High costs of the Keystone XL tar sands pipeline outweigh paltry benefits

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As the Senate considers yet another pro-Keystone XL measure, the case for the embattled Keystone XL tar sands pipeline has never been weaker. In recent weeks, a myriad of industry reports have shown that tar sands expansion is slowing due to a lack of pipelines, deflating the argument that tar sands expansion is inevitable. Meanwhile, the Associated Press has revealed the federal regulators found systematic bad welds and other defects in the construction of TransCanada’s Gulf Coast pipeline, highlighting the real risks of spills on the proposed tar sands pipeline. Finally, new trade reports reveal evidence that Keystone XL is an export pipeline through the United States rather than to it. This information comes after the State Department and media have thoroughly debunked the exaggerated job creation claims by Keystone XL’s proponents. The bottom line is that Keystone XL is not in the nation’s interest. The project would enable the expansion of a carbon intensive fuel that would exacerbate the problem of carbon pollution and put our communities, lands and waters at risks in order to get tar sands through the United States to international markets. It may be a good deal for the tar sands industry, but it’s all risk and no reward for the United States. 

Given the mounting case against Keystone XL, perhaps it shouldn’t surprise anyone that the proponents of the tar sands industry’s pet project are pushing to exempt the pipeline from further review and a required finding that the pipeline is in the nation’s interest. On Wednesday, the Senate Energy and Natural Resources Committee will vote on a bill proposed by Senator Landrieu approving Keystone XL. This bill would require the approval of a pipeline that would exacerbate climate change, increase the risks of tar sands spills to our communities, lands and water, and undermine the ability of Nebraskans to weigh in on the route for the pipeline through their state. The Keystone XL decision should be decided through the established national interest determination process based on a rigorous evaluation of the evidence. And recent evidence has bolstered the argument that Keystone XL is not in the national interest and should be rejected.   

Keystone XL is a linchpin for tar sands expansion. A series of recent industry announcements have highlighted that Keystone XL is a linchpin for tar sands expansion and associated climate impacts.  Since the State Department’s final environmental review was released in January 2014, two major tar sands mines have been cancelled due to deteriorating market conditions, including Shell’s 200,000 barrels per day (bpd) Pierre River Mine and Total’s 160,000 bpd Josyln mine. Shortly after those two projects were canceled, the Canadian Association of Petroleum Producers (CAPP) announced that it was reducing its 2014 forecast of tar sands production in 2030 by 430,000 bpd. Even this reduced forecast assumes that Keystone XL and all other proposed tar sands pipelines will move forward. CAPP’s Vice President observed:

“The biggest uncertainty in this forecast is the timing associated with this [pipeline] capacity and whether or not they can deliver the capacity on the timelines they now propose. We’re seeing capital costs continue to rise. And even in a flat-price forecast, if we see capital costs rise x per cent per year for the next 10 years, that’s going to really shrink the margins significantly.” - Greg Stingham, Vice President of the Canadian Association of Petroleum Producers, June 9, 2014.

The reality is that tar sands are among the highest cost, highest risk, and highest carbon crude oil in the world. It’s clear that cheap pipeline capacity leading to new markets are critical for the expansion of tar sands production proposed by industry – just the delay of Keystone XL is dramatically slowing the rate of  tar sands expansion.

Keystone XL would significantly exacerbate the problem of carbon pollution. As evidence mounts that a tar sands industry without Keystone XL will be smaller than one without it, it’s clear that we need to take Keystone XL’s carbon emissions seriously. Just the incremental emissions from Keystone XL would generate 1.4 billion metric tons of carbon over its lifetime. To put that in perspective, the Administration estimates that the cost of that carbon pollution ranges from $90 billion to $128 billion. The National Climate Assessment highlighted the havoc that climate related costs are wreaking on our health, our homes, our communities, and our businesses. Approving a long term piece of high carbon infrastructure like Keystone XL that would add over a hundred billion dollars in climate costs is simply not in our nation’s interest.

Keystone XL is not a national jobs plan. The State Department has confirmed that the Keystone XL pipeline’s paltry employment benefits pale in comparison with its climate costs. Contrary to claims that the tar sands industry’s pet pipeline project would create hundreds of thousands of jobs, years of analysis have confirmed that the building the pipeline would generate 1,950 construction jobs for two yearsthe equivalent of building a medium sized mall. After built, the pipeline would employ a total of 50 employees. By comparison, the clean energy and clean transportation sectors put over 78,000 Americans to work last year building energy solutions that protect our air, water, climate and communities. That why more than 200 business leaders – including executives at Apple, Oracle, Facebook, Google and leaders in clean technology firms - have urged the President to reject Keystone XL.

Keystone XL is an export pipeline through the United States, not to it. New reports have further highlighted the fact that Keystone XL is intended as an export pipeline. We’ve recently seen reports of hundreds of thousands of barrels of raw tar sands being exported directly from the Gulf Coast to international markets. This adds to the millions of barrels of refined product exported daily from Gulf Coast refineries to international buyers.  It is worth taking the time to evaluate whether it truly is in the U.S. interest to enable higher carbon emissions and take the risk of a major pipeline built through our water supply simply to enable the tar sands industry to access more lucrative markets outside the United States.

Keystone XL poses a real risk of tar sands spills. The Associated Press recently broke the story that Federal pipeline regulators are imposing additional safety conditions on TransCanada after finding systematic problems on its Gulf Coast pipeline – high rates of bad welds, dented pipe and damaged pipeline coating. Pipeline regulators reported during one week, almost three quarters of the welds made on TransCanada’s Gulf Coast pipeline required redoing. This is a problem for a pipeline that is currently routed through some of the most sensitive portions of the Ogallala aquifer - the United State’s largest source of fresh groundwater. The problem is exacerbated by the greater impacts of tar sands spills to water resources and the fact that TransCanada’s real time leak detection system is not capable of detecting leaks smaller than half a million gallons a day.

Forcing Federal approval of Keystone XL would undermine the ability of Nebraska and South Dakota to weigh in on the pipeline’s route. While TransCanada was able to push through an exemption from Nebraska’s pipeline siting law through the Nebraska legislature, now that that law has been found unconstitutional, Nebraskans will have a chance to consider the route through a public process. While Landrieu’s bill nominally permits Nebraska to evaluate the pipeline route, the reality is that the federal process has provided a critical umbrella providing Nebraska the space to consider Keystone XL’s route through the state. For context, when Nebraska’s legislature first considered a pipeline siting law, TransCanada put enormous pressure on the state – attacking its jurisdiction and threatening to sue the state for any costs caused by a reroute. This pressure did not end until President Obama delayed a federal decision on the project to allow Nebraskans the space to consider the pipeline route in 2011.

Even now, TransCanada has been working to undermine public processes in Nebraska to such an extent that the Pipeline and Hazardous Materials Safety Administration (PHMSA) was compelled to send the company a warning letter last month making the point that states and localities had an important role to play in pipeline safety. By exempting Keystone XL from the federal national interest determination process, the Landrieu’s bill would only strengthen TransCanada’s hand to the determent of Nebraska’s legal process.

Photo: Suncor Millennium Mine, a tar sands mine similar to the proposed Pierre River and Josyln mines that were recently cancelled amid  deteriorating market conditions induced by pipeline constraints. Credit Peter Essick.

About the Authors

Anthony Swift

Director, Canada Project, International program

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