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Crunch Time for Obama on Keystone Pipeline Decision

President Obama might be wishing he had ruled on the Keystone XL pipeline back in the fall of 2011 rather than postponing his decision until now. It has since ballooned into a major test of his presidency, with protests and arrests at the White House gates and a nation sharply divided between those heralding energy independence delivered by a deus ex Canada versus others sounding the tocsins to warn us of climate cataclysm from dirty oil.

Obama’s pointedly delaying his decision until after the election intimated that he favored the pipeline and was avoiding angering his environmentalist base with that decision. Those concerned about climate change were naively jubilant, reading the postponement as an indication that he would let the matter die. We thought the opposite, predicting on this page at the time that he intended to approve the pipeline, and there’s little reason to change that bet.

Now, a year and a half later, the State Department, involved because the pipeline crosses the national border, has given its approval. In March it issued its study that said the pipeline would not significantly damage the environment, much as it concluded in its original review even though the pipeline’s intended route then ran right over the largest water aquifer in the United States. Now that the pipeline’s path has been detoured around the aquifer, which provides 83% of Nebraska’s agricultural water and 78% of the that state’s public water supply, Governor Heineman has signed off. And in April the public comment period ended. So the matter sits on the President’s desk.

Obama has many times alluded to the necessity to confront climate change, from right after his election in 2008 to his second inaugural address in January in which he said, “We will respond to the threat of climate change, knowing that failure to do so would betray our children and future generations”. But fund-raising in Silicon Valley, he gave a hint of the difficulty he is having with this decision, saying to the gathering that environmental issues “are tough” and “You may be concerned about the temperature of the planet” and view the unconcern by others in a difficult economy as “shortsighted, [but] that’s what happens when you’re struggling to get by”.

refresher

The pipeline is a $7 billion project of TransCanada Corporation of Calgary that would transport some 700,000 barrels of oil daily across 1,711 miles from the tar sands of Alberta Province, through Montana and four Great Plains states, and down through Texas to refineries in Houston and Port Arthur on the the Gulf Coast. The Wall Street Journal claims that halting the project would cost the U.S. 20,000 jobs, echoing TransCanada’s claim, but the State Department says 6,000, a more persuasive number because the jobs are temporary and that is the number State estimates to be working at any one time.

The tar sands hold 175 billion barrels of recoverable oil. Only Saudi Arabia has more. The pipeline offers the U.S. the opportunity to replace an estimated 18% of the 8 million barrels we import daily — much of it from unstable and often hostile countries — with a reliable supply from the trusted country to our north.

borne back ceaselessly

It is the nature of the oil that ignited the controversy and has climate change activists anguished over backsliding. Both its extraction and its burning release higher emissions than other forms (see companion story in adjacent column). For those campaigning against the pipeline, the expediencies of the moment are hardly grounds for allowing a pipeline that will cause a quantum jump in carbon release, reversing hard won gains against climate change and “perpetuating our addiction to dirty fossil fuels, [by] moving to ever dirtier ones” in the words of NASA’s climate expert, James Hansen. He told Rolling Stone, "If we were to fully exploit this new oil source, and continue to burn our conventional oil, gas and coal supplies...twenty to 50% of the planet's species would be driven to extinction. Civilization would be at risk". In February he joined environmentalist Bill McKibben in a protest in front of the White House that led to the arrest of about 50 environmentalists, among them also Michael Brune, head of the Sierra Club. John Abraham, a mechanical engineer at the University of Saint Thomas in Minnesota, told Scientific American that, if we burn it all, Alberta’s tar sand oil will on its own raise global temperatures nearly by 0.4 of a degree centigrade.

inevitability

But America runs on oil and will continue to do so for a long time to come. Only 13% of our power comes from renewables — wind, solar and hydro — and most of that, still, from hydro. Environmentalists watching grudging progress against the rapidly changing climate (with the threshold of 400 parts per million of carbon dioxide in the atmosphere just recorded) fear that new and vast supplies of oil coming on the market will cause a drop in the price of oil in coming years that will make it impossible for renewable energy to compete and gain a foothold.

Pipeline advocates say that to think blocking the pipeline will spur green energy is a delusion. Their view is that if Obama nixes the pipeline, we will continue to import those millions of daily barrels from Mexico and Venezuela, and they also produce heavy oil that requires so much refining that it produces greenhouse gas emissions comparable to the tar sands. So what is there to gain by rebuffing Canada, our most important trading partner, especially remembering that Venezuela has twice threatened to cut off our supply. Their position is that a large supply of crude oil available by pipeline from a friendly neighbor is undeniably valuable for the energy security of the United States.

Added to that, President Obama must consider that halting the pipeline could cause a deep and lasting rift between Canada and the U.S., resulting in possible retaliation, such as Ottawa importing its military aircraft from elsewhere.

Worldwide demand for oil will reach 110 million barrels a day by 2035, the International Energy Agency projects, about 20% more than in 2009. So the argument is that Canada will exploit its reserves anyway. Having invested (U.S.) $100 billion in the tar sands over last 10 years, its industry is looking for security of demand, wherever that may be found. The industry already accounts for 75,000 jobs nationwide and Canada’s energy plan is to raise the current output of 3.2 million barrels a day to 6.2 million by 2030 with most of the increase coming from the sands.

undeterred

The State Department expects the oil to head south whether or not the pipeline is permitted. Alternate methods — truck, rail or barge — could deliver the oil to Texas with no border physically breached and therefore no permissions needed. State’s report calculated that 15 trains daily, each with 100 tank cars, could do the job. That paints a vivid picture of what our addiction to oil looks like. Each conveyance method has its own environmental impact, the State Department report points out — noise, traffic, air pollution and probability of spills — suggesting that if tar sands oil is inevitable, a pipeline has its advantages.

westward ho!

And then there is Canada’s Plan B. If the U.S. were to scrub the pipeline, Canada threatens to export its oil to China. Delegations sent to Beijing were no bluff, says Canada’s oil ministry. That plan would call for the far more arduous option of running a pipeline west to the coast of British Columbia. That entails crossing the Sierras, which would cost an estimated $5.5 billion, less than the pipeline, but and would take ten years. Once completed, some 220 tankers a year, reports The New York Times, would then ferry the oil out the twisting waterways from the inland town of Kitmat to the sea. That has British Columbians alarmed at the hazard of spills while seeing no benefits in return, and the plan is so far blocked by leaders of First Nation, aboriginal peoples in British Columbia who say they would block the pipeline from crossing their territories out of worry about spills and the threat to salmon runs.

Canada itself is not without disagreement. Two studies, one from the Royal Society of Canada and another commissioned by the federal government, claimed regulators had “not kept pace with rapid growth”, that Alberta’s environmental assessments had “serious deficiencies” well shy of “international best practice”. But conservative Prime Minister Stephen Harper, who withdrew Canada from the Kyoto Protocol, is a prime mover behind the tar sands expansion. That his power base is in Alberta raises concerns. An op-ed in the Times by a Canadian professor frets that Canada is becoming a petro state in which “capital and talent flow to the tar sands, while investments in manufacturing productivity and high technology elsewhere languish”.

And Canada’s oil companies “know there’s no hiding it’s a dirty business and the country’s fastest-growing source of greenhouse-gas emissions”, says a Bloomberg-Business Week article. They worry that its higher pollution content will cause their oil to be barred from foreign markets.

pipeline headlines

Dirty oil may have triggered the controversy, but the imbroglio has brought public attention to oil pipelines in general. Americans heretofore seem to have been unaware of their ubiquity. For example, an earlier TransCanada oil pipeline into the U.S. — narrower than Keystone XL but not small — elicited hardly a whisper of protest when constructed.

The U.S. has 2.5 million miles of pipeline. The map at left
shows a hairball in the Chicago region that doesn’t begin to compare with the tangle at the base of Texas where so much of the nation’s oil is refined.

Hardly noticed at the time, the media now often cites a 2010 spill into the Kalamazoo River in Marshall, Michigan. It was overshadowed by the BP oil spill in the Gulf. The spill of 819,000 gallons of diluted bitumen was caused by another Canadian pipeline, pumping the same Alberta extract that would flow through Keystone XL. It shut down the river for miles. The Canadian company, Enbridge, that owned the pipeline had to buy up 150 homes in an area that residents said was no longer livable.

In March a Chevron pipeline in Utah leaked more than 25,000 gallons, the third line break there in three years.

And this April in Mayflower, Arkansas, a 2-inch wide crack 22-feet long opened in an Exxon Mobil pipeline carrying close to four million gallons of heavy crude a day from oil sands in eastern Canada. Half a million gallons of oil mixed with water flowed even into the streets of the town, causing evacuation of 22 homes.

Between 2008 and 2012, U.S. pipelines spilled more than 3.1 million gallons of hazardous liquids on average each year, according to the nation’s pipeline regulator, part of the Transportation Department. Many of the pipelines are old — 65-years-old in the case of the pipeline running through Mayflower — and there is the question of whether the federal government has the capacity to monitor the safety of the vast American pipeline labyrinth.

returning to Obama’s desk

Speculation is that the President will still not face this rather defining action until late summer or early fall. Either way he will be lavished with praise by one faction and despised by the other. He is probably wishing there were some way to leave the decision to the next president.

The guess here is that Obama has ordered up a plan to balance the scales so that he can approve the pipeline, but needs more time, because that peace offering to the climate and environment crowd will have to be very concrete. Taking advantage of the Supreme Court’s ruling that carbon dioxide is a pollutant that can be regulated under the Clean Air Act, the Environmental Protection Agency has already been developing just such a regulatory package for the power industry. A recent Times article has the White House and State Department insisting that the “pipeline ruling will be made strictly on whether [it] is in the economic, environmental and security interests of the United States” and “is not a fundamental piece of the nation’s climate policy nor is it a political bargaining chip to trade for other measures”.

Nevertheless, on some bright midweek day in the fall, we may watch the President announce in the Rose Garden his ground-breaking step to force coal-burning plants finally to do what they have been avoiding for decades — and a day or two following we may then hear about an announcement made late on that same week’s Friday, too late for the news cycle, that, oh, by the way, the pipeline has been approved.

1 Comment for “Crunch Time for Obama on Keystone Pipeline Decision”

  1. Both the “climate change” knock on “tar sands” and the “toxic tort” knock on “dilbit” — whether in a heated pipe or railroad tanker — miss the political dynamic, which is to say the strategic money angle.

    This story is really about the Motiva refinery in Beaumont, Texas. Absent cross-border extension of the existing pipeline, this is the story of a bad investment Aramco and Shell made a long time ago without regard to several more recent developments: Those are massive US production of oil from shale (“fracking” + horizontal drilling) and the emergence of a “democratic socialist” bloc consisting of Cuba, Venezuela, and Ecuador.

    Motiva is a very expensive and huge refinery that was optimized for import of heavy oil from Venezuela back when that seemed necessary and economic even with the huge cost and delay of building a new refinery on the Texas Gulf Coast.

    That project is an economic fiasco today. Importing dilbit from Canada is, in effect a bailout of Shell and Aramco — two very unhappy campers right now. And, that bailout, which involves exporting refined fuels to Europe and Asia, also has the effect of keeping the domestic fuel price from falling pretty dramatically given the surplus of domestic production and fall in domestic demand.

    So, cui bono, as we say in Latin community?

    Canada gets a market for the dubious, mostly Chinese, investment in mining tar sand and extracting heavy oil from it — a serial folly. Royal Dutch Shell and Royal Saudi everything get a way to salvage their fiasco.

    But, that is just avoiding loss — protecting private wealth from private or actually royal folly with public indemnity, as it were. The huge — net, net, net — winners are the Koch Brothers, Valero, and others, including BP. These — the “usual suspects” down here — own WWII-vintage refineries which, however, produce gasoline cheaply from relatively cheap West Texas Intermediate and other high-quality crude now in something of a glut.

    The old refiners margins are huge as long as the price of a marginal barrel of fuel for export FOB Beaumont is high-enough and the volume large enough to keep the specialized and expensive Motiva plant out of default.

    Whatever the Cruz “strategy” in Congress is, the best retaliation for his antics by the Executive would be to crush import of dilbit. This would throw Motiva into default and force recapitalization of the new plant at a lower value consistent with competing with, replacing, or upgrading the old refineries.

    This would also be a good time to explore a wholesome relationship with Venezuela (known here on the Bolivar peninsula as Citgo). Otherwise, the Koch Bros and Cruz are going to have enough money to promote more of the sort of economic warfare with Cuba et alia that (a) killed Kennedy but still (b) keeps communism (the perfect regime for a siege economy) alive.

    Yes, behind the headlines — “Defund Obamacare!” — we have yet another way to perpetuate the political economy (and “deep state”) of fifty years ago.

    Or, acting strategically, President Obama could drive a stake through the heart of old man Koch’s evil empire, discomfit some crowned heads overseas but now provide a diplomatic opening for gracefully moving “democratic socialist” countries into the “social democratic” camp. Such countries in Latin America, notably Brazil, are good customers for high-value oilfield technology exports, not for elaborately cross-subsidized fuels we used to export to the Royal Navy and Air Force — you know our century-old, Anglo-American “industrial policy”.

    We really are in a new post-post-war period. We still need to think strategically. But, we should focus more on explicit threats of secession and treasonous finance than about imperial navies and subsidizing high-cost sources of oil for now mostly undersea or littoral navies.

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