Six myths about Keystone

Scott Tong Nov 3, 2015

1)  TransCanada asked the Obama administration to “pause its review” of the proposed Keystone XL pipeline. I assume this mean it’s now dead. 

Environmental activist Bill McKibben assumes so. For now, let’s call it sleep mode. Again, this is a requested pause, and to some degree the company has telegraphed a go-slow approach. In another part of the process — securing a route across Nebraska — the company just backed off a more combative strategy of seeking eminent domain. Instead, it’s seeking state regulatory approval, a process expected to last up to a year. Now there’s a second level of backing off in Washington, letting the company roll the dice with the next American president. That is, if the State Department says, “OK, we’ll approve the pause.”

UPDATE: Obama administration officials said the president will not suspend his review of the pipeline, as TransCanada requested. White House spokesman Josh Earnest told reporters the president would decide on the pipeline’s fate before he leaves office. 

2) But wait, isn’t Obama the all-of-the-above energy president?

He was, during the midterms. Now, many Keystone XL advocates say his rhetoric against Canadian oil sands and Keystone XL has grown much more critical. Two oil lobbyists in D.C. told me they expect the administration to reject the request. If that’s the case, then TransCanada is trying to pre-empt the rejection, saving political face. Perhaps more important, that lets the company keep its application intact without having to start the regulatory process all over. If you’re counting, this is year seven of this story.

The proposed Keystone XL pipeline. (Courtesy TransCanada)

3) This stops Canadian dirty oil from coming here, right?

Except that 2 million barrels is piped to the lower 48 every day. In fact, other non-Keystone pipelines have been built, allowing more Canadian oil sands to get to American refineries on the Gulf Coast.

As far as the economics, many current oil sands projects can still make money at a $45 per barrel selling price.

The big question mark is future oil sands development. Which has several strikes against it:

  • Not profitable. Major oil sands projects have required prices that range from $68 to $96 per barrel. Good luck there.
  • No price leverage. 99 percent of Canadian oil sands comes to the U.S., which means American refineries have the leverage to negotiate bargain-basement prices and require producers to pick up shipping costs.
  • Flat demand from the U.S.
  • Financial questions. Debt ratings for some producers are down. More than a dozen big projects have mothballed. And investors are already bolting for cheaper alternatives, like U.S. shale “fracked” oil. It’s no fun being one of the highest-cost producers on the planet.

4) Isn’t it fair to say American political opposition has halted the pipeline?

Pipes stacked at the Keystone XL pipeline's site in Cushing, Oklahoma.

Pipes stacked at the Keystone XL pipeline’s site in Cushing, Oklahoma. 

How about Canadian politics. We’ve seen regime change in both Ottawa at the national level, and Alberta at the provincial level. Politics have tilted, at least to some degree, to the left. It’s unclear if Canada’s prime minister-designate Justin Trudeau has Keystone XL on his priority list.

5) Is this good for the climate, at least?

Slow down. Oil sands are, according to one scientific study, about 20 percent dirtier than conventional oil. I’ll leave it to you to decide whether that’s a lot. The bigger issue is the world is running out of conventional oil. Increasingly, all that’s left is the unconventional, dirtier stuff. Everywhere. So we’ve arrived at a fossil-fuel ugly contest.

6) Without Keystone XL, doesn’t that mean more oil sands will move by rail, which is more dangerous?

Rail traffic actually appears to be going down.

Why? Because non-Keystone pipeline capacity has increased, so bottlenecks have eased. And again, in a world awash in oil, we the world’s drivers are not demanding Canadian oil sands the way we once were. 

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