The State Department's draft assessment of the proposed Keystone XL pipeline's effects on the environment steers between environmentalists' view of the project greatly expanding greenhouse gas emissions and industry's contention that the job-generating pipeline would have little impact on climate change.
State's release Friday of the supplemental environmental impact statement (SEIS) suggests the Obama administration is likely to issue a permit to TransCanada Corp. for the proposed Alberta-to-Texas pipeline, which would carry 830,000 barrels a day of oil sands crude to U.S. refineries. A decision is expected this summer (E&ENews PM, March 1).
The SEIS angered environmentalists who said State erred in assuming that the carbon-intensive oil sands industry would develop at roughly the same pace whether the United States issues a permit for Keystone XL or not.
But State bowed to environmentalists' insistence that it look at the effect the pipeline would have on global greenhouse gas emissions, even if they occur in Canada during oil sands production rather than emanating from the pipeline itself.
"If the proposed project were to induce growth in the rate of extraction in the oil sands, then it could cause [greenhouse gas] emissions greater than just its direct emissions," the draft says. It further estimates that oil sands development emits an average of 17 percent more greenhouse gases -- measured from crude's extraction through refining to use by motorists -- than conventional oil production.
But the document parts with greens who argue that rejecting the pipeline would inhibit growth of the oil sands industry.
"Based on information and analysis about the North American crude transport infrastructure (particularly the proven ability of rail to transport substantial quantities of crude oil profitably under current market conditions, and to add capacity relatively rapidly) and the global crude oil market, the draft Supplemental EIS concludes that approval or denial of the proposed project is unlikely to have a substantial impact on the rate of development in the oil sands, or on the amount of heavy crude oil refined in the Gulf Coast area," the draft says.
This view of Keystone XL tracks with what industry has maintained for months: that Alberta will expand development of its valuable oil sands resources no matter what Washington does.
"I think it is incredibly naive for people to suggest that delaying or denying one pipeline could actually result in the cessation of that business in Canada," said Alex Pourbaix, TransCanada's president of oil pipelines and energy, at a recent Washington briefing. "The oil sands and most oil reserves are going to continue to be developed because they are a very attractive and valuable commodity."
Demand for oil sands crude is only expected to grow, Pourbaix said, so producers will find a way to get their product to refineries and then to market.
The industry is already finding ways to expand oil sands development while it waits for Keystone XL's approval. Pourbaix estimated that 200,000 barrels a day of oil sands product is already is moving by rail, while more is transported via truck and barge. All these options have a larger greenhouse gas footprint than a pipeline, he said, and carry a greater spill risk.
"Pipelines are demonstrably the safest and most environmentally friendly way to move oil," he said.
And companies including TransCanada are looking at other options for moving their product.
Two pipelines have been proposed to carry oil from Alberta to the Pacific Ocean for export, and another two are proposed to head to the Atlantic.
"It's not about one pipeline," said Travis Davies, a spokesman for the Canadian Association of Petroleum Producers, in a recent interview. Some pipelines might not even need to be built from scratch. Falling U.S. demand for Canadian natural gas has spurred interest by some companies in converting their natural gas pipelines from gas to oil, he noted.
Eastern Canada has also begun to import gas from Pennsylvania and elsewhere rather than from western Canada, freeing up pipeline capacity that could accommodate oil.
For example, TransCanada's Canadian Mainline gas pipeline could carry between 600,000 and 800,000 barrels of oil a day if it were converted, Davies said. It runs from Alberta to the Quebec-Vermont border and connects with other pipelines in the United States and Canada.
Industry advocates say Keystone XL is still important, because its permitting is further along than other projects' and it could be running sooner. They acknowledge that rejection of the project could cause production to ramp up more slowly but say it would not have any lasting effect.
Environmentalists strenuously disagree.
"They call it Keystone for a reason," said Bill McKibben, founder of 350.org, on a call with reporters Friday. "If they don't have it, they're not going to be able to expand the tar sands the way they've been planning to."
Greens point to a study released in January by the Pembina Institute, an environmental think tank, that shows Keystone XL alone would allow the industry to grow by 36 percent by offering producers a way to move their product to market.
The industry plans to triple production between now and 2030, from the current 1.8 million barrels a day to more than 5 million barrels. That tracks with the amount of new production that has been permitted, the Pembina study says, but even if all current proposed pipelines were allowed to move forward, the industry would still be in search of additional ways to move product to refineries.
Not only are the other pipelines years behind Keystone in the permitting process, but some are unlikely to be built, environmentalists say.
The proposed Enbridge Northern Gateway Pipelines Project, for example, would move crude from Alberta to British Columbia. But environmentalists note that the pipeline is not guaranteed to gain public support from Alberta's more liberal western neighbor.
Greens said on the call that if Obama allows Keystone to go forward, it will eclipse the progress his administration has made elsewhere to curb emissions to become his legacy on climate change.
"For the next couple of decades, we will know that the KXL pipeline was approved under Obama at the time that we needed the strongest possible leadership coming from the White House," said Michael Brune, executive director of the Sierra Club, on the same call.
McKibben of 350.org said the struggle over the pipeline was as much a turning point for the climate change movement as the historic Selma civil rights march or the Stonewall riots in San Francisco, both mentioned in Obama's inaugural address in January, were for their movements.
But Elliot Diringer of the nonpartisan Center for Climate and Energy Solutions said the pipeline would not have the catastrophic impact on climate change that environmentalists say it would.
"Its direct impact on greenhouse gas emissions would appear to be marginal at best," he said.
As long as demand for oil remains high, he said, producers will have a powerful incentive to find a way to transport it. The key to limiting emissions from fossil fuels is to draw down consumption through efficiency measures, he said, rather than "trying to turn off spigot after spigot" of supply.
He also disputed environmentalists' claim that oil sands oil is the dirtiest in the world, saying that heavy crude supplies from California, Venezuela and Nigeria all have a larger greenhouse gas footprint. All are currently refined in the United States.
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