Keystone Consequences for the Future of Large Infrastructure Projects

The Keystone XL pipeline extension through the Great Plains states of the United States has not been approved by President Barack Obama yet, but it is already the most consequential infrastructure project of the 21st century. The repercussions of the delay and the consequences for global energy markets are still unfolding, but like those of another great battle on the prairie, the Battle of Little Big Horn where General George Armstrong Custer made his “Last Stand”, they will be felt for decades to come.

For environmental groups, Keystone has been a model for how to capitalize on local permitting processes bias toward giving interveners the chance to be heard. By mobilizing locals with frightful scenarios of potential problems with new infrastructure, outside environmental groups can delay project approvals by calling for new studies and raising new questions that state and local politicians cannot easily dismiss. The delay allows for national and even international fundraising, providing the resources for a protracted siege.

Like the Battle of Little Big Horn, Sands argues the repercussions and consequences of the delays on a decision on Keystone will be felt for decades to come.

Like the Battle of Little Big Horn, Sands argues the repercussions and consequences of the delays on a decision on Keystone will be felt for decades to come.

In the wake of the failures of Kyoto Protocol ratification and carbon cap and trade legislation in the U.S. Senate, the Keystone XL controversy provided a rallying point for environmental activists. The successes of environmental groups in delaying this pipeline have led to imitation: from coal ports to power lines, wind farms to nuclear reactors, environmentalists have increasingly targeted energy logistics projects instead of international treaties and legislation.

In the private sector, investors and energy companies have taken note of this shift and have adjusted their political risk assessments accordingly. For oil and natural gas, this has increased interest in “Back to the Future” strategies that expand capacity along existing rights-of-way (such as the Kinder Morgan Trans Mountain Pipeline) and even rail and truck transportation in unprecedented volumes. For electrical projects, the new calculus is discouraging generation far from customers.

Canadian firms have started planning for infrastructure that will give Canadian oil and gas access to markets other than the United States. The Enbridge Northern Gateway pipeline would provide access to the Pacific for Alberta oil – and perhaps its right of way could also accommodate a pipeline to give sea access to British Columbia’s natural gas reserves, located in the northeast corner of the province. Trans Canada’s Energy East project would cross the continent to bring oil sands oil to ports in Quebec and New Brunswick.

The search for new strategies and new ways to bring energy supplies to market is only the first wave of reaction to the Keystone XL delay. The second wave is coming, as various initiatives attempt to change the way that infrastructure projects are governed to prevent “another Keystone.”

For environmental groups, Keystone has been a model, but resurgence of North American manufacturing relies on access to affordable energy.

For environmental groups, Keystone has been a model, but resurgence of North American manufacturing relies on access to affordable energy.

David Farr is the Chairman and CEO of Emerson Electric, a St. Louis, Missouri based company that employs more than 2,000 people in Canada. Farr took to the pages of Forbes magazine in February1 to make two points: “the resurgence of North American manufacturing relies on access to affordable energy, and the latest pipeline technology is a vast improvement over what is currently in place. Stakeholders – from citizens in communities where pipelines are to be built to environmentalists concerned about collateral damage to the ecosystem – must engage in a process that improves our energy infrastructure and avoids a stalemate that leaves in place inadequate and outdated infrastructure without allowing for growth in demand, which will send manufacturing jobs elsewhere.”

Outside environmental groups are mobilizing locals to delay project approvals which support their national and even international fundraisers.

Outside environmental groups are mobilizing locals to delay project approvals which support their national and even international fundraisers.

Meanwhile in the U.S. Congress, U.S. Representatives Fred Upton (R-MI) and Gene Green (D-TX) the chairman and ranking member on the House Energy and Commerce Committee have co-sponsored H.R. 3301, The North American Energy Infrastructure Act. This bill, which has been reported out of committee to the full House, reflects a concern with the technical competence of the State Department to manage cross-border energy infrastructure assessment in support of the presidential permit decision. If it became law, The North American Energy Infrastructure Act would reassign responsibility for these technical assessments to the U.S. Department of Commerce for oil pipelines; to the Federal Energy Regulatory Commission for natural gas pipelines; and to the U.S. Department of Energy for electricity transmission lines.

“The second wave is coming, as various initiatives attempt to change the way that infrastructure projects are governed.”

Process changes are unlikely to stop there. To justify obstruction of energy infrastructure projects like the Keystone XL pipeline, opponents have promoted the notion of “social license” as a kind of approval granted or withheld (or bartered for other goods or payments) by activists in the name of society or even the environment. Social license does not confer permission in the legal sense, but purports to offer legitimacy in a moral sense.

Social license claims have found a growing audience in Canada, and the term is coming into vogue in some parts of the United States as well. Yet the combination of the Keystone XL pipeline’s example and the growing need for energy infrastructure to support growing oil, natural gas, and electricity production is leading some to ask: isn’t “social license” something granted by elected officials in a democracy?

Some are asking: isn’t “social licence” something granted by elected officials in a democracy?

Some are asking: isn’t “social licence” something granted by elected officials in a democracy?

There is no doubt that many in the United States believe that their democracy is not working very well. A July 2014 Gallup poll found that just 15 per cent approved of the performance of the U.S. Congress.2 Thomas Mann of the Brookings Institution argues that behind these low approval ratings is a more profound sense among voters that politics at the federal level has broken down and no longer can handle the challenges facing the country.3 This public despair in American institutions is unprecedented, Mann argues, and has resulted in an appetite for change unlike anything seen before.

Here again, Keystone XL is a contributing factor. The Pew Research Center has done extensive polling on the subject, and found in 20134 that most Americans supported building the Keystone pipeline. Not only that, a majority of all respondents in every age group supported building the pipeline. In further polling in 20145 Pew found that 49 per cent of self-identified Democrats supported the Keystone pipeline (and only 38 per cent opposed it).

“Social license does not confer permission in the legal sense, but purports to offer legitimacy in a moral sense.”

Canadian readers might recoil from what looks like American hyperbole, but I believe that whatever happens next in the Keystone XL saga, the consequences of this project will reshape the politics of energy infrastructure projects in the United States and Canada for decades to come. Like the Battle of Little Bighorn, the Battle of Keystone XL will be remembered as a catalyst for a change in political attitudes whose consequences will linger long after the combatants have lowered their arms.

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“Social license does not confer permission in the legal sense, but purports to offer legitimacy in a moral sense.”

  1.  David Farr. “Building a Coalition to Meet America’s Energy Needs” Forbes February 7, 2014 Available at: http://www.forbes.com/sitesrealspin/2014/02/07/building-a-coalition-to-meet-americas-energy-needs/
  2. Andrew Dugan. “Congressional Approval Rating Languishes at Low Level: More than one in five say replacing all members is best way to fix it” Gallup Politics July 15, 2014. Available at: http://www.gallup.com/poll/172859/congressional-approval-rating-languishes-low-level.aspx
  3. Thomas Mann. “Admit It, Political Scientists: Politics Really Is More Broken Than Ever” The Atlantic May 26, 2014 Available at: http://www.theatlantic.com/politics/archive/2014/05/dysfunction/371544/
  4. Pew Research Center for People and the Press, “Keystone XL Pipeline Draws Broad Support” April 2, 2013. Available at: http://www.people-press.org/2013/04/02/keystone-xl-pipeline-draws-broad-support/Pew Research Center for People and the Press, “Keystone XL Pipeline Divides Democrats: Proposal Retains 2-to-1 Support among Public” March 19, 2014. Available at: http://www.people-press.org/2014/03/19/keystone-xl-pipeline-divides-democrats/