Is the Keystone Pipeline Irrelevant?
Sneaky moves by the oil industry have probably made the contentious pipeline superfluous.
Photo via Wikimedia Commons
For years, environmentalists have wailed about the Keystone XL pipeline—so much so that its potential destruction of fragile ecosystems and the global climate felt almost inevitable. But there are signs that the Keystone XL pipeline itself is as good as dead, no matter what Congress or President Obama decides. That's because rapidly shifting economics, as well as some sneaky moves by a rival pipeline company, have probably made the pipeline superfluous.
First, a quick review: In 2008, a Canadian oil-shipping company, TransCanada, proposed an extension to the existing Keystone pipeline system, known as the Keystone XL, which would expand the firm's capacity to transport crude oil from Alberta's tar-sands region to refineries on the US Gulf Coast. Supporters say the pipeline would create jobs and boost the economy, while opponents say the pipeline would damage ecosystems in its path, and lead an expansion of the oil industry at a time when the disastrous effects of climate change are becoming increasingly clear.
The incoming Republican majority in the Senate essentially guarantees that President Obama will be forced to choose one way or another on the Keystone XL pipeline, either by vetoing the proposal or making a deal—something he has been avoiding for years. But the extra crude-carrying capacity Keystone XL could provide may not even matter much anymore. The 830,000 barrels per day of crude from Alberta's tar sands the pipeline would have supplied has now been fully made-up-for by a patchwork of workarounds by a nimble North American oil industry sick of waiting for the government's go-ahead.
In the US and Canada, a lot of energy companies have been bypassing pipeline systems altogether, choosing instead to transport oil to port by train—although that has come with its own set of problems. According to an analysis by Patrick Kenny of National Bank Financial in Calgary, in just the past few years, the oil industry has created a system of oil-by-rail shipping with capacity of 700,000 barrels per day. Oil by rail is the chief way the industry has made up the slack left by an un-built Keystone XL pipeline.
The Canadian pipeline company Enbridge, a rival of TransCanada, seems to have outsmarted TransCanada in the race to expand the amount of tar sands crude crossing the border by pipeline, coming up with a clever way to circumvent the State Department permitting process that has stalled construction of the Keystone XL. Over the last few months, they've built interconnections on their own right-of-way that lets them swap crude between parallel pipelines they control—one carrying tar sands crude from Alberta, and a second carrying conventional crude.
To take advantage of extra capacity in a 17.4-mile section of existing parallel pipelines that cross the US-Canada border between Manitoba and North Dakota, Enbridge is switching crude between the two twice—once on the Canadian side, and again on the American side—in an effort to get additional tar sands oil to American refineries. But like the oil trains, Enbridge's actions are not without controversy.
According to a report from Newsweek, after additional planned upgrades, Enbridge's improvised system could push half a Keystone XL–worth of additional oil from Alberta into the United States by the middle of next year. At the same time, Enbridge is waiting for the US State Department to approve its pending application to boost capacity on the very same pipeline. Correspondence between Enbridge's lawyers and the State Department reveals that US officials agreed the workaround didn't need a permit, even though it's resulted in an increase of crude oil transported across the border. "What Enbridge is doing is building an entirely new pipeline in the same right-of-way and calling it 'maintenance,'" Doug Hayes, an attorney for the Sierra Club, told Newsweek.
In a statement to VICE, Enbridge spokesperson Lorraine Little said the interconnections "take advantage of existing permitted cross-border capacity" and were constructed "to meet customer demands in the short term." Little declined to provide details on what the long-term plans were for the interconnect should the State Department reject the company's permit application, saying "we can't speculate on what may or may not happen." But she did note that Enbridge currently plans a "full replacement" of the pipeline that runs parallel to the Alberta Clipper, with a completion date targeted for "late 2017."
The project will eventually double the line's capacity, leaving it with about as much crude-carrying capability as the Keystone XL would have had. When combined with the 700,000 barrels a day being shipped across the border by rail, it's as if a Keystone XL were already in place. In other words, the very thing that opponents of the Keystone XL have been trying to stop—that is, the massive increase in Canadian crude oil reaching the open market—has already happened.
Critics have suggested that the planned replacement of this pipeline is a move designed to permanently enhance Enbridge's capability to transport tar-sands crude across the border. Now, the Sierra Club and other environmental groups are challenging the Enbridge border switch in court. "Public pressure has forced the industry to resort to smuggling tar sands across the border," said Jamie Henn of 350.org, a leading environmental advocacy organization. "Enbridge's dirty tricks won't likely hold up in the courts, and they certainly won't hold up under public scrutiny. You can't build a pipeline on this continent anymore without running into massive opposition. The State Department needs to apply the same climate test to Alberta Clipper that it is to Keystone XL: does this project significantly increase carbon emissions? In both cases, the answer is yes. They're both fuses to the same tar sands carbon bomb."
But Enbridge's workaround is another sign that a lot has changed in the six years that Keystone XL has been pending. While the energy industry no doubt would have preferred a speedy approval of the pipeline, it's clear that oil companies haven't been sitting on their while debate over the pipeline extension raged. As billionaire oil executive Harold Hamm recently told Politico: "We're not waiting on Keystone. Nobody is."
Plunging oil prices have also helped to make the Keystone XL moot. Since tar-sands oil is more inefficient and expensive to produce than conventional oil, it's likely the first place oil companies will look to shutter capacity when prices crash. The complex extraction process means Alberta oil companies are already producing some of the most expensive oil in the world as it is. Anthony Swift, an attorney for the National Resources Defense Council, told USA Today, "The reality is tar sands crude only makes sense in the world of expensive oil. That's not the world we're likely to be in in the near or immediate future."
The fact is, skyrocketing domestic oil production, coupled with declining demand for oil, has turned the debate to whether or not the US should become an oil exporting country. Last month's OPEC decision, marshaled by Saudi Arabia, essentially kicked off a survival of the fittest race to the bottom for oil producers worldwide, precipitating an instant plunge in the number of new drilling permits. Oil prices are expected to remain low for many months, as Saudi Arabia, one of the lowest-cost oil producers in the world, essentially puts a chokehold on the booming North American oil industry.
For Keystone XL to have relevance, it needs to have something to transport. For the time being, the overwhelming evidence suggests it would be a pipeline to nowhere.
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