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Written by William Klein   
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Tuesday, 08 November 2011

Keystone XL Pipeline

Are we addicted to oil? I think so. In 2009 the United States consumed 18.8 million barrels of oil a day.1 Another piece of evidence is our Nation’s pursuit of extracting oil from tar sands in Canada, a proposal to expand an existing pipeline to increase production by about 700,000 barrels a day—this is known as the Keystone XL Pipeline Project.2

To better understand the Keystone pipeline, let’s review our oil infrastructure…
Crude oil, the stuff coming out of the ground, is transported via pipes, trains, or boats to oil refineries.3 The refineries then “refine” the crude into various qualities of oil that we know as different grades of gasoline found at our local gas stations, as well as heating oil, diesel, jet fuel, and kerosene. So where does crude oil come from? Traditionally, crude has come from pockets of oil buried beneath the earth’s crust, where people (and later companies) could simply drill down, and the oil would come bursting up through the surface4 —how Bakersfield High School came to be known as the “drillers”! However, traditional oil production in the U.S. started to decline in the 1970s and this gave rise to the peak oil theory and communities. While there is some debate, recent efforts by major oil companies to begin extracting “unconventional” oil, such as deepwater drilling, oil sands extraction, and liquefied coal operations, clearly demonstrate that we are running out of the fuel that has powered the 20th century.

Today, oil companies are desperately looking to find additional sources of oil, and think they may have found gold in the Canadian Tar Sands. While they have known about these deposits for quite some time, only recently has it become profitable to extract oil from these deposits thanks to new technological developments and a decline in global traditional oil production. The extraction procedures are extensive and require a great deal of resources, which you can read about in greater depth in this Greeniacs article. So once this oil is extracted it still needs to be transported, and this is where we get to even more controversy…

Pipelines are by far the most efficient method of transporting oil, and extraction companies are limited in their oil extraction by the amount of available capacity of terminals to receive their oil. Oil terminals are in short supply in the U.S., with a few key terminals controlling regional oil distributions. In fact, the U.S. is divided into 5 regional PADDs (Petroleum Administration for Defense Districts), a relic from the World War II days when these districts allocated oil.5 Pipelines get complicated when they start carrying a variety of product gradients— for instance, diesel can’t mix with gasoline—so pipelines must be carefully calibrated and monitored. Additionally, pipelines must allow anyone to send their product through the line as long as the product meets the standards established by government regulations. If you are interested in an overview of the pipeline system, as told by the pipeline operators, take a gander at this pipeline overview paper.

Back to the Keystone Pipeline:
In essence, the Keystone XL Pipeline is in no way the first pipeline to be built. In fact, it is simply the fourth phase of an already built pipeline, the Keystone Pipeline, which carries Canadian crude oil to terminals throughout the Midwest.6 This is where the rubber hits the road for Canadian oil sands. Remember how earlier I mentioned that production is limited by the capacity of the terminals to receive the oil? And that anyone can use the pipeline as long as they meet minimum federal standards? All in all, this means that the Canadian oil sand extraction is incredibly hindered by the current infrastructure preventing increased extraction. There quite literally is no place for it to go… not to mention it has yet to be connected with world markets.

Now we see the big reason why the Keystone XL pipeline is such a big deal. It essentially doubles the capacity of oil sands production, while simultaneously linking the oil sands to the global oil markets by transporting the crude oil to the Gulf Coast refineries. While there is an increased flow of oil, there is no guarantee that this oil will ever makes its way to the United States. Once refined in the Gulf Coast, it is up to those companies (the Valeros and Shells of the world) to sell it, and they may not sell it to the U.S. if they can get a better price elsewhere. Valero, whom some might remember as a proponent of Proposition 23 in California last year (it sought to suspend California’s landmark climate regulations, AB 32, until unemployment dropped to the lowest level in decades), acknowledges that once the oil reaches the Gulf, it is fair game on the open market.7 So while Canada rips out their boreal forests and we face the risk of pipeline leaks—recent oil and gas pipeline leaks8 occurred in Marshall, MI, San Bruno, CA, Allentown, PA, and Laurel, MT—there is absolutely no guarantee that we will see a return on our investment in terms of oil production.

If the Keystone XL Pipeline is not built, then the oil sands must wait until another transportation method is developed. Many fear that Asia will come to the rescue and construct their own pipeline, which many translate into a concern that Asia will be taking “our” oil. This is an active threat, and could force President Obama’s Administration to make a decision sooner rather than later.9 Reflecting upon the beginning of the article, it is quite clear that we are addicted to oil. With articles coming out daily10 documenting the decline in production of conventional oil (which aligns with peak oil predictions), and the vast sums of money being spent pursuing these unconventional sources—Exxon is spending $37 billion this year alone searching for unconventional sources, and has spent $38 billion in the last 16 months acquiring shale-rock formations and developing procedures to extract oil from these sources11 —it is almost sad to see these monumental companies clinging on to their past ways, especially when alternative forms of energy are becoming so readily available. Change is always difficult, but it is also better to act when we have a choice, rather than when we have no choice left.

Because the Keystone XL pipeline crosses international borders, it must receive a permit from the State Department—thanks to a policy passed in 2004 by George W. Bush.12 As an additional aside, Bush also signed legislation that bans the US government from purchasing fuel with more emissions than conventional oil, essentially prohibiting the purchase of tar sands oil.13 Nonetheless, the permitting process is in its final legs now, having recently completed its Environmental Impact Report.14

Recent reports have revealed a complex web of interactions, in which former Transcanada lobbyists now serve on President Obama’s campaign and former Democratic operatives now lobby for the pipeline. Naturally these friendships resulted in the State Department rooting for the Pipeline’s success, and the State Department hiring a contractor who works for Transcanada to complete the Environmental Impact Review.15 This muddled mess doesn’t even begin to address the pipeline expansion project’s myriad of environmental effects—leakage in the Ogallala Aquifer in Nebraska16, the birds that die after landing in the oil sands’ tailing ponds17, the deforestation of the boreal forest18, not to mention the continued greenhouse gas (GHG) emissions from these oil sources. There has been a great amount of controversy surrounding just how much dirtier oil sand extraction is from conventional crude oil extraction, with figures ranging from 5%-37% higher GHG emissions.19

Sure, this pipeline won’t itself make a dent in the nation’s oil mixture today (it will supply only a fraction of our total consumption), but it could represent an important milestone in our ability to beat our addiction to oil. The question we should really be asking ourselves is whether we keep pursuing increasingly expensive and complex fuel sources, or do we transition to newer technologies that can be implemented now without destroying natural resources for future generations?

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1 http://www.eia.gov/countries/index.cfm?view=consumption
2 http://www.nytimes.com/2011/08/27/business/energy-environment/
   us-state-department-to-allow-canadian-pipeline.html?pagewanted=all

3 http://www.pipeline101.com/reports/Notes.pdf
4 http://www.ceoe.udel.edu/oilspill/crudeoil.html
5 http://www.touchoilandgas.com/padding-petroleum-markets-a7-1.html
6 http://www.coqa-inc.org/20101028_Ha_Keystone.pdf
7 http://blog.heritage.org/2011/09/01/valero-hits-back-at-misleading-report-on-keystone-pipeline/
8 http://energylegislation.blogspot.com/
9 http://www.reuters.com/article/2011/10/31/us-keystone-oliver-
    idUSTRE79U5BV20111031 ?feedType=RSS&feedName=environmentNews&utm _
    source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+reuters%2
    Fenvironment+%28News+%2F+US+%2F+Environment%29

10 http://www.businessweek.com/news/2011-10-25/oil-rises-to-
    12-week-high-as-declining-supplies-spur-bull-market.html

11 http://www.businessweek.com/news/2011-10-27/exxon-s-tillerson
    -needs-record-oil-output-to-reach-growth-target.html

12 http://www.bloomberg.com/news/2011-08-26/transcanada-s-keystone-
    pipeline-s-environment-risk-limited-u-s-finds.html

13 http://www.bsmith.org/?p=1351
14 http://www.huffingtonpost.com/2011/09/30/keystone-pipeline-meetings-nebraska_n_988203.html
15 http://latimesblogs.latimes.com/greenspace/2011/10/former-keystone-
    pipeline-lobbyist-hired-by-obama-campaign.html

16 http://www.huffingtonpost.com/2011/09/30/keystone-pipeline-meetings-nebraska_n_988203.html
17 www.youtube.com/watch?v=8aGVcoyIFnM
18 http://www.eosnap.com/image-of-the-day/destruction-of-boreal-forest-near-athabasca-oil-sands-
    canada-september-8th-2010/

19 http://www.greeniacs.com/GreeniacsArticles/Energy/Oil-Sands.html

    


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Last Updated ( Tuesday, 08 November 2011 )

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