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Goldman Sachs report finds that Keystone XL tar sands pipeline is linchpin for tar sands production

Anthony Swift

Posted June 10, 2013

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In a report released last week, Goldman Sachs painted a clear picture outlining why Keystone XL is a linchpin for tar sands production and the significant climate emissions associated with it. NRDC and Oil Change International summarize Goldman Sachs’ key findings in the following backgrounder. In short, Goldman Sachs finds that without Keystone XL, lower tar sands prices and higher transport costs will result in the cancelation or deferment of tar sands expansion projects. Contrary to the State Department’s findings, Goldman Sachs concludes that rail is not a feasible alternative for the tar sands pipeline due to higher costs as well as technical and logistical barriers. In its environmental review, State must recognize what the tar sands industry, the financial sector and the environmental community agree upon – that without Keystone XL, tar sands expansion and the climate impacts associated with it will be significantly reduced. On the basis, the President should reject the Keystone XL tar sands pipeline as a project that locks the U.S. into decades of dirtier fuel and increased climate emissions.

The Goldman Sachs report is the latest in a number of major developments demonstrating the intellectual bankruptcy of the argument that tar sands expansion, and the climate impacts associated with it, are inevitable. Last week, British Columbia formally rejected the Northern Gateway tar sands pipeline proposal, putting yet another nail in the coffin in the argument that without Keystone XL tar sands will be sent across Canada’s West Coast. Meanwhile Canada’s RBC Dominion Securities concluded that a rejection of Keystone XL would reduce investment in tar sands expansion by $9 billion over the next seven years. Finally, Goldman Sachs’ analysis supports a Reuters investigation showing that while light crude from North Dakota and Canada is being moved by rail, very little tar sands is shipped by rail. Goldman Sachs observes the same logistical obstacles NRDC has repeatedly cited which make it unlikely that rail will provide an economically feasible alternative for tar sands in the absence of Keystone XL.

The time has come for all parties to agree with the facts on this point – the proposed Keystone XL tar sands pipeline is critical for the tar sands industry’s expansion plans and the significant climate impacts associated with it.

The question before the Obama Administration is whether a project that will increase the production of the most carbon intensive transportation fuel on the planet is consistent with its inaugural commitment to promote policies that address climate change:

We will respond to the threat of climate change, knowing that the failure to do so would betray our children and future generations.

President Barack Obama, January 21st, 2013

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Michael BerndtsonJun 10 2013 01:44 PM

So what is Goldman Sachs financial position on tar sands generally and the XL pipeline specifically? I'm wondering if the rejection of the western pipeline was appreciated by those with interest the Great Plains route.

I just did a silly number crunch earlier this morning on the amount of petroleum coke produced based on the 2020 project capacity of 3,000,000 barrels of bitumen flowing out of Alberta daily. It came out to be roughly a half a foot covering the entire area of Central Park in NYC. That would by about 150 feet of petroleum Coke piling up annually in the Park. This might give those in the financial business a pretty clear perspective as they pensively stare out the window and marvel at the view.

SWJun 10 2013 03:18 PM

Okay then, keep buying the same quality bitumen from dictator regimes like Venezuela. This pipeline needs to happen for both sides of the border. The fact it has been mired in red tape for five years is ridiculous.

David GreenwoodJun 10 2013 08:38 PM

Its amazing how fast Americans have forgot 9/11 and how Canada was there for them. We opened our airports and our borders, we stood by them in Afganistan and have been there to buy their goods for decades. Keystone XL has wrapped itself around peoples heads as the key to stopping polution. Tar sands will be the ruin of all of us, even though technology is changing the fastest with oil sands extraction in comparison with all methods of oil. Lets look at obamas new exploitation of the arctic I for one woul be against bringing this through Canada is keystone is denied. Its not against the tar sands its against canada. Now lets talk pollution, hows about nuclear pollution from warships, hows about treaties on shipping pollution
I used to love the us now its hard not to hate americans

Bob LovelessJun 10 2013 08:47 PM

Obama MUST reject the Keystone XL pipeline for the sake of the planet. We are at a critical point in history. If expansion of the Tar Sands occurs you can kiss this planet goodbye as we know it. Your grandchildren and great grandchildren are going to pay a very heavy price - they are going to be living in a hell on earth.
The Bitumen that would flow through the XL pipeline is not for the United States. It would go to Gulf state ports and be exported. The USA will never see one drop of oil!
In the mean time the undemocratic petropolitical governments and their Big Oil buddies are trampling all over citizen's rights and treating them like criminals. The USA and Canada are no longer true democracies.
Canada is being run by a defacto dictator who has is destroying Canada's environment and democracy and trampling all over the rights of our First Nations people - who are starting to fight back with legal action.
The Alberta Tar Sands are not only threatening the world's climate, but they are threatening the future water supply of Alberta, consuming enormous amounts of natural gas, threatening the heath of those living down stream for the leaky toxic waste ponds, endangering the caribou herds, etc.
In the end it is all about greed. Greedy governments and greedy corporations.

Larry RickettsJun 10 2013 10:12 PM

Canada stands to make a lot of money if the KXL pipeline is approved by Obama. That's nice. Can you drink that money, eat it ot inhale it? What good is the money if it ruins the air, the water and your health?
The USA has thousands of Super Fund sites that can't all possibly be cleaned up at this point. They are all a result of someone making lots of money. Canada, don't be like the USA. Keep your land, water and air clean for your kids and grand kids .

GSJun 10 2013 11:12 PM

It is astonishing to me that perhaps otherwise intelligent and educated people believe that a modern thriving economy can run without oil, gas or nuclear energy. Additionally, why in the world do American environmental ideologues spend far more time bashing Canada's oil sands when the coal industry of the southeastern US is far more environmentally damaging? One hears nary a word. The answer is not to act like a Luddite and try and stop progress. The answer is to continue to make the development of our natural resources as safe and clean as possible through sensible regulation and ongoing technological development.

Michael BerndtsonJun 11 2013 07:37 AM

Dear Canada,

Thank you very much for your youth hockey programs and seemingly endless supply of talent.

Chicago Blackhawks

Tim MarshallJun 11 2013 09:44 AM

The report is interesting but is spun well by the author. the truth is with oil price in the ninety dollar range many companies are rethinking their want of an oil sands plant. The cost of construction, availability of capital and timeline to get a plant into production all play a role. But a multi-billion dollar cost is the main roadblock. While the symbolic rejection of the Northern Gateway is newsworthy it ignores the fact a federal decision is the final one. Northern Gateway is not the only pipeline proposed nor will be the end of oil to Canada's west coast. Rail will become more prevalent for shipping as delay in pipeline construction warrants. While not the preferred method the ability to move the products, bitumen and synthetic crude, which is still about 50% of the output, means rail is going concern. As with many things oil sands the cost maybe higher now, but with increasing volumes the costs will come down. As to Venezuelan oil, it increasingly is going to China, with no US contracts signed, how much longer it comes to the US is a good question.
As our "dictator" he is neither as scary nor as shortsighted as many would have you believe. His pragmatic view on energy, trade and economy is almost boring. The First Nations question is a good one but will more than likely end up in the supreme court before any answers are apparent.

Will YJun 11 2013 02:33 PM

I don't think expanding the tar sands is going to cause "hell on earth". With all the environmental regulations in place, mines are fully reclaimed after use and polution is kept within safe limits. In fact the new oil extraction operations are mostly done using underground methods the have minimal damage to the subsurface. Oil extraction is actually extremely energy efficient. Per barrel of oil, only 20% of GHG emissions come from production and extraction, 80% comes from fuel consumption in vehicles. It is actually the producers who are cleaner than the users.

Also, for the "US not seeing a drop of oil", thats ridiculous. 99% of oil produced in Alberta that is not sent to other regions within Canada goes to the US. The Alberta oil sands projects provides jobs in the US because many major refineries are not in Canada.

Before gaining the group hysteria of the uneducated, read about what's really going on.

-Some University Student

Claudette RossJun 11 2013 04:22 PM

Will, Perhaps this summer you can make a trip to Ft. McMurray Alberta; then post on this topic.

Will YJun 11 2013 04:28 PM

Claudette, I'm obviously educated on the matter, so for your information, I am doing my co-op term rught now in Ft. McMurray...

The new technologies like SAGD are actually pretty clean, and companies are doing a lot of work on energy efficiency and energy saving.

As for strip mining, it is an ugly sight during production, but all companies are legally-bound to put money aside for reclamation. If you look at sites post reclamation they look better than before. In fact, by removing the oil sands, and backfilling with clean soils, it actually improves the lands. Although it takes a long time to notice, that's why people don't realize.

JerseyCurmudgeonJun 11 2013 05:45 PM

What most of my fellow Americans don't understand is how Alberta's tar sands relate to the larger, and long-standing desire on the part of a lot of Albertans to become the economic power at the head of an independent Western Canada. Western Canada's Germany, if you will.

The long-standing animosity in Alberta toward Eastern Canada and especially Toronto is well understood by most Canadians. Without the pipeline, the tar sands become less and less economically viable. And without the tar sands, Alberta's separatist visions will stay with their sludge - stuck in the ground.

Tim MarshallJun 11 2013 07:50 PM

Sorry, Jersey the politics for Western Separation has not existed in years. Economic prosperity has overridden any desire for the West to separate. In fact the current pipeline debacle highlights the wide gulf western provinces have in goals, ambitions, and prospects for economic development. Without the pipeline the prospects for other lines become more likely. At some point pipe will be built to a coast. The economic argument grows everyday.

Willias SmithJun 12 2013 06:05 AM

some Canadians pretend that Venezuela is a dictatorship ,they forgot that Harper have closed the parliament twice to avoid a non confidence vote,Harper is an enviromental criminal

Tim MarshallJun 13 2013 09:08 PM

Some also pretend history does't exist. Mr. Trudeau, the senior one, prorogued parliament 8 times in his tenure. Others still make Harper out to be something he's not. But to each their own, even in politics.

Gary TothJun 16 2013 01:02 PM

So many opinions and so many arguments for both sides. Will Y argues that the corporations are incredibly responsible and will leave the land better than they found it. Others argue that rejecting the XL pipeline is a slap in Canada's face from the US. Others argue that it will destroy the environment, which so far is the only legit argument I can see here. Will Y, what planet were you born on where all corporations behave like responsible planetary citizens and do everything in their power to protect the environment? And to the Canadians who think Americans are agents of the nonexistent "To hell with Canada", movement.----- Where do you get this idea? There might be a few and irrelevant American bred idiot Canada haters running around, but not enough to be concerned about. It should be obvious to anyone paying attention to the larger picture that we need to be developing sources of clean energy. Not investing that money into enlarging a totally outdated and dangerous energy source. All arguments against that are fueled by the very few deranged sociopaths who are making ungodly amounts of money making sure our world standard for energy consumption remains on fossil fuels. Anyone who doesn't include this in their overall argument makes that argument misleading and irrelevant..

Rob DekkerJun 18 2013 03:36 AM

The Canadian National Energy Board wrote in their 2010 report that building the Keystone XL should boost revenues for the Alberta tar sands operators (Exxon, SunCor, Shell etc) by $2 billion to $3.9 billion annually, because of the expected increase in the price of West Canadian Select (the marker for Alberta tar sand bitumen).

What they did NOT say is that this increase in revenue would be mostly paid by Mid West gasoline consumers, in the form of a 10-20 cts/gallon hike in gasoline prices.

Meanwhile, do not expect the Canadian government to advertise this fact in their (tax payer funded) $ 16 million pro-Keystone XL PR campaign in the US media.

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