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U.S. Should Welcome Crude From Canada’s Dirty Oil Sands: View

September 26, 2011

Sept. 27 (Bloomberg) -- On first look, it might seem wrong to allow TransCanada Corp. to build the 1,700-mile Keystone XL pipeline to carry oil from Alberta, Canada, to the U.S. Gulf Coast.

After all, if such a pipeline were to ever leak, as pipelines do, there is some risk it could pollute the Ogallala Aquifer under Nebraska’s Sandhills, which supplies 80 percent of that state’s drinking water.

What’s more, a new conduit would seem to only encourage the further development of the Athabascan oil sands in Alberta. This is a dirty business, to be sure: Vast tracts of spruce and fir are cleared to make way for open-pit mines, from which deposits of sticky black sand are shoveled out and then rinsed to yield viscous tar. For deeper deposits, steam is shot hundreds of feet into the earth to melt the tar enough that it can be pumped to the surface. Then there are the emissions associated with mining Canadian oil sands: It produces two and a half times as much carbon dioxide and other heat-trapping gases as oil drilling in, say, Saudi Arabia or west Texas.

So perhaps the U.S. State Department, which has the authority to approve the Keystone XL pipeline, should simply say no. That’s what many citizens and environmental groups will argue at a series of public hearings in Great Plains states this week.

Oil and Jobs

A closer look, however, reveals that blocking the $7 billion pipeline would do more harm than good. Consider, first of all, that the Canadian oil sands contain more than 173 billion barrels of recoverable crude, second only to Saudi Arabia’s 264 billion barrels. Extracting it means almost half a million new jobs for Canada and, for both Canada and the U.S., a sizable supply of oil that is safe from interruption by unfriendly governments.

Pipeline opponents have implied that if the U.S. doesn’t buy Canada’s oil, then companies will be discouraged from developing the oil sands. But it’s unrealistic to assume that the oil couldn’t be sold elsewhere. Yes, today’s business plan calls for sending most of it south -- some 700,000 barrels a day through Keystone XL. If the U.S. blocks that conduit, though, we can reasonably expect that another pipeline would be built to Canada’s west coast, where the oil could be sent by tanker to China and elsewhere.

Although it’s true that oil sands crude accounts for relatively large amounts of emissions during extraction, in the well-to-wheels life cycle of the oil, its emissions are only about 17 percent greater than those of other kinds of oil. That’s because most of oil’s emissions come not from extraction but from use.

And it’s Canada, not the U.S., that must account for rising emissions from the oil sands (as well as monitor the quality of its nearby water). By 2020, the government agency Environment Canada has reported, emissions from oil sands development will increase by one-third and account for almost 12 percent of the country’s total emissions. This will boost Canada’s contribution to global greenhouse gas emissions from 2 percent to 2.1 percent -- an increase that, under United Nations agreements, the country will need to offset with technological improvements in oil sands extraction, improved energy efficiency or emissions trading, for example.

Given that the U.S. contributes more than 18 percent of the world’s emissions, and unlike its northern neighbor hasn’t signed the 1997 Kyoto Protocol, it has enough to do to deal with its greenhouse gas problem.

Safety Matters

In deciding whether to allow Keystone XL to run through six American states, the only relevant question is whether it would be safe. The State Department, with help from the Environmental Protection Agency, has studied the risks. It has determined that, as long as TransCanada complies with all laws and regulations, builds Keystone XL properly and operates it safely (although some minor spills would be expected), the pipeline would have “no significant impacts” on wetlands, water supplies or wildlife along its route.

Keep in mind, the U.S. is crisscrossed by thousands of miles of pipelines carrying crude oil, liquid petroleum and natural gas. One of these is the Keystone 1 pipeline, which already carries crude from the oil sands. Yes, these pipes sometimes leak -- spectacularly last year when almost 850,000 gallons of oil spilled from a ruptured pipe in Michigan. Far more often, when leaks occur, they are small and self-contained.

After the public hearings, the U.S. should give TransCanada the green light -- and then make sure the company manages pipeline design and construction with care.

--Editors: Mary Duenwald, David Shipley

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To contact the Bloomberg View editorial board: view@bloomberg.net.


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