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NY Times story on Keystone XL

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.



4 responses to “NY Times story on Keystone XL”

  1. Ujjayant Chakravorty

    good point..these NGO types are clearly abandoning rationality! My feeling is that Keystone has now become a symbol and if Obama wants the left to vote for him, this will be postponed until he gets re-elected. It will be built then..

  2. Alastair

    Where has rationality got us?

    The NYTimes article and Andrew’s post do not mention carbon taxes once. The discourse is Keystone vs other oil sources and pipelines, Keystone’s effects as an individual project, and Keystone’s contributions to emissions. By those measures, Keystone can be minimized away.

    How many years have scientists been raising the alarm about anthropogenic global warming? Despite the science on AGW, no credible carbon tax (or alternative) exists in North America outside of arguably BC.

    A carbon tax, not opposition to projects like Keystone, may be the only way to truly combat climate change. But in the absence of leadership from our politicians and heads of industry, opposing Keystone as a symbol and to send a signal to industry and government is an important tool.

    Rationality may tell us the best solution to a problem, but emotional arguments about catastrophic emissions may be the only thing driving the changes required.

    The oilsands boom is returning. There is no credible plan in sight to reduce emissions. Emissions increases, and measured climate damages, are on the high side of past climate change scenarios.

    It is not that approval of Keystone can lead to a slippery slope of additional emissions, it’s that we are already on Mr. McKibben’s slippery slope.

    We should all oppose Keystone until rationality triumphs and a credible carbon tax is introduced.

  3. Rundle in NYC

    The comedy in all this is the supposition that America has the time and the gumption to resolve the XL issue in the near future.

    Do they have television sets and newspapers in Alberta? If they did, they’d see America is currently pre-occupied with other things…….

    If Canada, at the behest of Alberta, really wanted to expedite the XL approval, they’d offer the Americans a solution on GHGs and pipeline safety, rather than playing this nieve game of brinksmanship and expecting the Americans to take the time to sort out their policy for them.

    The current approach is akin to asking a cancer patient to worry about his cousin’s broken arm — instead, the cousin should get a cast on the arm and quit bothering the cancer patient.

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