Wednesday, February 05, 2014

Interpreting the State Department's Latest Assessment of the Keystone XL Pipeline

Earlier today, I participated in a webchat hosted by The Energy Collective on the subject of the emissions and market impact of the Keystone XL Pipeline (KXL). It was prompted by last week's release of the State Department's "Final Supplemental Environmental Impact Statement" (SEIS) on the project. I encourage you to view the Youtube video of the event, but I thought I should also share some of what I learned in the course of preparing for the webchat, along with a few thoughts there wasn't time to discuss online.

The full SEIS runs around 2,000 pages. I focused on the 38-page Executive Summary and referred to the relevant sections of the longer document when I needed more detail. In particular, I wanted to understand how the authors of the report had assessed the project's impact on greenhouse gas emissions (GHGs), including how they went about trying to gauge how the market would behave with and without the controversial northern leg of the pipeline, linking the Alberta oil sands developments to the main US oil storage and trading hub in Cushing, OK. (The southern segment of the pipeline, from Cushing to the Gulf Coast, is already in operation, because it didn't require a permit to cross an international border.)

President Obama's stated criterion--I still believe he will make the final call--is ensuring the project does not "significantly exacerbate the climate problem." In terms of emissions, the SEIS analysis shows a range of incremental lifecycle GHG impact of 1.3-27.4 million tons of CO2 equivalent per year. For a project this size, that falls below what I'd consider a reasonable threshold for "significantly". It's equivalent to 0.02-0.4% of total US emissions. On the low end that's on par with US emissions from making glass--not generally considered an important emitter.

Yet even if you don't accept State's conclusion that at expected oil prices over the next few decades the oil that would be carried by KXL would be produced with or without the pipeline, the total direct emissions of 147-168 million tons/yr would still only constitute 0.3% of global emissions of around 50 billion tons. As Jesse Jenkins of the Energy Collective pointed out in the webchat, the emissions of any project would look small compared to global emissions. That's precisely the point, when opponents have characterized them as "game over" for the world's climate.

The key to the conclusions in the SEIS is that these barrels will find a market somewhere, and in the process they will back out some other crude oil. As a result, they would have a minimal impact on the global oil price, and so would be unlikely to increase demand, which is what determines how much oil is refined globally. It's also the case that the alternative crude oils the incremental oil sands production would displace aren't much lower in lifecycle emissions, e.g., heavy Venezuelan or Middle East crudes.

Meanwhile, the report indicates that alternative dispositions would involve either longer or more energy-intensive transportation, including rail and/or tanker, entailing around a million tons per year in higher emissions, along with more spillage than expected from KXL. On that basis, it's hard to read this report as anything other than an endorsement of the view that the pipeline would have a minimal net impact, relative to the likely outcomes that would follow if it is not built.

One of the main points we didn't have much time to discuss in the webchat concerned the role of the SEIS in the decision that the administration must eventually make about the project's permit. I thought the most insightful recent comment on this came from President Obama's first Secretary of Energy, Dr. Steven Chu. He sees Keystone as a mainly a political choice. I agree. However, I wonder if the political considerations have started to shift.

Until recently, it seemed that the balance of political costs and benefits favored continuing to delay the decision as long as possible, by whatever means came to hand. That was certainly the case in 2012, with the White House at stake. An approval then might have pleased independent voters, but it would also have deterred an important segment of the President's political base. This year, with control of the US Senate--and thus the administration's agenda in its final two years--potentially up for grabs, the costs might be rising. At least four Democratic Senators in states that voted for Governor Romney in 2012 (Alaska, Arkansas, Louisiana and North Carolina) have made recent statements in support of the permit for KXL. An October surprise on Keystone might come too late to help them.

Nothing in the Supplemental Environmental Impact Report altered my previous view that President Obama should approve the permit for KXL. Yet because it was written after the Lac-Megantic rail disaster, I thought its figures on the potential for more rail accidents and fatalities if the pipeline isn't built added a compelling argument. Oil by rail is a new reality of the North American energy economy; KXL won't change that fact, one way or the other. However, the addition of up to 1,000 more rail cars of crude oil per day, passing through many more communities than the pipeline would, is a sobering reality to weigh against opposition that I heard another participant in today's webchat suggest was at least partly symbolic.

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