Blog Post

The Keystone XL Pipeline: Issues And Non-Issues

Aug 10, 2011 | Joel Darmstadter

Before the end of 2011, the United States State Department will have made a decision – probably affirmative- certifying the construction of the $7 billion Keystone XL Pipeline to carry oil sands crude from Alberta to the U.S. Gulf Coast for refining. (It’s the trans-border nature of the project that entails State Department certification.)

The U.S. currently imports about two million barrels a day of Canadian oil sands – about 22 percent of total U.S. oil imports. At full capacity, the pipeline’s output, initially around 700,000 barrels a day, is reckoned to reach 900,000 barrels a day.

The prospect of this expanded flow has provoked intense disputation – pro and con. Not for the first time in such controversies, the issues are economic, political, and environmental. Let’s measure the economic in terms of the price of oil, the political with reference to energy security implications, and the environmental to reflect concern over climate change and other ecological impacts. And in each case, let’s distinguish between issues and non-issues. Ok, with a nod toward nuance, let’s make that relatively legitimate and relatively subsidiary issues.

On the economic front, one must remember that – for all its price volatility and occasional supply disruptions – oil remains a fungible commodity in a worldwide market and trade network, factors that ensure a significant degree of stability. The addition of 900,000 barrels per day of Canadian oil sands to this market of some 90 million barrels a day may reduce the price of a gallon of gasoline by a few cents, but don’t look for a bonanza.

At the same time – and here I revert to the political – the pipeline is attractive because it originates in a stable and secure environment like Canada, rather than in a country or region prone to military and government upheaval.

On the climate change topic, opponents frequently point to the much more CO2-intensive extraction process for oil sands compared to conventional crude oil. The former’s emissions have been estimated at about twice of the emissions of the latter. But, on a well-to-wheel basis – i.e., from the oil well to the car’s tailpipe exhaust – oil sands exact a much more modest, even if not inconsequential, 20 percent penalty.

On the environmental front, there is the matter of toxic and other damages inflicted on Alberta soils and waterways from what still remains today an evolving technology. Even so, what could the U.S. do about what is assuredly an issue that it is in Canada’s own interests to manage?

Last but not least, opponents have pointed out that much of the planned pipeline route overlies America’s Ogallala aquifer – a precious national water resource across the Great Plains region of the country. Indeed, following lengthy initial and supplemental Environmental Impact Statements (EIS) by the State Department, the Environmental Protection Agency (EPA), in a critical June 6, 2011 response, cites the risk that a major pipeline rupture and spill could impose on the Ogallala. For that, and a variety of other reasons, EPA calls for still additional State Department analysis of the pipeline’s impacts, including consideration of alternate routes.

Unhappily, but scarcely surprising, the Keystone Pipeline conundrum is just one more benefit-cost dilemma where judgments and calculations deserve to be aired and differences resolved as rationally as possible.