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Jun03

Keystone XL: The Cost of Controversy

BY KATE KUNKEL

oil pipeline jobsA report just out from RBC Dominion Securities, which is a part of the group which also owns the Royal Bank of Canada, estimates that cancelling the Keystone XL pipeline would cost in the vicinity of $10 billion. While the losses would be felt on both sides of the border, more would be suffered by construction, engineering and project management companies in the U.S. because most of the pipeline is being constructed south of the 49th parallel.

While the Canadian and Alberta governments have been staunchly supporting the project since its inception, the Obama administration has not yet made its decision on whether or not to allow the pipeline in its current iteration to cross the international border. This is holding up the more than 700,000 barrels of oilsands crude which would be pumped daily from Hardisty, Alberta to the Texas coast.

Environmental groups have protested it every inch of the way, citing the possible catastrophic consequences of a spill. Recent spills from other (mostly much older) pipelines have not helped the case for building the conduit, but I have to ask – what are the catastrophic consequences of not allowing the pipeline?

Surely there are economic considerations, not the least of which is the possibility of good paying jobs during construction and ongoing refining jobs once the oil is flowing.

Environmental Costs

But what about the environmental consequences of NOT building the pipeline? While there is much talk of the fact that oil sands production creates more greenhouse gasses, (GHG) than other crude, I think it’s prudent to put the numbers out for analysis. In 2010, oil sands GHG emissions were 48 Mt (1 Mt = 1 million tonnes) in 2010. That equals less than 0.15 % of global emissions.

According to the government of Alberta, the oil sands industry has reduced GHG emissions per barrel of oil produced by an average of 26% since 1990, with some facilities achieving reductions as high as 50%. However, production is increasing so overall emissions are growing.

That is one of the arguments against the Keystone XL pipeline. But to truly compare oil sands oil with other sources, you have to follow the oil through the complete stage of their development, something called “well-to-wheels”. These lifecycle emissions are what should be discussed when considering this question.

oil tankerAs for imported oil, according to the Fraser Institute, “while oil produced in Saudi Arabia has fewer GHG emissions than that produced from heavy oil sands in Canada’s north, one must take into account that the emissions expelled from transporting Saudi oil to market by tankers adds to the overall GHG emissions.”

So there really isn’t much difference wells-to-wheels in emissions. Scratch that off the protesters’ list.

Renewables

There is much talk of ethanol and other plant based fuels as well. Do they burn cleaner? Maybe. But what is the carbon footprint of the machinery used to plant, harvest, and transport the feedstock? Is that considered by the environmentalists when rejecting Keystone because of Alberta’s GHG emissions?

For the sake of the environment, of course we should be looking at renewable energy sources like solar and maybe wind for powering electric vehicles. But judging by the terrible consequences to birds and bats of wind farms, they don’t seem to be a particularly environmentally sound option, either.

So with respect to environmental costs: yes, there are many, but is power from Alberta oil more environmentally unsound than that from any other source?

Intangible Costs

oil obama saudiAnd what about the intangible costs? What about human rights? According to the International Energy Agency, global demand for oil will rise from 89.2 million bpd to 99 million bpd in 2035. Where is this going to come from? Would you rather get your oil from Canada which is one of only two oil-producing countries classified as “free” according to Freedom House, (the other one is Norway) or from Saudi Arabia, Venezuela or Nigeria where human rights are routinely ignored and gender equality is an obscure notion?

The costs of building the pipeline continue to rise with every obstruction. Yes, it will be expensive. But what is the real cost of not building Keystone XL?

Kate Kunkel is Senior Editor of VALVE Magazine. Reach her at This email address is being protected from spambots. You need JavaScript enabled to view it..

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