Controversy Over Meaning and Timing of Oil Pipeline Report

Washington – Allowing a Canadian company to construct a third oil sands pipeline through the nation’s heartland could eventually eliminate U.S. dependence on Middle Eastern oil, while having little impact on global emissions of heat-trapping gases.

That’s how oil pipeline giant TransCanada interprets a new report focused on its controversial Keystone XL pipeline project.

Economists and environmental advocates reviewing the same report beg to differ with those sweeping conclusions.

At issue is a recently released U.S. Department of Energy study called “Keystone XL Assessment,” which has sparked further debate over the long-running pipeline controversy, as Canada’s prime minister visits the White House today and protesters take up positions outside.

DOE’s Office of Policy and International Affairs hired the consulting firm EnSys Energy to write the report. EnSys was tasked with evaluating what impact TransCanada’s Keystone XL project would have on refining, trade and oil markets. The authors present multiple scenarios in their 124-page study.

Energy Department officials commissioned the analysis for the State Department as part of a wide-reaching environmental review of the $7 billion-pipeline proposed by Calgary, Alberta-based TransCanada. The State Department is in the midst of updating its draft environmental impact statement.

“This study supports what we have been saying for some time,” TransCanada president and chief executive officer Russ Girling said via a news release. “Keystone XL will improve U.S. energy security and reduce dependence on foreign oil from the Middle East and Venezuela.”

Due to the international nature of Keystone XL, Secretary of State Hillary Clinton’s team at the State Department is tasked with granting a thumbs up or down to TransCanada’s request for a presidential permit to build and operate the 1,959-mile pipeline. The infrastructure could carry up to 510,000 barrels of heavy crude oil from tar sands mines in the province of Alberta and across six states to refineries in the Gulf of Mexico.

A decision on the proposal is expected within the next weeks or months. The Canadian National Energy Board approved the project in March 2010.

Despite the involvement of several federal agencies, the State Department appears to be calling the shots over the pipeline, and was responsible for releasing the DOE report.

Liz Barratt-Brown, a senior attorney with the Natural Resources Defense Council, pointed out to Solve Climate News in an interview the curious timing of the study’s release. The study is dated Dec. 23, 2010, but it was only made public earlier this week, just ahead of Canadian Prime Minister Stephen Harper’s meeting today with President Obama at the White House.

The two leaders are likely to discuss the Alberta oil sands and the new pipeline, as well as bilateral efforts on climate change, trade and security, according to news reports about the visit.

Greenhouse Gas Emissions

Last July, the Environmental Protection Agency gave the draft environmental impact statement that the State Department issued concerning Keystone XL its lowest possible ranking.

EPA officials said they found the document “inadequate” because of a lack of safety and spill-response planning, inattentiveness to the potential impact on Canada’s indigenous communities and concerns about greenhouse gas emissions affiliated with the pipeline.

The Ensys analysis hypothesizes that construction of Keystone XL would not significantly alter either the carbon footprint of refineries on a global basis or the total lifecycle of greenhouse gas emissions.

However, NRDC experts argued that framing the emissions impact in a global transportation emissions context — instead of a U.S. context — can dwarf any impact.

The greenhouse gas savings from not constructing Keystone XL would be 26 million tons of carbon dioxide by 2030. That’s the equivalent of emissions reductions from doubling California’s low carbon fuel standards, according to numbers crunched by NRDC low carbon specialist Simon Mui.

EPA spokespeople contacted this week by SolveClimate News about the DOE report did not respond to requests for comment.

When asked to comment about the emissions impact of Keystone XL, TransCanada spokesman Terry Cunha stated that “it’s important to recognize that the oil sands will be produced regardless of whether Keystone XL is built as there are a few options to bring Canadian crude to international markets.”

“Therefore, the pipeline’s existence is independent of the emissions associated with the oil production,” he said.

Cunha also pointed out that the Gulf Coast is a large refining center with many choices of crude oil available.

“While Canadian crude is a very attractive choice, it is far from the only choice, so refiners will go on refining crude regardless of whether Keystone XL is built,” he said. “Canadian crude oil is very similar to other crudes refined at the Gulf Coast and do not produce higher carbon dioxide emissions when refined compared to the crudes that Gulf Coast refiners would use in their place.”

Reducing Dependence on Foreign Oil?

Paul Blackburn, who carefully monitors oil sands issues, is an attorney with Plains Justice, a nonprofit that helps communities in Montana, Nebraska and North and South Dakota with energy decisions.

He told SolveClimate News that TransCanada is off base in claiming that construction of Keystone XL could free this nation of foreign oil imports during the next 10 or 20 years.

The report, he pointed out, repeatedly emphasizes that reducing the demand for oil via energy efficiency measures is the most crucial factor when it comes to reducing imports from the Middle East.

“A combination of increased Canadian crude imports and reduced U.S. product demand could essentially eliminate Middle East crude imports longer term,” the report states on page 118. “Low U.S. demand is also projected to reduce U.S. net product imports and potentially turn the USA into a net product exporter after 2020.”

However, Blackburn stressed that it’s easy to misinterpret that sentence because constructing and operating the Keystone XL does not equate to increased Canadian crude imports, as TransCanada frequently states. No matter how many pipelines are built, he added, the volume of oil flowing from Canada to the U.S. is limited because extracting oil from Alberta’s tar sands is such a costly undertaking with myriad technical and logistical challenges.

In fact, the report states that pipeline capacity is so excessive now that the need for another pipeline is at least 10 years off. It goes on to say that if industry forecasts for oil field development are just slightly slower than expected, the flow out of Canada wouldn’t merit building Keystone XL until 2025 or 2030 — or perhaps even beyond that time frame.

“Building another pipeline is like buying a second refrigerator and expecting it to fill with food,” Blackburn said. “The real question is, ‘Is the food out of the field and ready to buy, and if so, who else would buy it so we can’t?’

“Oil doesn’t flow magically out of oil fields,” he continued. “It takes years to expand production. And if Asians buy the oil instead of us, we won’t get it anyway.”

The Tricky Asia Factor

The report also states that more Middle Eastern oil will flow to the U.S. if Canadian authorities allow companies to build a pipeline from Alberta, through British Columbia, to the Pacific Coast. That’s because it would be cheaper to ship oil via pipeline to the Pacific where it can be transported to Asia by tanker than it would be to pump it through the Keystone XL to the Gulf Coast.

According to the report, those savings on shipping would translate to oil companies earning at least $2 more per barrel by selling to Asia.

“The critical factor is losing oil to Asia, not increasing import capacity into the United States,” Blackburn said about insights from the report’s authors. “We’ve already rolled out two brand new red carpets for Canadian oil. A third won’t make a difference for years, if ever, especially if the Chinese roll out a more appealing red carpet in the meantime.”

Confining oil sands oil to North America would benefit consumers’ wallets, Blackburn said, but oil companies eager to fill their own pocketbooks are pressuring Canadian and U.S. governments for coastal access.

Building Keystone XL would serve to bolster Gulf Coast refineries, he said, adding that Midwestern refineries would likely expand if the proposed pipeline is nixed.

Why the DOE Study is Useful

The Ensys study is fair because it covers the territory requested by the State Department, Barratt-Brown said, but it is far from complete.

“I think the DOE report is very helpful overall because it makes the point that this tar sands pipeline is not needed,” she said, adding that the country already has two pipelines to accommodate Canadian oil sands — though neither one extends to the Gulf Coast. “The tradeoffs are too great and the report puts a fine point on that.”

Specifically, she noted that it doesn’t make any sense to rush to approve a pipeline with an expected lifespan of 50 years. Mining operations not only compromise Alberta’s boreal forests — a geography she referred to as the “Northern Serengeti” because of its tremendous biological diversity — but it also threatens the Ogallala Aquifer that Nebraska and other surrounding states count on for drinking water and agriculture.

A yes or no on Keystone XL’s future won’t come Friday at a meeting with a prime minister intent on chatting up both Canadian oil and pipeline company interest in expansion of the tar sands, Barratt-Brown said.

Instead, she concluded, the decision will be informed by a mix of factors — the Ensys study, the revised environmental impact statement, the input of Congress and “the growing chorus of voices along the pipeline route afraid for their land and water, and in the refinery communities in the Gulf already struggling for cleaner air.”