proposed major federal action, to force a review by CEQ, which is a part of the executive office of the president. The CEQ source said once a matter is in their hands, "we have broad authority to do what we will with it."
Regulations describe seven possible avenues that CEQ can decide to pursue to resolve inter-agency disputes referred for resolution. CEQ can decide whether it wants to mediate the dispute, for example, hold public hearings, or publish its own findings and recommendations. If inter-agency differences are irreconcilable, as a last resort CEQ can submit the referral and its response together with its recommendation to the President for action.
The State Department must now give EPA satisfactory answers about the pipeline and resolve inter-agency differences, or EPA can formally refer the matter for review to the White House within 25 days of the release of the final Environmental Impact Statement, which the State Department is preparing.
What was particularly striking about the EPA letter is that it asked the State Department to provide a broader national security analysis of the implications of committing the nation long-term to oil from Canada, asking for an evaluation of energy security hand-in-hand with environmental security.
"What was really noteworthy was the call for a full assessment of the climate and energy implications of oil sands development, Dyer of Pembina said, "and tying those two discussions together."
EPA also wants to be sure that a wide range of specific environmental impacts are properly evaluated before approval for the pipeline is given. The transmittal letter from Cynthia Giles of EPA dated July 16 says:
The topics on which we believe additional information and analysis are necessary include the purpose and need for the project, potential greenhouse gas emissions associated with the project, air pollutant emissions at the receiving refineries, pipeline safety/spill response, potential impacts to environmental justice communities, wetlands and migratory birds.
Environmental campaigners called the EPA letter a "gamechanger" and lit up the blogosphere and opinion pages, notching an unexpected victory over industry. After years of effort to try to slow demand for tar sands oil in the U.S., campaigners are finally seeing their arguments seriously taken up at the highest levels of the federal government.
US scrutiny is sure to put pressure on both the governments of Canada and of Alberta to improve the environmental performance of the oil sands. The lengthy EPA letter to the State Department asks for answers to questions that Canadian authorities have not seriously confronted, except to sidestep them to favor industrial expansion. The EPA is in effect now starting to do a job that industry-friendly Canadian regulators have failed to do for decades.
The latest evidence of lax regulation and enforcement came in the form of a scandal which erupted earlier this month when federal politicians from the Canadian government and opposition parties mysteriously canceled an 18-month investigation  into oil sands pollution. They also ordered draft copies of their report destroyed. Now for the first time in the U.S., Canadian efforts to greenwash the oil sands are bumping into tough talk from highly placed sources.
This month it was US Ambassador to Canada, David Jacobson, who said Canada needs to demonstrate how it is meeting its obligations of environmental stewardship. Last month, it was John Podesta, president of the Center for American Progress  who headed the Obama transition team and is part of the president's inner circle on energy, who delivered a blunter message in a keynote speech to tar sands boosters gathered in Washington.
"Oil extraction from tar sands is polluting, destructive, expensive and energy-intensive. These things are facts. I think suggesting this process can come close to approximating being 'greened' is largely misleading, or far too optimistic, or perhaps both. It stands alongside clean coal and error-free deepwater drilling as more PR than reality."
It an abrupt departure from business-as-usual inside the corridors of power in the US. The oil Industry is also now facing further challenges in the court of public opinion, thanks to an unorthodox ad campaign in four US cities unleashed by a coalition of campaigners.
Images of dead ducks in oil sands tailings pond have been plastered on billboards in Denver, Portland, Seattle and Minneapolis. Next to them is a picture of an oil-drenched brown pelican at the site of the Deepwater Horizon spill. "Alberta: The Other Oil Disaster," the billboard reads. "Thinking of visiting Alberta, Canada? Think again," it continues. The campaign will debut in cities around the UK this week.
Historically, Americans have little cared where their oil was sourced, unless an embargo made supplies scarce or the price got too high. The War on Terror erased that form of blissful ignorance, as US soldiers took fire from enemies financed by American expenditures at the pump. Three months of oil gushing into the Gulf and another similarly unacceptable equation has now intruded on public awareness.
"The disaster in the Gulf has put the costs of oil consumption into sharp focus," Dyer said. "The world is running out of oil and neither deepwater sources of the Gulf nor oil sands in Canada provide a sustainable alternative."
Now it is up to the State Department to satisfy the EPA's serious concerns about the pipeline, as it prepares the final environmental impact statement for the Keystone XL project. The Department of Energy yesterday also questioned the core arguments  for the pipeline. If the project fails to adequately protect environmental security, there's a chance EPA could refer it to CEQ for resolution, which means the decision to sign off on the permit for the pipeline could ultimately rest with the president.
(Photo: Department of Defense, State Department, White House, Coast Guard, CEI)