Do or Die Time for the Keystone XL?

Do or Die Time for the Keystone XL?

Zak Rose - Dec 09, 13

Geopoliticalmonitor.com 

After years of debate, a final decision on the Keystone XL pipeline may be close at hand.

The proposed expansion of the current Keystone pipeline is designed to increase the capacity of crude oil flowing from Alberta's bituminous sands (“oil sands”) to the United States. The plan was originally tabled in 2008 and quickly devolved into a nexus of competing political agendas regarding job creation, ecological conservation, energy independence, and climate change.

The current Keystone pipeline provides a relatively inexpensive and convenient way for Canada to access the American oil market, and accordingly, it provides the United States with guaranteed access to a strategically significant resource. The XL proposal consists of separate phases, one of which is already underway; this southern portion of the pipeline will extend down to the Gulf of Mexico, a major hub of US refining capacity. The northern portion, however, has remained a political sticking point. Crossing the international border from Alberta, it requires special presidential approval and as such has become an extremely high-profile issue in the US political arena.

The greater shipping capacity represented by the proposed northern segment would mean a wider market for Canadian crude oil and the opportunity to capitalize on these endowments while demand is robust. For the United States, greater access to Canadian oil means greater energy independence, thus reducing the need for Washington to rely on imports from unstable regimes or those with questionable human rights records.

It is also suggested that building the Keystone XL would create a number of jobs along the construction route, and that once built, it would also serve as a valuable infrastructural fixture for transporting US-sourced oil across the country.

TransCanada, the company that owns Keystone, and the Canadian government have been eager to give voice to these potential boons, and both have pushed consistently for the United States to commit. Many in the US government have taken up the call as well, voicing their satisfaction with the present Keystone and their wish to reap the economic advantages that an expansion potentially offers.

But there has also been an equally enthusiastic groundswell of resistance against the project.

Those who oppose the Keystone XL do so primarily for environmental and ecological reasons. Early concerns were raised about the extension's proposed route, which traversed environmentally-sensitive areas and major natural water supplies. Opponents argued that a leak or spill around these critical resources, such as the Ogallala aquifer in Nebraska, could produce severe consequences.

Though TransCanada subsequently agreed to change the proposed route in order to bypass the most sensitive of these areas, the environmental concern surrounding the issue has been large enough to prompt several rounds of impact assessments and supplemental reviews.

Today, the debate hinges less on the possibility of ecological harm in the event of a disaster, and more on the broader issue of clean energy.

Crude oil from the tar sands is considered a ‘dirty’ resource due to the carbon emissions produced during its extraction. Mining tar sands requires much more energy than mining conventional oil deposits. Moreover, some of this additional energy comes from natural gases extracted via the controversial process of hydraulic fracturing (“fracking”). As a result, the total greenhouse gas emissions produced per barrel of crude from the oil sands is comparatively high.

Opponents of the Keystone XL thus argue that the project would exacerbate climate change, and that building a long-term energy plan on crude oil represents a step away from the path to clean energy. This is a concern that has kept the Keystone XL's northern portion from proceeding, despite the apparent support of high-ranking members of the Obama administration over the years. Former Secretary of State Hilary Clinton said in 2010 that she was “inclined” to approve the project, and the State Department's environmental reviews have not contained any recommendations to block the plan.

Still, approval has not been forthcoming. Citing a need to conduct further studies and due diligence that would exceed a decision deadline set by Congress early last year, the first Keystone XL proposal was rejected by President Obama, albeit with a suggestion that TransCanada try again later.

But now we may be nearing a final decision. Obama's previous caution and deference to public criticism of the State Department's environmental surveys are thought to be motivated in large part by his bid for re-election. By heeding the calls for ever more study and investigation, he was able to postpone taking a firm stance until a second term was assured. And even when he rejected the original plan, he managed to cast himself in a neutral light, as the rejection was not the result of any principled view or new findings, but simply a refusal to be forced into making a hasty decision.

Now in his second term, President Obama will be much less timid, and though a myriad of strong views continue to surround the Keystone XL project, a final decision is likely approaching.

This attitude shift was apparent in June 2013, when President Obama distilled the issue down to a single point, declaring that he would not approve the project if it were proven to contribute negatively to climate change. Presumably, then, if the pipeline extension were shown not to have an impact on global warming, it would receive a presidential green light.

Some consider this to be a strong indication that Obama will ultimately reject the project. Mining the oil sands is a carbon-intensive process, and the Keystone XL effectively broadens the market and increases demand for it. By this logic the project would incentivize increased greenhouse gas emissions, and thus fail to meet the president's criteria.

However, some studies have shown that the Keystone XL would not increase carbon emissions. These reports claim that even without the extended pipeline, Canadian oil sands would continue to be mined at the same rate. Rail and traditional means of shipping would simply take the place of the proposed pipeline, and no fewer barrels of crude would be extracted, rendering carbon emissions unchanged.

Perhaps unsurprisingly, this is the view shared by Canadian oil producers. Despite recent delays in the Keystone XL approval process, and even with recent increases in domestic oil production in the United States, Alberta's oil fields continue to see productivity increases. Top Canadian producers and sector analysts remain confident that the potential of the oil sands will be harnessed and consumed one way or another. Given the emphasis placed on oil sands development by the Harper government, it is easy to believe that mining will continue with or without Keystone XL.

Still, the recent production boom in US oil has left onlookers wondering if the future of Keystone XL is threatened. With a plentiful, more refined domestic product, US demand for Canada's crude is far less urgent. If it were still 2011 and the incumbent Obama still had an election to worry about, this would have been precisely the type of development that would engender more caution and heel-dragging.

Yet this is a different President Obama, and he can finally afford to forge ahead even amidst lingering doubts. Though a boom of domestic oil might weaken the pro-Keystone XL camp, it does not eliminate the benefits of inexpensive crude oil, and the State Department seems to have accepted that increased access serves the US economy and national security in the short and long terms.

Now he seems poised to finally make a decision. And by pinning the Keystone XL’s fate on climate change while simultaneously holding up the State Department's conclusion that Alberta's oil sands will be mined regardless, President Obama seems to be hinting at what form the decision will ultimately take.

The southern portion of Keystone XL is already being built and business as usual continues at Canada’s oil sands - for ecological better or worse. Once the president is able to demonstrate that there is no connection between increased carbon emissions and the northern extension, he will have no reason to block the final piece of the Keystone puzzle.

Zak Rose is a contributor to Geopoliticalmonitor.com