What Senator Landrieu's letter is missing: Keystone XL tar sands pipeline will increase Midwest gas prices and do nothing about foreign oil
Posted March 9, 2011
This week, Senator Landrieu sent a letter around for Senate sign-on that urges the State Department to complete its review and permit the controversial Keystone XL pipeline that would bring Canadian tar sands across America’s heartland to the Gulf. She makes all the arguments that we have heard proponents of the pipeline make. The problem is that those arguments are flawed and here’s why.
TransCanada has recently admitted that the pipeline will actually increase the price of crude in the Midwest with no attendant benefit in reducing gas prices elsewhere. And it will also do nothing to relieve our exposure to Middle Eastern and other sources of oil supply that are politically problematic.
First on prices – Landrieu’s letter insinuates that that Keystone XL will reduce gas prices. It will not. In fact, TransCanada made the case before Canada’s regulatory board that the pipeline would increase Canadian oil company profits by $2 billion to $3.9 billion for the price of crude sold to the U.S. That is because the pipeline will take oil out of the Midwest – where there is a scarcity of refining capacity for the carbon-heavy bitumen (unrefined tar sands) that requires it to be sold at a discount. Instead, the same tar sands will go to the Gulf where there is more capacity, but not so much that it will cause lower prices in that region. The effect of this is to raise the price of oil in the Midwest. According to TransCanada’s submissions, this means that the average barrel of Canadian tar sands crude will increase by $3.00 and for crude sold in the Midwest by $6.55. This translates to a price increase at the pump of up to 15 cents. That’s fine for the oil companies that want to make a profit but it is a really bad idea for those of us that have to buy gas.
Second on oil imports – Landrieu’s letter incorrectly cites a recent DOE report, as have other proponents. What the DOE report actually found was that the Keystone XL pipeline will not have an impact on oil imports. That sounds implausible. How could a 900,000 barrel a day pipeline not offset some foreign oil? The reason is that the U.S. does not have a tar sands or Canadian oil pipeline bottleneck. The U.S. has more pipeline capacity to carry tar sands oil than Canada produces. With the two dedicated tar sands pipelines that have recently been approved and the existing Canada-U.S. pipeline system, the U.S. has more than 2 million barrels of day of tar sands pipeline capacity. In contrast, Canada produces 1.4 million barrels a day, of which the U.S. imports about a million. We can double our tar sands imports, which won’t happen for another decade, and still have capacity without the Keystone XL. What the pipeline will do is move oil from one region of the country to another, as explained in the price discussion above.
Finally on safety – Senator Landrieu’s letter says that the pipeline is “shovel ready.” While TransCanada stands ready to build another tar sands diluted bitumen pipeline, their first diluted bitumen pipeline has already spilled eight times, and this amidst TransCanada’s claims that Keystone XL will be the “best and safest” pipeline ever built. Considering how corrosive unconventional diluted bitumen appears to be, does it really make sense to break ground on a project before our safety regulations have caught up? This is an especially acute concern as the pipeline will cross the fragile Nebraska Sandhills and the Ogallala Aquifer that supplies drinking water for almost 2 million people in America’s heartland. Virtually all the Nebraska politicians have vocally opposed the routing for the pipeline, citing concerns that the State Department has not adequately assessed the impact of a release. Republican Senator Mike Johanns was filmed this week by Nebraska Watchdog and is quoted saying the pipeline should be delayed until those assessments are done, even if it delays the pipeline a year or two.
Less than a year after the devastating BP oil spill off the coast of Louisiana, Senator Landrieu should take heed of her Nebraska colleague’s concerns that proper precaution be taken. She is unfortunately now well aware of the costs of proceeding with a new high risk technology before the proper government oversight and safety measures are developed and implemented.
As for Canada’s “strict environmental regulations,” the photos can speak for themselves.
Last year, in response to a request from another Senator, Senator John Kerry, EPA prepared an extensive report outlining the steps the U.S. could take to reduce its oil use. Reducing our demand seems a far safer and better solution than racing to build another tar sands pipeline.
Left: Two of 1600 ducks that perished in a Syncrude tailings pond in 2008.
Right: Suncor Millenium tar sands mine. David Dodge, The Pembina Institute.