As TransCanada pushes out a false line on Middle Eastern oil, NRDC releases important pipeline safety report
Posted February 18, 2011
Earlier this week, TransCanada conceded in its report on earnings that the controversy over the Keystone XL tar sands pipeline proposal has pushed the deadline for approval back to mid-late 2011. The controversy has grown as the public learns more about plans to lay a pipeline into one of the nation’s most important freshwater aquifers and other hazards associated with the extraction and refining of tar sands oil from Alberta, Canada. Yesterday, four major groups, led by NRDC, released a report calling on the U.S. government to investigate serious safety concerns before permitting any more tar sands pipelines.
Apparently in a bid to counteract the controversy, TransCanada has contorted a recent analysis by the Department of Energy (DOE) to argue that the Keystone XL tar sands pipeline would reduce U.S. dependence on foreign oil imports. TransCanada CEO Russ Girling said, on the day the DOE report was released, that “this study supports what we have been saying for some time -- that Keystone XL will improve U.S. energy security and reduce dependence on foreign oil from the Middle East….” The story was widely picked up and the line was repeated and repeated and repeated again. Their allies on Capitol Hill – including Chairman Fred Upton (R-MI) of the House Energy and Commerce Committee – and in the Canadian government have also gotten in on the action and have repeated this line.
So what does the DOE contractor’s report actually say?
The Ensys report says that the proposed Keystone XL tar sands pipeline will not reduce U.S. dependency on Middle Eastern oil:
TransCanada, and its oil allies so contorted the analysis that the report author, DOE contractor, Ensys, felt obliged to issue a rebuttal. Ensys took pains to say that it was really lowering U.S. demand for oil that offsets Middle Eastern oil and maybe some Canadian crude, but not a new tar sands pipeline.
Here is the key part of Ensys’ rebuttal:
The EnSys report makes clear that it is the low demand scenario, (which assumes strong policy actions to reduce U.S. oil use), supported by potentially increasing US imports of Canadian crudes, that "could essentially eliminate Middle East crude imports longer term", not the Keystone XL tar sands pipeline. As the EnSys report clearly states in its executive summary, the Keystone XL tar sands pipeline would not of itself have any significant impact on U.S. oil imports. (my emphasis)
The Ensys report finds that what does offset Middle Eastern oil is reduced oil demand:
The Ensys model is straightforward. They assumed the Canadian industry projections for tar sands production (i.e. an average increase of about 150,000 barrels a year until 2025 – which are usually overly optimistic) and they held the Middle Eastern barrel as the fungible barrel. Then they ran various pipeline scenarios against both an AEO projection for oil demand and an EPA low demand scenario for 2030. Reduction in demand then correlated to reduction of Middle Eastern oil as one would expect. After 2025, Canadian production of tar sands oil also falls off in a low demand scenario if coupled with no expansion of pipelines.
The Ensys report found that there is significant tar sands pipeline overcapacity into the U.S. for the foreseeable future:
The analysis found little difference in supply scenarios due to building the Keystone XL tar sands pipeline – and that is primarily due to the fact that the U.S. has already permitted the building of two tar sands pipelines since 2008. As my colleague Paul Blackburn says, "we've already rolled out two brand new red carpets for Canadian oil." We have more pipeline capacity than Canada is producing tar sands oil. And that overcapacity extends out for at least the next decade until production, based on CAPP’s production estimates, matches up with pipeline capacity (holding Canadian consumption of tar sands constant). The Ensys report posits that pipeline redundancy might be desirable, perhaps alluding to the rupture last summer in Line 6B of Enbridge’s Lakehead pipeline system, which caused a spill of roughly 800,000 gallons of oil into the Kalamazoo River and shut the pipeline down for two months. This, of course, contrasts with TransCanada’s argument that the Keystone XL and other tar sands pipelines are the safest and most reliable pipelines operating in North America.
Ruptured Enbridge Pipeline Section from Kalamazoo Spill, Courtesy of National Transportation Safety Board
The Ensys report confirmed that there would be a price increase, not decrease, if Keystone XL tar sands pipeline is built:
TransCanada and its allies often argue not only that the pipeline will reduce our dependence on Middle Eastern oil but that it will make gas cheaper at the pump. The Ensys report found two things – one, that the price of crude in the Midwest will increase if the pipeline is built, and, two – that refinery investments were likely to move from the Midwest to the Gulf. (It did not find that building the pipeline would decrease the price of tar sands crude in the Gulf.) TransCanada concedes the point that building the pipeline is going to increase the price oil companies will get for tar sands oil (their own report put the price increase significantly higher than the Ensys report). But they refuse to concede that this will increase the price at the pump. In an article published Wednesday in the Lincoln Journal Star, Phil Verleger, an energy analyst, strongly disagrees with TransCanada, stating that the National Wildlife Federation has it right when they say it could increase gas prices in the Midwest by 7 cents a gallon.
In the midst of all this controversy, the Prime Minister of Canada arrived at the White House on February 4th pitching the pipeline. In a question and answer with the press, the President was careful not to enter the fray, instead leaving the question about the pipeline to the Prime Minister. In a week in which TransCanada and others pointed to the turmoil in the Middle East as a reason to push the pipeline forward, the President chose instead to engage on energy issues by travelling to New York State to promote clean energy. Eighty-six U.S. environmental, land, and property rights groups weighed in in a letter to the President, underscoring the importance of moving to a clean energy economy, rather than becoming more dependent on dirty, high carbon tar sands oil.
The State Department is currently conducting an Environmental Impact Statement for the pipeline. After that is finalized, it will consult with other agencies to determine whether the proposed pipeline is in the national interest. The Ensys study fails to make the case that the pipeline is in the national interest or would provide significant security benefits. Instead, it is reduced demand for oil that gets us the real security benefits.
Unfortunately, the very policies necessary to reduce our demand for oil – like the low carbon fuel standard – are under attack by the oil interests. And they are under attack – and this is the kicker – because the oil industry (and the Canadian government itself) is pushing the tar sands as the energy security answer.
TransCanada and the oil industry’s interests in building the pipeline are clear – to sell more oil and make a profit – but those are not necessarily what should rise to the top of an inquiry regarding national interest.
On the other hand, clean energy, clean air, clean water and becoming less reliant on oil – wherever it comes from – are clearly in the national interest and are the surest way to reduce our reliance on Middle Eastern oil.