The State Department is Wrong, and so was I: Building the Keystone XL Pipeline Would Increase Greenhouse Gas Emissions

Three years ago, I first became interested in energy politics and policy when I wrote a column arguing that the opposition to the Keystone Pipeline was of questionable symbolic and practical value.

I was wrong.

As often happens when a college sophomore takes some 200-level economic classes, my argument rested on an incomplete understanding of global oil markets. “As oil supplies diminish, prices will eventually soar even higher,” my first Keystone column argued. So does the State Department’s final environmental impact statement, which argues that the pipeline will not produce increased carbon emissions because the oil sands will be developed either way, driven by high demand and rising oil prices. Their report relies on an assumed oil price of $130 per barrel in 2030, a number wildly higher than that called for by many financial experts. At $130/bbl, oil from tar sands would absolutely find its way to market – by rail, by truck, or concealed in the bodies of oil mules.

But the realities of the oil market have changed since the issue first started making headlines in the summer 2011. While we may live in a world of peak oil, that peak has shifted from supply to demand. There are more alternatives than ever to tar sands oil from Albert. Solar and wind are ever rising, cars go further on fewer gallons of oil – or run on batteries, and even within the market for fossil fuels, the revolution in shale oil has provided a marginally cleaner, marginally cheaper supply just south of the Canadian border. Increasing regulation, higher efficiency, and more alternatives have all led experts to predict that oil prices will not rise, but rather fall between now and 2030. Last summer, Deutsche Bank (not exactly a hippie publication) wrote that

The oil market is discounting that we are in a peak oil environment, and that demand efficiency and a stronger US dollar will offset geopolitical risk and inflation, leading to steady downward pressure on nominal prices … we have seen the all-time peak oil price…

Some have even predicted that oil will fall into the $70 range, a price at which even the State Department concedes that

Oil sands production is expected to be most sensitive to
increased transport costs in a range of prices around
$65 to $75 per barrel. Assuming prices fell in this
range, higher transportation costs could have a
substantial impact on oil sands production levels—
possibly in excess of the capacity of the proposed
Project.

Outside investors are more concerned about the effects of falling prices on the output and profitability of the tar sands projects. HSBC and Wood Mackenzie research has shown that many new projects of this type are profitable at prices above $85-105 per barrel, assuming they have an easy pathway to the market. Last summer, a group of investors including Boston Common Asset Management (BCAM) and Norwegian investment giant Storebrand wrote a letter to Statoil urging them to withdraw from several tar sands projects because

Even on a standalone basis, the economics of many oils sands projects are questionable given project execution risks,
transportation bottlenecks, and uncertainty about future oil prices. We also see additional threats in the negative externalities of oil sands projects: future carbon regulation, water scarcity, local environmental damage, and impairment to traditional livelihoods.

Proponents of the pipeline (or those who say it doesn’t matter either way) often argue that the pipeline merely will replace the inevitable rail and road transport of the product. But these alternatives are more expensive, lowering the effective price that oil suppliers can get by as much as $8 per barrel. By any understanding of the laws of supply and demand, when a commodity (or a good, or a service) will command a lower market value, its supply shrinks. This basic theory also assumes that the supply of tanker cars and trucks are entirely elastic – that the moment the oil is discovered, fleets spring into existence with its transport as their sole raison d’être. This, too, is overly simplistic: the State department’s own report finds that it would take until 2030 for alternative methods of transport to replace the capacity of the pipeline if President Obama does not approve its construction.

This is not to understate the many other issues with the pipeline. Chief among these is the right of landowners to determine what happens on their own property. The pipeline is wildly unpopular among Nebraska landowners, who worry that a spill could contaminate the Ogalla aquifer, the source of their livelihood and much of America’s agricultural dominance. When diluted bitumen spills into a water supply, the chemicals used to liquefy it separate out and it reverts to its original form, making it almost impossible to clean up. In terms of its impact on climate change, the State Department does not consider the refinement of petroleum coke, a byproduct of tar sands refinement that is both cheaper and dirtier than the cheapest and dirtiest coal, and is now being shipped to China in record amounts where it goes from the furnace of power plants straight into the atmosphere.

This past Saturday, hundreds of students from around the country including my former coeditor (and future boss), Middlebury’s own Hannah Bristol, zip-tied themselves to the fence around the White House in yet another protest demanding that the President refuse to allow the construction of the Keystone XL pipeline.

Those protests have held off a massive infrastructure for several years. It is time to kill it entirely. The evidence clearly suggests that regulatory uncertainty over the fate of the pipeline created by the forcefulness of the opposition to its construction has slowed the development of the Alberta tar sands. A refusal to allow the pipeline will mean that more of the asphalt-like substance that has to be heavily diluted with caustic chemicals to even resemble oil would stay locked away in the ground forever; that the forest and marsh the currently covers that fossil remnant of previous life might be preserved to serve as a habitat for animals and a sink for atmospheric carbon dioxide. The State Department’s report ignores this reality by resting its analysis on oil price benchmarks higher than anyone else paying attention to the oil market. But they concede that at lower prices – e.g. those predicted by other experts – stopping the Keystone XL pipeline will slow the development of Albertan Tar Sands and slow the rate of climate change. The time has come to put this issue to rest and move on to the next battle in the long war against the threat of man made global warming. 

The Key Thing Nobody is Saying About Fracking

If natural gas truly is intended to be a “bridge fuel” as renewable electricity generation and storage technology improves, shouldn’t the 60 year supply of natural gas that does not require fracking be enough to fill that role?  

It has become impossible to talk about natural gas in 2013 America without talking about the controversial practice of horizontal-high volume hydraulic fracturing – fracking. Between spokesmen for the gas industry touting gas as the cheap, squeaky-clean “fuel of the future” and Josh Fox broadcasting images of flaming hoses, faucets, and the like to suggest the dangerous implications of gas development, it’s too easy to forget a simple fact.

Two-thirds of American natural gas reserves do not require fracking.

Hose on fire!

The natural gas debate summarized in one misleading image (Or, what happens when you hook your hose up to a gas vent and light it)

The Energy Information Agency (EIA) says that the United States has 97 trillion cubic feet (tcf) of proven, recoverable shale gas. That’s the type that you need to frack. The type that requires a drill to go through about 3000 feet before turning sideways, blasting apart the bedrock, flushing it all with water, sand, and chemicals, and collecting the resulting product. That gas has been associated with a number of dangers: earthquakes caused by the high-pressure lubrication of the bedrock, water contamination caused by faulty cement casings, and the leakage of methane, a greenhouse gas far more potent than carbon dioxide, to name a few. There’s no reason to suggest that these problems can’t be alleviated by proper regulation and oversight. But is the risk even necessary? Continue reading

President Obama’s Divestment Drop-In

On Tuesday, President Obama gave a speech on energy and the environment at Georgetown University. Scheduled between major Supreme Court decisions, in the middle of a work day in the summer during a high-profile criminal case and an international manhunt for Edward Snowden, the speech unsurprisingly – and probably intentionally – got somewhat lost to the non-environmental media. It was truly a speech for supporters, designed to be overlooked by the public at large.

It was noticed by energy markets, though; stocks in coal companies plummeted significantly on news of more regulation for existing power plants and an end to international development aid for non-CCS coal plant construction. The Stowe Global Coal Index fell to its lowest level since the 2009 financial crisis in a sign that investors are beginning to see the writing on the wall. Fossil fuel companies are almost categorically overvalued and as economies begin to account for their full costs, their profits will fall.

It was also noticed by hard-core supporters. At the end of the speech, the President said two words that got environmental groups extremely excited:

“Convince those in power to reduce our carbon pollution. Push your own communities to adopt smarter practices. Invest. Divest. Remind folks there’s no contradiction between a sound environment and strong economic growth.”

305.org’s divestment campaign was launched just this year; in a matter of months, a brand-new issue received a tacit endorsement in a major presidential address. That’s huge. It’s also not particularly surprising given the President’s roots.  Continue reading

Laying Pipe in Addison County

This week, President of the College Ronald D. Liebowitz released a statement reiterating the College’s support for the Vermont Gas pipeline. This comes in the face of motivated and organized student and community opposition that has made its presence well known over the last few weeks. This decision repudiates the state’s ban on hydraulic fracturing by supporting a pipeline that will carry natural gas produced by the process across Vermont. It is also the right thing to do; it is the right thing for Middlebury College, the town of Middlebury and the state of Vermont.

I could spend pages debating the merits of fracking. It has become a dirty word within the environmental movement, and it is an undeniable fact that fracking has an environmental impact. Yet the severity of that impact has been overstated. Natural gas has replaced coal as the go-to method of electrical generation in the United States. This is a step forward; natural gas contains half the carbon dioxide and none of the particulate emissions of coal. Natural gas extraction, through hydraulic fracturing or any other means, has less of an impact on the landscape than the strip mining and mountaintop removal used to produce coal.

In this case, the gas delivered by the pipeline would mainly replace the fuel oil and propane that Vermont residents use to heat their homes. The process of producing either of these is no less fraught with pollution and environmental degradation than fracking. Propane is a byproduct of — surprise — natural gas or petroleum refining. Fuel oil is a similar, dirty leftover of this process. As conventional sources of oil disappear, oil companies increasingly turn to oil sand and oil shale. I don’t need to sell anybody at Middlebury on the harms of oil sand extraction, and oil from shale is produced by a mechanism similar to fracking for natural gas. Whether or not Addison County allows the pipeline, then, its residents will rely on the byproducts of the technological achievement that is fuel extraction through hydraulic fracturing. Continue reading

Middlebury Reaffirms Pipeline Support

Middlebury College President Ron Liebowitz has released a new statement reaffirming the College’s support of the VT Gas pipeline in light of an SGA resolution and a petition created by students asking that the college withdraw its support. The statement focuses on the economic impact of the pipeline. For curious parties without a Middlebury email account, I’m reproducing it here:  Continue reading