This article on the debate over GHG emissions and the Keystone XL pipeline in the NYTimes does a really good job at highlighting the key issues…and made my day by linking to my blog.
I was also very happy to see this quote from Bill McKibben: “It’s not that this project alone would lead to catastrophic emissions, but it would start a process that could lead to more pipelines down the road and even more extraction.” I’ve written at length here and in the Globe and Mail about the importance of judging the project based on its impacts and not based on the impacts of hypothetical exponential growth in oilsands production, and it’s nice to see Mr. McKibben making this point clear. I believe that analysis of the impacts of this project should consider the degree to which approval of this project enables related future pipeline projects and the ways in which it alters both future oil production decisions and the case for future infrastructure projects. In doing so, however, I find it hard to see the slippery slope which Mr. McKibben describes.
In my view, there is limited scope for Keystone XL to enable significant new future pipeline capacity to the US. The current 3.1 million barrels per day of export capacity is, if anything, making it harder to make the case for Keystone XL given that the case is not one for pure physical capacity, but for capacity expansion to particular markets. Under current growth forecasts, building Keystone XL would put enough pipeline capacity in place to handle Alberta production (not exports, production) for the next 10-15 years. With that much capacity in place, and with no sign of increases in US oil demand, it’s hard to see how Keystone XL will make building more pipelines to the US easier. That’s not to say that more will not be built, but they are not likely to be easier to build because of Keystone XL. The case might be made that future expansions within an existing right-of-way are substantially easier than greenfield development, but that has upper limits, and approvals would still be subject to a “needs” assessment.
Further, building Keystone XL would imply that the case for Enbridge’s Northern Gateway pipeline becomes more about financial advantage gained from access to multiple markets and less about the need for physical export capacity -relatively new territory for regulatory processes. I can’t see a scenario in which building Keystone XL makes it more likely that Northern Gateway and other proposed links to Pacific tidewater get approval. If anything, the relationship should be exactly the opposite.
Finally, I don’t see how building Keystone XL will have a meaningful impact on US oil demand. The US does not face physical import capacity constraints so, in the absence of the pipeline project, US consumers will still have access to oil at world prices (albeit perhaps slightly higher Brent crude prices) and will consume oil based on their preferences and the price of alternatives. Keystone XL will likely, in the near term, shift prices within the US, but the overall impact will be small. Without inducing a significant change in prices, it’s hard to see how Keystone XL will have a material impact on US oil demand or alter the degree to which the US is dependent on oil. This is essentially the conclusion of both the EPA and the US State Department, although they differ on the likely sources of oil which would be used in the event Keystone XL is not approved.
In summary, I can’t see a realistic scenario in which building Keystone XL enables the building of significantly more pipeline infrastructure and/or drives more oil demand in the US, but I’m happy to have that discussion. If we are working toward a better assessment of impacts, then I’m all for it.