Environmental column: Keystone the irrelevant
Published: Monday, October 28, 2013
Updated: Monday, October 28, 2013 22:10
There is a vast amount of carbon in Canada’s Athabasca tar sand formation that should remain in the ground and unburned. I use the word “should” because most scientists agree society is approaching the limit when continuing to dump carbon in the atmosphere will have severe consequences to future generations, and these tar sands are particularly carbon-intensive.
For those who are unaware, a bitterly contested pipeline called the Keystone XL proposes to move huge volumes of this oil-like substance to refiners on the Gulf Coast.
Environmentalists have protested fervently against this pipeline in front of the White House and across the nation, even facing arrest. Their main goal is to avert the emission of the associated carbon and prevent the tar sands from being extracted. On one level, these protests seem to have had traction with the Obama administration which has final say on whether the pipeline is constructed. To date, the Obama administration has understandably dragged its feet. A clear decision in either direction will alienate large and influential voting blocs.
Now for the contrarian perspective. Whether you like it or not, no matter how you feel, Keystone XL is quickly becoming irrelevant to the extraction of tar sands. These sands are being mined and exploited with even more fervor than the protests and the product is finding its way to market through rail rather than pipeline.
Currently, rail is filling this gap at a rate of 160,000 barrels per day or about 5,000 gallons every minute. More frightening, this represents more than ten-fold growth in just the last two years. While currently more expensive than projected pipeline costs, the massive and ongoing investment in rail infrastructure will both increase capacity and lower costs to near pipeline levels. Increased rail requires no executive action and is unlikely to be stymied by any current or foreseeable future regulations on either side of the United States-Canada Border.
Keystone XL or not, the sands will be extracted at a pace mostly or wholly unaffected by a lack of pipeline infrastructure. This was the finding of the top independent energy consultancy IHS-CERA in a report released two months ago. In addition to finding no net impact on global carbon emissions from a Keystone XL decision in either direction, the price differential between rail and pipeline was projected to shrink to $6 per barrel.
If by some unforeseen miracle, protest movements can successfully reduce production from Canadian tar sands, this will simply increase investment and production in other dirty and low grade oil deposits across the globe. Remember, easy oil is gone. All that remains are deposits that are of very low quality or in inhospitable environments.
The heavy and similarly dirty oil of Venezuela’s Orinoco Belt represents a close geological alternative that refineries along the U.S. Gulf will seek desperately for the high tar-sands-like refining margins they yield. This Orinoco Belt is no easier to get at and results in very similar CO2 emissions (within five percent according to IHS) relative to the Canadian tar sands.
That brings the one take-home message. Many environmental movements implicitly believe they can outsmart the incredibly nimble and motivated global market. In cases where supply is opposed (like in the case of Keystone XL) these movements often fail to realize that without a commensurate reduction in demand, supply must come elsewhere by definition. Like trying to reduce the volume of a balloon by pressing on one area, the global market reacts simply by expanding elsewhere. The protest movement has essentially squashed the market for pipelines while simultaneously and unwittingly birthing a virtual pipeline of rail. It is not clear to me that one option is more or less environmentally responsible than the other.
Without acknowledging what these likely alternatives will be, protests will forever be exerting much effort for little or no reward. Like many other popular climate movements, the Keystone XL protests serves only to draw attention to an issue that already is long on attention and short on action.
As a last point, I urge you to remember that we cannot simply reduce oil demand by installing wind turbines, solar panels or any other renewable electricity technology. These forms of energy serve very different purposes and are nowhere near interchangeable with today’s infrastructure.