Part one of a two-part series on the Keystone XL pipeline
Gas prices are spiking once again; the cost of a gallon of regular unleaded is about 12 percent higher than it was a year ago. But winter typically isn't the time for a rise in gas prices. Demand for gasoline is at a 14-year low and domestic oil production is at an eight-year high.
Some analysts link the increase in gas prices to the tensions in Iran and speculators on Wall Street. Others point to policy decisions limiting drilling in environmentally sensitive areas, as well as President Obama's decision to deny a permit for a massive oil pipeline called Keystone XL.
The proposed pipeline would travel 1,800 miles from Alberta, Canada, all the way down to the Gulf Coast. The controversy over its impact — environmentally, politically and economically — makes it prime election issue.
A Proposal Turns Controversial
TransCanada, the company behind the proposal, already operates a massive pipeline that has been pumping crude oil from Canadian tar sands. The pipeline ends in the small town of Cushing, Okla., where the oil is stored in massive tanks scattered across the town.
Canada has the potential to produce more than six times the amount of oil it now makes. Because the existing pipeline ends in Oklahoma, however, Canada can't deliver the oil to refineries on the Gulf Coast and, from there, to the lucrative global oil market. The Keystone XL was supposed to help resolve that issue.
When TransCanada proposed running the XL pipeline through the Sandhills of Nebraska, a delicate ecosystem, it hit a snag. All pipelines — even the most advanced like TransCanada's — eventually leak, and a few years ago, cattle ranchers said they were concerned the new pipeline would destroy the Ogallala aquifer. The Ogallala is one of the largest aquifers in America, and a primary water source for farmers and ranchers in seven states who raise cattle, wheat and corn.
Nebraska's Republican governor initially sided with the ranchers. Last August, he wrote a letter to President Obama, asking him to deny TransCanada a permit to build Keystone XL.
"When I wrote that letter, we were trying to get their attention to say look, we don't want it to go through the Sandhills," Gov. Dave Heineman says. "Probably the only option at that time was to deny the permit."
Heineman says if the Keystone XL could bypass the Sandhills, it could be an opportunity for both his state and the country.
"When you've got an 8.3 percent unemployment rate in America and we're trying to have energy independence, to me this was a no-brainer. We should have moved forward with the project," he says.
Supporters of the pipeline argue more oil from Canada means the U.S. would rely less on oil from places like Venezuela and Saudi Arabia.
TransCanada says the pipeline would create 20,000 direct jobs and thousands more related ones. (Opponents dispute those figures.)
A Rancher Fights Back
Because of his vocal opposition to the pipeline, Randy Thompson has become a symbol in the state. There are signs all across Nebraska that feature his face and read, "I Stand With Randy."
Four years ago, Thompson was contacted by an agency representing TransCanada that said the pipeline could cross his land.
"He just said ... we're wondering if we could have permission to come on and do some surveying," Thompson says.
TransCanada wanted Thompson and other affected landowners to sign over the rights to parts of their land in order to build the pipeline.
Thompson was offered $9,000. But he wasn't interested.
In 2010, TransCanada sent a letter to his 92-year-old mother, who co-owned the land with him. The gist of the letter was if they refused to cooperate, Keystone would use eminent domain to acquire an easement.
Thompson was stunned that a foreign company could potentially take over his land. But Robert Jones, TransCanada's vice president, says the company was following normal procedure.
"The Keystone pipeline system was under construction in 2010 and we were absolutely considering the precedent in the past, anticipating a presidential permit shortly," Jones sy.
Thompson and other ranchers thought the tone of the letters was unnecessarily aggressive, but the letters had the opposite effect on other landowners.
"I had a neighbor told me, said, these guys are way too big," Thompson says. "There's no need to fight them. Just as well sign and get it over with. So he signed the easement right away."
Another rancher, Sue Luebbe, lives right in the heart of the Sandhills. The water table on her land is so close to the surface, you need to dig down only two feet to hit the aquifer.
One afternoon four years ago, she noticed a helicopter hovering over her land. Inside the cockpit were two surveyors working on behalf of TransCanada.
The chopper terrified Luebbe's cattle, causing a stampede that sent them into a barbed-wire fence. Luebbe got on the hood of her pickup truck and pointed a rifle at the helicopter.
"I saw both of them and I also gave them some sign language. They kind of understood," she says. "So they took off as fast as they could."
She says she refused an $18,000 offer from TransCanada to build the pipeline on her land. Like Thompson, she's joined Bold Nebraska, a group that's made it its mission to stop the Keystone XL.
The Battle Continues
TransCanada says it will submit a new proposal to the U.S. government next year. The proposed route, the company says, won't go through the Sandhills.
But now, Thompson and other ranchers are convinced the whole enterprise is bad for the environment and a raw deal for Nebraska.
Thompson says remembering his parents' perseverance through the Great Depression and droughts drive him. If they were able to survive those hard times, he says, he can get through this.
"I know what my folks went through to get a piece of ground. And these sons of bitches come along and they tell me we're going to take this land away from you whether you want us to or not," he says, "and they got a fight on their hands."
Heineman says he's sympathetic, but only to a point.
"The fact of the matter is we're still going to be using coal and oil for a long period of time. Hey, I'm a supporter that we need to move to cleaner coal technology and those things," he says, "but it is not going to happen overnight."
GUY RAZ, HOST:
From NPR News, it's WEEKENDS on ALL THINGS CONSIDERED. I'm Guy Raz.
Here's a question: Why is the price of gas all of a sudden going up? At this gas station here in Washington, D.C., a gallon of a regular unleaded is $3.86. That's 12 percent higher than this time last year. And there's a pretty good chance that soon, it'll reach an average of four bucks a gallon nationally.
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RAZ: But why now? Demand is at the lowest in over a decade, and domestic oil production is at an eight-year high.
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RAZ: Well, some analysts attribute higher prices to tension with Iran. Others point to speculators on Wall Street. And then there are those who say it's all about President Obama's policies. In particular, a decision the president took late last month to deny a permit for a massive oil pipeline. It's called Keystone XL. It's a pipeline that would travel more than 2,000 miles from one of the biggest oil deposits in the world, in Alberta, Canada, all the way down to the Gulf Coast.
Today and tomorrow on the program, we're going to take a closer look at Keystone XL, the plan, the controversy and the potential consequences if that pipeline is or is not built. Keystone XL, the North American oil boom and what it means for gas prices, that's our cover story.
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RAZ: Now, the first thing you need to know about the Keystone pipeline, it already exists.
VIRGIL PFENNIG: Put your hand on it. Yeah. You can feel it going through there.
RAZ: Mm-hmm. Yeah. So that's all (unintelligible) in Canada?
PFENNIG: Yes, it is.
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RAZ: This is the sound of Canadian heavy crude oil. For more than a year, it's been flowing south, down the Keystone pipeline from the Canadian tar sand in Alberta. It ends in Oklahoma, in the small town of Cushing, population 7,000. And there, the oil is stored in massive tanks, hundreds of tanks, scattered all across the town.
Now, the pipeline that doesn't exist, the one you've heard all the debate about, is a second proposed pipeline. That's Keystone XL. It would be bigger than this pipeline, and it would follow a more direct route from Canada. The same company that built the first one wants to build the second. It's a company based in Calgary called TransCanada. Virgil Pfennig is TransCanada's manager in Cushing, Oklahoma, and he showed us around last week.
So half a million barrels of oil a day or more can come through here?
PFENNIG: Yes, that is correct.
RAZ: Canada has the potential to produce more than six times the amount of oil it now makes. But because the existing pipeline ends in Oklahoma, Canada has no way to deliver its oil to refineries on the Gulf Coast and, from there, to the lucrative global oil market. That's what Keystone XL was supposed to resolve.
And with one Keystone pipeline already pumping at full capacity, the second one wasn't supposed to be particularly controversial. But the project hit a snag, some 420 miles north of Cushing, in the statehouse in Lincoln, Nebraska.
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RAZ: TransCanada originally proposed running the XL pipeline through the Sandhills of northern Nebraska. It's one of the most delicate ecosystems in the country, right above the massive Ogallala aquifer. And that's where TransCanada ran into a ragtag coalition of environmentalists, cattle ranchers, Republicans and Democrats who stood in the way.
BRENT BAUGHMAN, BYLINE: Test, one, two, three, four five.
RAZ: Producer Brent Baughman and I traveled to Oklahoma and to Nebraska last week to find out more. Our first stop was to the office of the governor, Dave Heineman, a Republican.
And where do you recommend we eat in Nebraska?
GOVERNOR DAVE HEINEMAN: You should go to a steak house.
HEINEMAN: Beef. It's what's for dinner.
RAZ: I had beef for lunch.
HEINEMAN: I'd have beef for dinner too.
RAZ: Nebraska is the third largest cattle state in the country. And a few years ago, it was small-scale cattle ranchers who began to raise concerns over the route of Keystone XL. Now, all pipelines, even the most advanced like TransCanada's, eventually leak. And cattle ranchers fear that a leak along the Keystone XL pipeline could devastate the Ogallala aquifer. It's one of the largest aquifers in America and a primary water source for farmers and ranchers in seven states who raise cattle, wheat and corn.
Governor Heineman sided with the ranchers in the Sandhills. So last August, he wrote a letter to President Obama, asking him to deny TransCanada a permit to build Keystone XL.
HEINEMAN: When I wrote that letter, we were trying to get their attention to say, look, we don't want it to go through the Sandhills. And probably, the only option at that time was to deny the permit if we had to go that far.
RAZ: Heineman now says President Obama should have approved the pipeline, but conditionally. The condition that it wouldn't run through the Sandhills.
HEINEMAN: When you've got an 8.3 percent unemployment rate in America, and we're trying to have energy independence, to me, this was a no-brainer. We should have moved forward with the project. And all he has to do is decide, is it in the national interest or not?
RAZ: Now, supporters of the pipeline argue more oil from Canada means the U.S. would rely less on oil from places like Venezuela and Saudi Arabia. And TransCanada says the pipeline will create 20,000 direct jobs and thousands more related ones. Those figures are disputed by opponents. We'll talk more about that tomorrow.
But what the company didn't expect was a man named Randy Thompson, now the most famous rancher in Nebraska.
RANDY THOMPSON: Welcome to Nebraska.
BAUGHMAN: Thank you.
RAZ: Thank you. We're glad to be here.
Randy Thompson is a barrel-chested rancher who wears a white cowboy hat. He stuffed some tobacco inside of his lower lip and showed us around.
THOMPSON: There's one of my old long horns right here. That's one to be butchered.
RAZ: A bone white long horn skull is mounted on the barn door.
THOMPSON: See what shot her in the head.
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THOMPSON: Proper way to treat your pets, isn't it?
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RAZ: Four years ago, Thompson was contacted by an agency representing TransCanada.
THOMPSON: I just got a call one day on a clear blue sky.
RAZ: And that call?
THOMPSON: He just said, well, there's a pipeline proposed and it would possibly come across your land and wondering if we could have permission to come on and do some surveying.
RAZ: TransCanada wanted Thompson and all affected landowners to sign over the rights to part of their land in order to build the pipeline. Randy Thompson was offered $9,000. But he wasn't interested, so the company started to get aggressive. And in 2010, TransCanada sent a letter to his mother who co-owned that land with him.
THOMPSON: At the time, my mom was 92 years old and she got this letter, you know, that says: You are, by now, aware that TransCanada Keystone pipeline is constructing and will operate on 1,833-mile crude oil pipeline.
RAZ: The letter goes on to read that if he refused to cooperate...
THOMPSON: Keystone will use eminent domain to acquire the easement.
RAZ: His first call was to his lawyer. The lawyer's advice? Cooperate. Eminent domain was nothing to mess around with. And if TransCanada was successful, Randy Thompson would receive less-than-favorable terms.
THOMPSON: I got to tell you, I was sick when I got this letter. It keeps you up at night. I've talked to a lot of landowners. We're not used to dealing with this kind of stuff.
RAZ: There are questions as to whether TransCanada even have the power to threaten eminent domain at the time. The letter suggests the pipeline project had been approved. Thompson was stunned that a foreign company could potentially take over his land. But TransCanada official Robert Jones says the company was simply following normal procedure.
ROBERT JONES: The Keystone pipeline system was under construction in 2010. We were absolutely considering the precedent in the past, anticipating a presidential permit shortly.
RAZ: What bothered Thompson and other cattle ranchers in Nebraska was the tone of the letter. He felt it was unnecessarily aggressive. But, in fact, similar letters sent to other landowners had the opposite effect.
THOMPSON: I had a neighbor told me, said, these guys are way too big. He said, there's no need to fight them. He said, we just as well sign and get it over with. So he signed the easement right away.
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RAZ: Right in the heart of the Sandhills, about four hours northwest of Lincoln, Sue Luebbe, another cattle rancher, is getting ready for calving season. The water table on her land is so close to the surface, you only need to dig down two feet to hit the Ogallala aquifer.
So you had - how does this work?
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RAZ: She has more than 40 water windmills on the ranch that pull the water into troughs for the cows to drink from. One afternoon four years ago, Sue Luebbe noticed an unusual sight in this part of Nebraska, a low-flying helicopter hovering over her land. Inside the cockpit, two surveyors working on behalf of TransCanada.
The chopper terrified Luebbe's cattle and caused a stampede that sent them into a barbed-wire fence, leaving some of the cows bloodied.
SUE LUEBBE: I got on the hood of my pickup and I pointed the rifle at them.
RAZ: And they saw that?
LUEBBE: Oh, yeah. I also gave them some sign language. They kind of understood, so they took off straight to the east as fast as they could go.
RAZ: Sue Luebbe refused an offer of $18,000 to allow TransCanada to build the pipeline on her land. And like Randy Thompson, she got hooked up with a liberal group called Bold Nebraska, a group that made it its mission to stop the Keystone XL pipeline.
JANE KLEEB: Yeah. So essentially, this is Bold Nebraska's office.
RAZ: From the upper floor of a small building in downtown Lincoln, Jane Kleeb heads up Bold Nebraska.
KLEEB: And for some of us, you know, early on, maybe it was we were opposed to it to the Sandhills and the aquifer. But as we've seen TransCanada's behavior to landowners, we don't trust them.
RAZ: For now, Randy Thompson, Sue Luebbe and other opponents of Keystone XL have won. TransCanada now says it will submit a new proposal to the U.S. government next year - a route, the company says, that won't go through the Sandhills.
There was a time when that might have been good enough. But now, Randy Thompson and other ranchers like him are convinced that the whole enterprise is bad for the environment and a raw deal for Nebraska. And he's become a symbol in the state. There are signs all across Nebraska that feature his face. They read simply: I Stand with Randy.
THOMPSON: My parents didn't raise me to lay down, roll over for people. I mean, my folks got married in 1933 and they didn't raise a crop for seven years in a row. They went through the drought, the Depression, and they survived all that. And they were, like, in their 50s before they were ever able to buy a piece of land. And I'll tell you right now, that's what drives me, because I know what my folks went through to get a piece of ground. And these sons of (bleep) come along and they tell me we're going to take this land away from you whether you want us to or not, and they got a fight on their hands.
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RAZ: Back in the state capital, Lincoln, Governor Heineman told us he's sympathetic, but only to a point.
HEINEMAN: The fact of the matter is we're still going to be using coal and oil for a long period of time. Hey, I'm a supporter that we need cleaner coal technology and those things, but it is not going to happen overnight. And in the meantime, I'd like to keep energy cost low for our citizens.
RAZ: But how much of an impact will more Canadian oil flowing into the U.S. have on oil prices? And what about the environmental consequences? That's the subject of the second part of our report tomorrow on the program. In a moment, our economics correspondent John Ydstie explains some of the reasons behind the sudden rise in gas prices.
Stay with us. I'm Guy Raz. And you're listening to ALL THINGS CONSIDERED from NPR News. Transcript provided by NPR, Copyright NPR.