Keystone XL, Take Two

TransCanada wants to build another cross-border pipeline. Although its application for the Keystone XL project is still pending, the Canadian energy company asked the U.S. State Department for permission in April to construct a 240-mile pipeline between North Dakota and Saskatchewan, Canada.

TransCanada describes the Upland pipeline project as an opportunity to move American oil from the Bakken Shale formation to refineries and shipping ports in eastern Canada. It’s a clever economic pitch to the U.S. government, but some environmentalists suspect it’s a ruse—a backdoor attempt to build Keystone XL, which appears to be headed for rejection. If the Upland pipeline were constructed, TransCanada would only be a few minor legal and engineering hurdles away from reversing the flow of the oil, making it possible to move carbon-intensive tar sands crude from Alberta into the United States.

“We’re concerned that this project has more to do with crossing the border than building this particular pipeline,” says Joshua Axelrod, law and policy consultant for NRDC’s Canada project (disclosure). This suspicion isn’t paranoia on the part of environmentalists—neither the timing nor the economic fundamentals of Upland make sense.

First, there is no demand for another Bakken shale pipeline. With the current oil glut, existing pipelines in the area aren’t even running at full capacity—each day, most of the 750,000-barrel capacity goes unused. What’s more, over the past four years, oil producers in the region have turned down three other proposed pipelines that could have moved an additional 800,000 barrels per day. Oil producers aren’t exactly lining up to buy space in the Upland pipeline, either. So far, TransCanada has only managed to sell contracts for 23 percent of the proposed pipeline’s 300,000-barrel-per-day capacity. Drillers in the Bakken clearly prefer to move oil by rail, which allows them to ship to the highest-paying market at the time of shipment. Pipelines don’t offer that kind of flexibility.

Second, the timetable for the project is even more puzzling because of Upland’s complete reliance on another proposed TransCanada pipeline, Energy East, which would run more than 2,800 miles from Alberta to Canada’s eastern refineries. Along that route, Energy East would pass through the tiny town of Moosomin, Saskatchewan, home to around 2,400 people, one Tim Horton’s, and the northern terminus of the proposed Upland pipeline.

But there’s a catch: The Energy East project is in all kinds of trouble. In April, the Canadian agency responsible for protecting wildlife declared one of the pipeline’s proposed endpoints along the St. Lawrence River a danger to beluga whales, forcing TransCanada to push back its completion until at least 2020. The company may have to wait even longer than that, since the Canadian government has not yet issued a major assessment of the project, which could cause further delays. There’s also the strong possibility that Energy East will never materialize. While the project has languished for years in the planning stages, the Canadian public has turned against it, with approval figures dropping from 65 percent in March 2014 to 41 percent in January 2015. Utilities, who will lose gas-shipment capacity when portions of the pipeline are converted for oil, are also fighting Energy East.

TransCanada has conditioned most of its Upland supply contracts on the approval of Energy East. So construction on Upland wouldn’t begin for several years, making the proposed opening date of 2020 exceedingly optimistic at best. Either way, by the time the proposed Upland pipeline could transport its first drop of oil, the Bakken formation may already be in decline. The U.S. Energy Information Administration predicted last year that Bakken oil shale production will peak around 2020 at a million barrels per day, with output gradually lessening. Some analysts think the drop-off will begin even sooner. Since a typical pipeline has a lifetime of 50 years, Upland would have decades of productive life long after the Bakken has become a minor oil source.

You don’t need a crystal ball to guess what will happen. When Upland inevitably becomes an economic disaster—either because Bakken oil producers refuse to use it or there’s simply not enough oil to put in it—reversing the pipeline’s flow to bring tar sands crude into the United States will become very tempting for TransCanada.

This sort of thing has happened before. In 2006, ExxonMobil flipped the direction of the Pegasus pipeline to carry tar sands crude from Illinois to refineries near the Gulf of Mexico. The company initially boasted of the “success of the Pegasus pipeline reversal,” but the aging structure ruptured in 2013, spilling thousands of gallons of oil into a neighborhood near Mayflower, Arkansas. In another effort to provide an entryway to the country for tar sands crude, ExxonMobil has worked to reverse its Portland–Montreal pipeline despite heavy public opposition.

TransCanada seems to be playing the long game with the Upland pipeline. The company may assume public opposition to tar sands will eventually die down, and if so, Upland would be there to send the highly polluting oil into the States. The State Department ought to be playing an even longer game, though. Tar sands are bad for the climate and bad for the landscape—and they always will be. We ought to be preparing for a future that doesn’t depend on tar sands oil, not building infrastructure that’s obviously designed to facilitate its extraction.