Energy

Is the Keystone XL Pipeline Now Redundant?


The Valero refinery in Port Arthur, Tex., is a terminus for oil that would travel through the proposed Keystone XL Pipeline

Photograph by Michael S. Williamson/The Washington Post via Getty Images

The Valero refinery in Port Arthur, Tex., is a terminus for oil that would travel through the proposed Keystone XL Pipeline

In a classic Friday afternoon data dump, the State Department just issued a long-awaited, and very long (2,000 pages) draft report assessing the impact of the controversial Keystone XL Pipeline.

At first glance, it’s pretty much right down the middle: The 875-mile pipeline doesn’t pose any new significant risks to the environment; nor will it make or break the future of the North American oil industry. With or without the Keystone, the Canadian oil that it is meant to move will get developed anyway. Killing it will not in turn kill the development of the extreme, hard-to-extract oil sands in western Canada.

The draft makes a thorough analysis of the project’s potential environmental impact, running through a litany of potential hazards: soil erosion, water contamination, threats to endangered species. The report doesn’t discount these risks, but it does lay out a handful of precautions that can be taken to avoid many of them. As for carbon emissions, building the Keystone will produce about 240,000 metric tons of CO2, and operating it would result in about 3 million metric tons of CO2 each year—or about the same amount as 626,000 passenger vehicles produce each year.

Overall, the report does not raise any huge environmental red flags, much to the chagrin, perhaps, of noted environmentalist and anti-Keystone crusader Bill McKibben, the subject of a lengthy profile in this week’s Bloomberg Businessweek magazine. Nor though, does the State Department find huge economic benefits in the project. It estimates that building the Keystone would create about 42,000 jobs, translating to about $2 billion in earnings. Only 35 of those jobs would be permanent, mostly for people who would inspect, maintain, and repair.

Here’s the big takeaway, though: If the Keystone were never to happen, Canadian oil-sands production would fall by only about 0.4 percent to 0.6 percent of the projected total by 2030. In the 15 months since President Obama delayed approval of the Keystone, the oil industry in North America has gotten especially creative at moving oil by rail, truck, and barge. That’s not going to stop. What many don’t understand is that those alternative modes of transportation are far more carbon-intensive—and expensive—than moving oil through a pipeline. Plus the rate of spillage tends to be higher for rail and barge transport than for pipeline transit.

Philips_190
Philips is an associate editor for Bloomberg Businessweek in Washington. Follow him on Twitter @matthewaphilips.

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