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Enviros and industry agree: Keystone XL means more oil. Why does the State Department disagree?

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Judith Lewis Mernit | Feb 04, 2014 08:00 AM

It’s hard to know where to begin unpacking the U.S. State Department's Final Environmental Impact Statement on the controversial Keystone XL, the transcontinental pipeline that has been proposed to transport heavy crude oil from the tar sands of Alberta to the Gulf Coast of Louisiana. On one hand, the document admits that from "wells to wheels" — a lifecycle analysis that includes extracting, refining and burning — crude from landlocked Canada is 17 percent worse for the climate than the other kinds. On the other, moving any oil, no matter how polluting, along a pipeline is better than transporting it by rail or tanker. No one wants to repeat what happened last summer at Lac-Mégantic, the small Quebeçois village where 47 people died when a train derailed carrying oil from North Dakota’s Bakken fields, nor do the residents of Casselton, N.D., want to be forced to flee another fiery rail crash, as they did in December. Build the pipeline, goes the ominous Hobson's choice the State Department report offers, or get ready for more horrific railcar explosions to rock rural North America.

copy_of_2211351.jpg
The proposed route of the Keystone XL pipeline.

Whether that's really the tradeoff, however, remains a matter of debate. There's no question that as flammable petroleum fills up tank cars designed for more benign cargo, rail disasters have mushroomed. Since March, the New York Times reported recently, “there have been no fewer than 10 large crude spills in the United States and Canada because of rail accidents.” Keystone XL would be contractually obligated to carry off about 100,000 barrels per day from the Bakken development, thus reducing the railcar risk from North Dakota as well Alberta. The pipeline, then, clearly wins on the issue of transportation risk.

But as a project that crosses an international boundary, the pipeline's approval hinges not on the opinions of rail-safety experts but on a decision to be made by President Barack Obama, who announced in his landmark June speech on climate that "the net effects of the pipeline’s impact on our climate will be absolutely critical to determining whether this project is allowed to go forward." And that net effects calculation gets tricky.

On its face, the State Department's analysis says the pipeline will have no significant impact on climate, which is different from saying the oil itself won't contribute to carbon pollution when it's extracted and burned. Instead, the report concludes, the pipeline won't exacerbate the greenhouse effect for the simple reason that oil producers will still develop the fields without it, moving their oil to export terminals in the Gulf by rail or truck. In other words, no matter how "GHG intensive" the tar sands' oil might be, access to the pipeline won't exacerbate climate change because access to the pipeline will have no effect on oil production. Several environmentalists opposed to the pipeline, including NextGen Climate Action founder Tom Steyer, say that's bunk. And most investment analyses argue that without the pipeline, Canada's oil will cost so much and sell for so little it won't be worth the trouble.

On Sunday, Steyer — the San Francisco billionaire who has famously sunk large sums of his personal fortune into fighting the pipeline — issued a detailed open letter to Secretary of State John Kerry, arguing that the study’s conclusions “conflict with and are contradicted by tar sands industry executives who confirm that they need the pipeline in order to continue to develop the tar sands and to reach international markets.” He goes on to cite chapter and verse: "If Canada fails to develop its oil sands now — and fails to build the pipelines to move it to market — the opportunity could vanish for decades," the Toronto Star, quoting industry executives, reported on January 15; without a pipeline “I would have to slow down," an executive from the Canadian oil developer Cenovus told the The Globe and Mail's editorial board. “The pipeline has to be done,” another oil-industry executive said in Davos. And so on.

The State Department study essentially dismisses the cries of oil-industry executives — who do, after all, stand to make more profit with the pipeline than without it — as anecdotal. If “analysts and financial institutions” have said that denying the pipeline would reduce production, it’s because “they have different focuses, near-term time scales, or production expectations, and/or include less detailed data and analysis about rail and transport.” The study’s more substantiated conclusion is that, while “lower than expected oil prices could affect the outlook for oil sands production,” oil prices will stay above the break-even point for domestic oil production, and extraction from the tar sands will continue apace, with or without a pipeline.

It's worth noting that other environmental groups, such as the Sierra Club and 350.org, have read — or perhaps spun — the State Department report differently, trying to make a case that the report proves the pipeline will indeed worsen greenhouse gas pollution. "The State Department wisely walked away from its earlier contention that Keystone XL would have ‘no significant impact’ on climate disruption,” said the Sierra Club's Michael Brune in a statement. Bill McKibben of the climate activist group 350.org backed him up. They're correct only in the most literal sense. The report also acknowledges that, even with a conciliatory detour around Nebraska Sandhills, the project will disturb whooping crane habitat, devastate the endangered American Burying Beetle, and possibly contaminate the Ogallala aquifer that supplies fresh water to millions of High Plains farmers and residents. Indeed, the study documents all the way through just how much damage the Keystone XL and the bounty it carries will do to the planet. It's just that all the alternatives are worse. Looking at the climate problem alone, not building the pipeline will cause 28 to 42 percent more greenhouse gas emissions to be released into the atmosphere, mostly because trains and trucks burn fuel.

There are, of course, alternatives that go beyond the scope of the report. Oil could become uneconomical if people stopped using so much of it; trains might not burst into flames if the industry were forced to retrofit tank cars to carry petroleum more safely. If the State Department’s study only passingly factors a steep drop in oil prices into its takeaway conclusion, Steyer and others have speculated that there's a simple explanation: As Inside Climate News' Lisa Song reported in March, the primary agency behind the study, Environmental Resources Management, has long-established ties to the oil industry. The accusation alone augurs against the report’s own hopes that no “perceived conflicts . . . would impair the public’s confidence in the integrity of the work.”

But establishing conflict-of-interest in the report’s preparers may not even be necessary for Obama to apply his greenhouse-gas litmus test to a denial. Pipelines, once built, need to be fed to remain structurally sound. Without the pipeline, there still exists the possibility that oil sands production will decline for all sorts of reasons. Once it's built that possibility diminishes to near zero. The President could decide for himself that the pipeline effectively locks in more destruction of Alberta’s boreal forests for the extraction of tar sands oil. He could then conclude quite reasonably that it will therefore hasten climate change. It would then be hard for anyone, even the most studious analyst of the State Department’s massive report, to prove him wrong.

Judith Mernit Lewis is a contributing editor to High Country News. She tweets @judlew.

Patrick  Johnston
Patrick Johnston Subscriber
Feb 05, 2014 01:41 PM
A well written, but ill informed about the geography of Canada. The West of Canada is bordered by the Pacific Ocean and the East of Canada is bordered by the Atlantic Ocean and the North is bordered by the Arctic Ocean. Canada is not "land locked."
Patrick Hunter
Patrick Hunter
Feb 09, 2014 04:26 PM
The oil industry seems to operate without any hint of patience. All resources must be produced "now". I believe the public interest is in slowing that development. Lower production would tend to increase price which in turn would lower demand for fossil fuel and raise the affordability of alternative energy.
The other tactic is to place carbon fees on the production, distribution and use of carbon. That new revenue would be returned to citizens as dividends. Energy misers would come out ahead. The industry is signalling that they actually expect such fees. A high enough fee--say at the border--could (and should) make importation financially unfeasible. Ergo: no pipeline.
It's in the interest of everyone on this planet to keep tarsands "goop" in the ground. The environmental destruction in Alberta and the addition to global warming from the production and burning of tarsands is tragic. It needs to be "criminal". We will see it that way in the near future.
Part of the "urgency" to produce these fuels comes from Wall Street demands for profit. To a large degree, Wall St. controls our governments. Wall St. is the other thing that needs to be buried.
Thanks for informative article.
Dale Lockwood
Dale Lockwood Subscriber
Feb 09, 2014 08:43 PM
If its built,why should the U.S.A. and Canada suffer the environmental damage for a product being sent over seas?
If its built the oil should stay here.

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