The public furor over the Keystone XL oil pipeline has been historic, breaking old stereotypes of environmentalism and galvanizing public opinion. Perhaps no other proposed pipeline in the history of North America has generated the kind of opposition that Keystone XL has, and for good reason. Keystone XL presents serious environmental concerns, and whether or not the project serves the “national interest” is questionable. But in pushing Keystone as a defining environmental issue and its rejection as essential to combatting climate change, environmentalists risk deflating America’s first real citizen climate movement.
The Keystone XL pipeline involves two major segments. The first segment (approximately 850 miles in the United States) would cross the U.S.-Canadian border in Montana, pass through South Dakota, and terminate in Steele City, Nebraska. Pursuant to Executive Order 13337, because this pipeline segment connects the United States with a foreign country, it requires a Presidential Permit from DOS before it can proceed. As a result, this segment has drawn significant attention from environmental activists. The second segment (approximately 480 miles), known as the “Gulf Coast Project,” would connect an existing pipeline in Cushing, Oklahoma with locations in southern Texas. Because this segment does not cross the U.S. border, it does not require a Presidential Permit. It has been under construction since 2008.
Issuance of a Presidential Permit for the first segment would represent a singular decision by the Obama Administration that the Keystone XL pipeline serves the “national interest.” In its May 2012 Presidential Permit application, TransCanada argued that Keystone XL would serve the national interest of the United States, for four primary reasons: (1) it would provide a “secure and reliable source of Canadian crude oil to meet the demand from refineries and markets in the United States”; (2) it would “reduc[e] U.S. reliance on crude oil supplies from Venezuela, Mexico, the Middle East, and Africa”; (3) it would “provide significant economic and employment benefits to the United States”; and (4) it would have “minimal impacts on the environment.”
The validity of these assertions, however, is questionable. First, Keystone XL will likely raise the price of oil consumed in the U.S., not lower it. Construction of the pipeline will allow Canadian oil producers to reprice their oil at the (higher) global benchmark, resulting in Midwestern consumers having to pay up to 10-20 cents more for a gallon of gas. Second, rather than boosting the domestic oil supply, most of the oil sands that would be refined on the Gulf Coast is destined for export. As of 2011, the New York Times reported that, of the six companies that had already contracted for three-quarters of the oil, “[f]ive are foreign, and the business model of the one American company – Valero – is geared toward export.” Third, because more than 50 percent of the steel pipe used for Keystone XL is being imported by TransCanada, a significant portion of the economic impact will be felt outside the U.S. Moreover, independent estimates on job creation range from 50 permanent jobs to 2,500 temporary jobs.
Fourth, and perhaps most importantly, the environmental impacts will be real and likely severe. For one thing, Canadian oil sands are, on average, more greenhouse gas (GHG) emission-intensive than the crudes they would displace in U.S. refineries. Well-to-wheel, increases ranges from 14%-20% for all transportation fuels sold or distributed in the U.S. Simply stated, developing Canada’s vast reserves of oil sands is a horrendous idea if we are serious about addressing the threat of climate change. For another, even though hundreds of oil spills happen each year in the U.S., oil sands are a “whole new monster” in terms of the difficulties they pose. A 2010 pipeline spill in Michigan and 2011 pipeline spill in Montana heightened concern about pipeline integrity, something of import when it comes to TransCanada. For Phase 1 of Keystone, TransCanada claimed that 11 spills could be expected over a 50 year period. In the first year of operation in Canada and the U.S., over 30 spills occurred.
It was for many of these reasons why environmentalists were outraged on March 1, when the Department of State (DOS) released its Draft Supplemental Environmental Impact Statement (SEIS) for the Keystone XL oil pipeline. Although DOS stressed that the report did not represent its final decision – the public now has 45 days to comment during a review – the report discounted the environmental impacts of the controversial project and seemingly paved the way for its approval.
DOS noted that, under the very best scenario, restricting oil sands development would only amount to a 2 to 4 percent reduction in Canadian oil sands production by 2030. Furthermore, even if the Presidential Permit is denied, TransCanada has alternate means to ship the oil sands to the Gulf. For example, TransCanada could ship the crude via railroad to Stroud, Oklahoma, where it could be loaded into existing and expanded pipelines and pumped approximately 17 miles to Cushing, Oklahoma, where it would enter the existing Keystone pipeline system. Or TransCanada could ship the crude oil from Alberta to a western Canada port, and then via oil tanker to Gulf Coast markets. Therefore, according to DOS, “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.”
That statement is central to DOS’s technical assessment amounting to the tentative approval, barring significant intervention from another agency, of the Keystone XL pipeline. And it also reveals one of the most puzzling things about environmentalists’ approach to the Keystone XL controversy. Given the magnitude of our environmental problems, stopping Keystone XL certainly will not save the planet. One has to wonder, therefore, whether environmentalist’s are naive in choosing this particular battle; that is, whether their almost singular fixation on Keystone XL is misplaced.
By targeting Keystone XL, environmentalists may have misallocated resources. They have fixating themselves on curtailing the supply of oil, when they really should be focusing on changing the incentives creating the demand for oil. “Instead of indulging in distractions,” argued the Washington Post Editorial Board, “Mr. Obama and his friends in the environmental movement should push for policies that could make a significant difference by cutting demand for carbon-intensive fuels.” One way to do this, the Washington Post noted, is through a carbon tax.
This is not to say that opposition to the pipeline is misguided. Indeed, there is good reason to vehemently oppose Keystone XL, many of which are articulated above. Nor does it mean that Keystone XL is a good idea. But the controversy over the project has ignored one salient fact: as the Congressional Research Service acknowledged, “neither issuance of a Presidential Permit nor increased oil sands development would preclude the implementation of energy/climate policies that would support less carbon intensive fuels or energy efficiency improvements.”
If DOS were to reject TransCanada’s application for a Presidential Permit, that action would be a boon to environmental stakeholders. But where does the environmental movement go if DOS approves the project, as it appears it is likely to do? Such a defeat would surely dampen the enthusiasm of individuals alarmed about climate change. Of perhaps greater concern, however, is that it would disempower the politicians willing to do something about it.