Keystone Pipeline XL: Costs rise, questions proliferate

The Keystone Pipeline XL is not dead yet, but it's on life support. Last year, the State Department released an environmental impact statement prepared by Energy Resource Management (ERM) that was criticized by environmentalists. Mother Jones Magazine published information that the State Department had removed from the report that revealed possible conflicts of interest within ERM. But the project appears to have grave flaws that go beyond the discovered discrepancies in ERM's Environmental Report, which are only procedural mistakes (whether intentional or not) and hence do not affect the basic value of the project.

The Environmental Protection Agency (EPA) sent a letter, dated April 22, 2013, to State Department. EPA agreed with the report that oil produced from tar sands is dirtier than comparable oil from the US. State thanked ERM for some of the findings published in their report, including the attempt to quantify the amount of green house gases that would be produced by the Keystone Pipeline XL project. But Neither State nor ERM explained what these figures mean.

In the letter, State quotes the report as estimating that the oil from tar sands well-to-tank contributes 81% more to global warming than oil from other sources. This means that oil from tar sands has 81% more capability of producing green-house gases when it arrives in the refinery tanks, prior to being refined into gasoline. But the letter goes on to say that the oil from well-to-wheels has only 17% more green-house gases than conventional oil. This means that when your car burns the gas, it produces only 64% less green-house gases than it had before it was refined. Neither ERM nor State explains what happened to 64% of the green-house gases between the tank and the wheels. This is a critical question because President Obama made it clear that he would not approve the project if it contributed “significantly” to global warming. While 81% is significant, 17% may not be.

The difference between the two figures is due to one of the peculiarities of oil from tar sands. The chemical process (“cracking”) of turning tar oil into usable oil results in a byproduct, called petroleum coke. This coke contains most of the 64% of green-house gases lost before the refining in complete. Oil companies argue, and State tacitly agrees, that this coke will never be used for energy production.

This argument is not believable. Oil companies are in the business of selling hydrocarbons for money. That is their business model. It is unlikely that oil companies will let such a large amount of salable merchandise go to waste. In fact the Koch brothers' company, Koch Carbon, collects this coke and sells it overseas as a lower quality, dirtier form of coal. This fact became public knowledge recently when a huge cloud of coke dust, illegally stored by Koch Carbon in Detroit, blew over the Detroit River into Windsor, Canada.

Job loss from Keystone XL

President Obama recently noted that as few as 50 permanent jobs may be produced by the pipeline. The Washington Post Fact Checker awarded him two pinocchios for lowballing the jobs figure. The Post criticized Obama was using a jobs figure from an organization that opposed the pipeline instead of his own State Department.

The State Department is ill-equipped to prepare a report about oil pipelines. They found it necessary to hire outside consultants because they have no one on staff who is qualified to do the job. State could not find a consultant with no ties to the oil industry because any outside consultant qualified to evaluate an oil pipeline must necessarily have ties to the oil industry.

The accusation that Obama is “lowballing” the number of jobs to be created by Keystone XL is false. As usual, Obama is using a moderate estimate. The Cornell report the Post refers to in its criticism of Obama makes some persuasive arguments that Keystone will actually raise unemployment, not lower it:

1. TransCanada, the oil company responsible for Keystone XL, predicted that completion of the pipeline will end the glut of oil in the Midwest and raise the price of gasoline 10-20 cents a gallon for several years.¹ This will have a ripple effect throughout the entire economy and result in the loss of thousands of jobs. The profits will go to the oil companies, which will ship the oil to China.
2. Keystone XL will likely leak, causing oil spills, although it is hard to predict how often and how severe these leaks will be. Since the publication of the Cornell report, TransCanada has rerouted the pipeline away from sensitive watersheds in eastern Nebraska, so the Cornell report is out of date. A major leak, such as the one in Kalamazoo, costs millions to clean up. This will cut into the company's profit and decrease the number of permanent jobs it creates.
3. Keystone XL will contribute to global warming, which is responsible for ecocatastrophes costing billions of dollars. One study places the global warming potential of the Keystone tar sands oil deposits at 0.42 degrees centigrade. We can't predict how many jobs this will cost. We will only know that after global warming has occurred, but we can predict that the cost will be huge.
4. Operation of Keystone XL will impede progress in creating a green-jobs economy. Green companies that are just starting up will have trouble finding sources of capital if the financial interests believe they can make more money investing in new energy extraction projects.

President Obama has proposed an “all of the above” strategy that includes both increased fossil fuel production and subsidies for green industries. Politicians who support the oil companies have adopted this phrase, saying they support an all-of-the-above strategy when in reality they only support more fossil fuel production. There is no all-of-the-above strategy. Oil interests and green interests are competing for the same market, a market in which the well-entrenched and extremely profitable oil industry has an immense advantage.

Keystone XL is looking more dubious all the time.

1Cornell university Global Labor Institute, Pipe dreams: Jobs Gained, Jobs Lost by the Construction of Keystone XL, 27, http://www.ilr.cornell.edu/globallaborinstitute/research/upload/GLI_KeystoneXL_012312_FIN.pdf. Note that this prediction comes from TransCanada itself, not a source opposed to the pipeline, as claimed in the Post.