WSJ’s Bussey: An Inevitable Keystone Pipeline

“Keystone XL, or a similar pipeline and set of worries, isn’t just inevitable. It’s something we should accept to prevent worse alternatives from coming to pass.”

John Bussey comments in the Wall Street Journal:

If the Prohibition Era taught us anything about business, it’s that demand has a way of finding supply. That was true of whiskey. It will likely also be true of Canada’s oil sands and the controversial Keystone XL pipeline.

Keystone XL, or a similar pipeline and set of worries, isn’t just inevitable. It’s something we should accept to prevent worse alternatives from coming to pass.

The 1,700-mile pipeline, proposed by TransCanada Corp. and blocked for the moment by the White House, is back in the news. Lawmakers in the U.S. Congress are seeking to override the administration and start construction of the pipeline, which would carry oil from the oil sands of Alberta to refineries in Houston. President Barack Obama and Canadian Prime Minister Stephen Harper discussed the matter on Wednesday.

Big corporate names have stakes in the Canadian oil sands: ConocoPhillips, Exxon, Shell, Chevron, Marathon, Statoil, Total, Sinopec and BP among many others.

Environmentalists say the pipeline is a bad idea: “It locks the U.S. into a high carbon form of energy,” says Nathan Lemphers at the Pembina Institute in Calgary. “Until there’s a national energy policy, these sorts of pipelines will become the surrogate battleground for the environmental movement.”

Susan Casey-Lefkowitz of the National Resources Defense Council says the pipeline would promote a dirty and energy-intensive form of oil extraction, pipe that oil through environmentally sensitive areas and aquifers in the U.S., and ultimately keep the U.S. addicted to the wrong sort of fuel, speeding climate change.

Theirs is a compelling argument for abstinence: Until Washington stops dithering and charts a clear road to cleaner energy, remove the temptation to burn more oil by preventing access to supply.

Last month, the White House delayed a yes-or-no decision on the pipeline—conveniently until after the 2012 presidential election.

Markets, however, won’t delay. Global demand for energy, driven by growth in developing countries, is expected to rocket 33% over the next 25 years, says the International Energy Agency. By 2035, China is likely to consume almost 70% more energy than the U.S.

Fossil fuels such as oil will still account for 75% of energy consumed in 2035, says the IEA. And these numbers assume positive steps toward conservation and the adoption of renewable and other fuels.

Where will the new energy come from? Globally, reliance will grow on a relatively small number of producers, mainly in the Middle East and North Africa, and the oil will be shipped along vulnerable supply routes, says the IEA. By 2035, the agency says, OPEC’s share of global production will rise to above 50%.

If you wonder why China is currently running sea trials for its first aircraft carrier, these vulnerable supply routes and China’s own energy insecurity provide an answer.

Frustrated with the U.S., Canada is talking with China about piping its oil west instead of south. Enbridge Inc. has proposed a pipeline to a port at Kitimat, British Columbia, where the oil would be loaded on ships bound for Asia. Native communities in the region are resisting the project.

Somehow, though, demand will eventually pull the oil to market. “That oil is going to get produced, it’s going to get refined somewhere, and it’s going to get consumed,” says Larry Nichols, executive chairman of Devon Energy. Devon produces about 30,000 barrels a day in the oil sands now and plans to more than quintuple production by 2020.

Until cleaner energy sources are cheap, effective and available enough to supplant oil—until pipelines like Keystone are no longer needed—the options for the U.S. are difficult but clear:

On supply:

The U.S. can continue to rely on dicey regimes in countries such as Saudi Arabia and Venezuela. Or it can buy more oil from its ally Canada and companies it knows, with the added short-term benefit of generating jobs to build new pipelines to U.S. refineries.

On the environment:

The U.S. can let oil-sands oil go to Asia with all the carbon emissions that entails: pollution from shipping, possible substandard refining, and use of the product in Chinese industries with weak emissions rules. Scientists have already found that mercury and other effluents from China’s power plants and factories drift across the Pacific and contaminate North American waterways. Expect more.

Or the U.S. can pipe the oil to Houston where regulators scrutinize refiners over emissions, where ever-greater economies of scale help companies create best practices in refining, and where the U.S. can earn money exporting refined products to the rest of the world.

The choices seem inevitable. Why wait?

Reality is always a good thing to embrace.

Read Bussey’s column (subscription required).

7 thoughts on “WSJ’s Bussey: An Inevitable Keystone Pipeline”

  1. Josh, thanks for giving your association. I can be frank instead of attempting to tutor.

    The climate “threat” is ridiculous. The carbon dioxide increase is how much, 10% over Mexican oil? Plus, with the location, it is a prime candidate for CO2 injection to assist oil production. This is assuming you consider CO2 increase to be a negative, when I am of the opinion that increased CO2 and the mildly warmer and wetter world it would provide are a boon to humanity.

    As for safety issues, you’re deluding yourself. The primary cause of pipeline explosions is theft. Pipelines have fewer and smaller accidents than trucks or trains, and it is by far the cheapest, safest, and most efficient method of transport.

    As for environmental protection, that’s Canada’s business. To my knowledge, all proposed new drill sites do not have tailings ponds. I suggest you spend your time arguing for stricter permitting requirements rather than protesting the most environmentally friendly part of the entire project.

    Your obstructionism is doing nothing but harming the planet and risking lives,

  2. J.D. When Ike ran through, the average plant was down for a week (mostly due to the railroads. My plant was up and running as soon as the floodwaters drained from the parking lot and we got empty railcars in). Even the worst hit refinery was back up within a month. Not a big deal.

    Of course, I may be biased, but it’s best to keep the refineries concentrated for efficiency.

  3. NRDC’s blog, which has Keystone XL content on a very regular basis, allows comments on every new post.

    Worth noting that the Canadian pipeline that Bussey and most pipeline pushers use to illustrate the threat of tar sands oil going to China—Enbridge’s Northern Gateway—was delayed for a year by Canadian regulators for at least a year over the same safety and climate concerns that have unhinged Keystone XL. The tar sands industry would be best served to use this delay to clean up its act—lower the carbon liabilities that make this the dirtiest oil on the planet or do something about the 50+ square miles of toxic waste lakes. Instead, they will continue to move forward, creating and sustaining the public anger that has blocked these projects.

  4. it is astounding to me that environmentalists around the world seem to believe that mankind should slip back in time to where the way of life was an incredible struggle for our species. I am tired of the environmental movement trying to dictate our lifestyle, yet offer no alternative though science to keep us from slipping backward. They are free to stop using the oil, gas, and other products that my industry provides. I am tired of being lectured by so-called academics that use all the products we provide, yet they expect us to move to their fantasy world. So if you please, stop using our cars, oil, gas, plastic products, medicines, homes, and all else we provide. Then provide the next path for 6 billion people. But, please speak when you have an answer. not just for the sake of hearing yourself bitch.

  5. A shorter pipeline and build refineries in Wyoming, South Dakota or even Nebraska makes more since. Houston and other near coast refineries already concentrate the risk of damage from hurricanes.

    The chance of a hurricane and massive blizzard at the same time would lower than for one hurricane disrupting multiple facilities.

  6. The pipeline has nothing to do with “locking us in.” It is the elimination of the pipeline that attempts to lock us in – to inadequately developed, technologically and phusically limited, expensive and inefficient energy sources with no (or even negative) net effect on an environment that is in good shape , resilient, and is only one of many considerations. We are close to strangling ourselves to keep from sneezing.

  7. What I find astonishing is that if you go to the NRDC website(s), there is no option to leave a comment–typical truculent envirochondriac attitude.

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