Late last week, President Obama formally rejected TransCanada’s request to build its “Keystone XL” pipeline, which would have pumped oil derived from Canada’s tar sands to refineries on Texas’s gulf coast.
The decision came after years of speculation as to whether the administration would approve the pipeline for its stated energy security and economic benefits or reject it on environmental grounds like so many in the activist community have demanded.
The pipeline became a point of heated contention because it would have transported oil derived from tar sands, a gooey mixture of hydrocarbon-rich bitumen, clay, sand, and water that is abundant in Western Canada. Because tar sands must be heated before their bitumen can be collected and processed, extracting oil from tar sands requires more energy (and associated greenhouse gas emissions) than conventional oil drilling.
Environmentalists rose in opposition to the pipeline because they say it would have contributed to climate change by unlocking Canada’s reserves of tar sands and threatened wetlands along its intended path. Meanwhile, supporters downplayed its environmental risks and touted the fact it would help create American jobs and increase oil imports from one of our strongest trading partners.
I won’t get into the fray of the political arguments that emerged around Keystone XL, because seemingly all of the talking points for and against the pipeline have been polluted by politics and partisanship since it was first proposed in 2008. Rather, I’d like to review what the administration’s own technical analyses said about the pipeline, and shed light on why it took the President so long to decide its fate and eventually reject it.
Beyond the Politics: The Impacts of Keystone XL
During the (several) years the Obama administration was weighing its decision to accept or reject Keystone XL, a number of thorough and unbiased reports analyzing its impact were released, including a State Department Environmental Impact Statement in 2011, an independent engineering assessment by Batelle in 2013, a Supplemental Environmental Impact Statement in 2014, and a number of other relevant reports and academic papers.
These reports all essentially agree on a few basic facts: 1) Keystone XL would not be a game changer for the U.S. economy; 2) tar sands oil produces more greenhouse gas emissions on a lifecycle basis than conventional oil; and 3) the Keystone XL pipeline is likely the best option for transporting oil from Canada's tar sands versus alternative options like rail.
The State Department’s second environmental impact assessment published in 2014 assessed the economic activity that would be sparked by the Keystone XL pipeline during construction and operation.
It found that construction of the pipeline would contribute about $3.4 billion to the U.S. Gross Domestic Product from wages paid directly to workers and other indirect income associated with the pipeline project. While this might sound like a lot, it is actually just 0.02 percent of total U.S. annual economic activity as measured in 2012.
Furthermore, while the pipeline would create about 42,000 direct and indirect jobs during its two-year construction period, only 50 permanent jobs would remain after start of operations. Keystone would benefit the economy—but its impact would be too small for most Americans to notice.
Tar Sands Versus Conventional Oil
A 2014 report by the respected and nonpartisan Congressional Research Service reviewed a number of government and independent studies that have investigated the total greenhouse gas emissions of gasoline derived from tar sands oil.
It found that gasoline derived from Canadian tar sands produces about 17 percent more greenhouse gas emissions than typical U.S. gasoline, and between 2 and 19 percent more emissions than gasoline derived from imported crude on a “well-to-wheel” basis, which includes all of the emissions produced by extracting oil, refining it into gasoline, and burning it in a vehicle’s engine.
Considering the broad agreement between studies illustrated above, it is clear that tar sands oil itself produces more emissions than oil from alternative sources. However, this fact is only one of a series of factors that affect the actual emissions impact of the Keystone XL itself.
The ultimate emissions impact of Keystone XL depends on how the emissions associated with pumping oil in a pipeline compare to alternative transportation options such as rail. Furthermore, it depends on the effect the pipeline has on the actual level of oil production from Canadian tar sands.
Keystone XL Versus Alternative Transportation Modes
In its latest environmental impact statement, the U.S. State Department directly compared the Keystone XL pipeline to five alternative options that would be used to transport Canadian tar sands oil: two alternative pipeline routes, and three scenarios that would likely occur if Keystone XL were not built. The findings indicate that Keystone XL would produce less transport greenhouse gas emissions than alternative options.
Furthermore, the analysis found that Keystone XL would result in the lowest volume of spilled oil on a cumulative basis versus alternatives, as shown in the table below.
The pipeline itself would likely produce less greenhouse gas emissions and result in less spilled oil than alternative transportation options. The question is, how often are these alternatives actually used, and to what extent would the pipeline enable tar sands oil to be extracted in the first place?
The Impact of Keystone XL on Tar Sands Oil Production and Emissions
In the Market Analysis section of its latest environmental impact statement, the U.S. State Department illustrated the extent to which crude oil transport by rail from Canada’s tar sands has already increased in the absence of adequate pipeline infrastructure. Between January 2011 and November 2013, rail exports from Canada’s tar sands increased from less than 5,000 barrels per day to over 180,000 barrels per day.
The rise in rail shipments of crude oil and the presence of other alternative transportation options prompted the State Department to conclude that:
The dominant drivers of oil sands development are more global than any single infrastructural project. Oil sands production and investment could slow or accelerate depending on oil price trends, regulations, and technological developments, but the potential effects of those factors on the industry’s rate of expansion should not be conflated with the more limited effects of individual pipelines.
In line with this conclusion, the State Department assigned a rather wide range to the ultimate greenhouse gas emissions that it thinks would be produced as a result of Keystone XL: from a minimum of about 1 million metric tons of greenhouse gas emissions annually all the way to a maximum estimate of over 27 million metric tons annually. These values correspond to an increase in total annual U.S. greenhouse gas emissions of 0.015 to 0.4 percent versus 2013 levels.
In my opinion, the impact that one pipeline will have on production of oil from Canadian tar sands will almost certainly be lesser in magnitude than other larger market forces, such as the global price for oil, production from other onshore and offshore sources of oil, political instability, and a number of other factors that could influence the global oil market. Moreover, its impact on greenhouse gas emissions is likely less than other factors we can directly control, like limits on greenhouse gas emissions from power plants or methane leaks from the oil and gas supply chain.
Getting to No: What Drove Obama to Delay and Then Reject Keystone XL
Given the fact that Keystone XL likely would not increase greenhouse gas emissions in a serious way, and be safer than alternative transportation methods, you might be asking how Keystone XL morphed into the primary focus of many environmental activists in the United States and around the world. The answer to that question has more to do with politics and emotion than the actual facts at hand.
Regardless, it’s clear that the way Keystone XL emerged as a divisive political symbol for action on climate change had a direct impact on President Obama’s decision to finally say “no.” Had there not been a major grassroots campaign against the pipeline, I believe the Obama administration would have approved the pipeline based on the findings of its own State Department.
But of course, there was a significant (and at times vicious) campaign against Keystone XL. The political symbolism of Keystone XL drove President Obama to approach the question of the pipeline from not only a pragmatist, analytical perspective that considers its direct impacts, but also a political perspective that considers the indirect impact his decision would have on the global environmental movement and its efficacy around the world.
President Obama was trapped between these two competing factors for years as he delayed his decision on the pipeline. In the end, he waited until the U.S. oil market had evolved to a point where Keystone XL became more relevant politically than practically, and he rejected the pipeline.
The President will no doubt hold up his decision to reject the pipeline at the upcoming United Nations Climate Change Conference in Paris as a sign the United States is willing to act on climate. I hope that the political capital the administration gains from rejecting Keystone XL will make up for the fact that it was likely rejected based more on politics than the facts.