Is the Proposed Keystone XL Pipeline in the National Interest?
with opening remarks from
Senator John Hoeven (R-ND)
Congressman Gene Green (D-TX)
James Burkhard, Global Oil Group, IHS CERA
Jim Kimball, Director, Economics and Contracts Department, International Brotherhood of Teamsters
Lucian Pugliaresi, Energy Policy Research Foundation
Jon Rozhon, Canadian Energy Research Institute
Lorne Stockman, Research Director, Oil Change International
Paul Sullivan, National Defense University and Georgetown University
Anthony Swift, Policy Analyst, International Programs,Natural Resources Defense Council
Luiza Savage, Maclean’s Magazine (moderator)
Elana Schor, Environment & Energy Daily (moderator)
The Keystone XL pipeline would create jobs, increase tax revenues, and reduce dependence on foreign oil, said Senator John Hoeven (R-ND) at an event hosted by the Canada Institute. The program brought together a group of distinguished panelists to offer their perspectives on whether the Keystone XL (KXL) pipeline is in the national interest. The proposed pipeline would carry crude oil from Alberta’s oil sands through Montana, South Dakota, Nebraska, and Kansas to Cushing, Oklahoma, and finally through Texas to the U.S. Gulf coast. KXL would allow roughly 700,000 barrels per day (bpd) to be transported from Canada to the United States. The project was approved by the Canadian National Energy Board in March 2010 and currently awaits approval from the U.S. Department of State. The program coincided with State’s own national deliberation hearings on KXL. A final decision on the pipeline is expected before year’s end.
Setting the Stage
Senator Hoeven was joined by Congressman Gene Green (D-TX) to deliver their views on whether KXL was in the national interest. Hoeven maintained that it is the job of policymakers to create an environment that empowers American businesses to create jobs, investment, energy development, and new technologies, while balancing environmental concerns. According to Hoeven, KXL promises to create hundreds of thousands of jobs and secure a vital source of energy from a secure and stable neighbor. In short, said Hoeven, if the United States is to address the energy and economic issues facing the United States, KXL is exactly the type of project the country needs to approve.
Congressman Green shared Hoeven’s favorable view of KXL. He noted that KXL would increase the supply of oil to five refineries in his Houston district and potentially displace oil from less friendly countries to the United States, such as Venezuela. Green maintained that at a time when U.S. still imports 60 percent of the oil it consumes, it is imperative to seek sources of oil from friendly nations such as Canada. Green also reminded participants that even if Texas refineries produced an increased amount of heavy crude from Canada, they would still need to adhere to Texas’ emissions and environmental standards.
The National Security Debate
If the United States does not import Canada’s oil, another country will, said Paul Sullivan of the National Defense University. He noted that Canada is already developing pipelines that would enable oil from the oil sands to reach the Asian market. Should the United States balk at receiving heavy crude from Canada, it would be eliminating a highly accessible source of oil that has the capacity to displace imports from less stable sources of U.S. imports. Sullivan maintained that the recent uprisings that have occurred in Egypt and Libya could spread to Algeria, Iran, Saudi Arabia, and other oil exporting nations. Other sources of U.S. oil imports, such as Mexico and Venezuela, have suffered from declining oil production. This bleak outlook for oil producing nations around the globe makes an even stronger case for the United States to secure as much oil as it can from Canada, said Sullivan. Responding to the environmental critiques of KXL, Sullivan said that while the goal of eliminating U.S. dependence on oil as an energy source are laudable, such change takes considerable time.
Lucian Pugliaresi of the Energy Policy Research Foundation argued that approving KXL would send a strong signal to Canada that the bilateral energy relationship is preserved. KXL would also improve distribution efficiency of U.S. and Canadian produced oil in the United States. He explained that KXL would help alleviate the current supply glut in the Midwest and allow excess supply to be processed by the refineries that currently receive a large portion of U.S oil imports. Pugliaresi said that according to the National Petroleum Council, Canada and the United States could combine to increase their current oil production total by more than 10 million bpd by 2035.
Not everyone believed KXL would enhance U.S. energy security. Lorne Stockman of Oil Change International argued that KXL is nothing more than a means for Canada to export its oil sands oil from the U.S. Gulf Coast. He pointed to evidence that U.S. oil demand is in decline and will continue to decrease over the next several decades as new environmental regulations are implemented, in particular the Obama administration’s new Corporate Average Fuel Economy (CAFE) standard. In fact, said Stockman, U.S. exports of its own petroleum products have increased by 60 percent since 2007. Such facts, he argued, make it hard to accept that the United States is in need of more Canadian oil. Stockman also maintained that KXL would not insulate the United States from oil supply disruptions or offer any security from price volatility. The only way to truly enhance U.S. energy and environmental security, said Stockman, is through ongoing efforts to reduce the country’s demand for oil. Stockman also pointed out that climate change should not be omitted from discussions of national security, noting that the environmental impacts of climate change are of increasing concern to the U.S. military.
Alexander Pourbaix of TransCanada provided insights on the future of oil sands production and addressed pipeline integrity concerns surrounding KXL. Canada currently exports 2 million bpd of oil to the United States, with roughly two thirds of that total coming from the oil sands. Unlike most petroleum producing nations, said Pourbaix, Canada will have the capability to expand its oil export capacity in the future. According to Pourbaix, Canada may be in a position to export 3.5 million bpd of oil by 2020. He reminded participants that KXL is financed completely by TransCanada and carries no burden to U.S. taxpayers. Pourbaix maintained that pipelines remain the safest method of transporting oil and noted that the Department of State’s final Environmental Impact Assessment found KXL to have limited environmental consequences. Pourbaix said that KXL would be constructed and maintained with state of the art materials, and when crossing rivers, would be buried deeper than industry code.
Evaluating KXL’s Economic and Environmental Impact
If Canada does not develop additional infrastructure to keep pace with oil sands development, the country may be faced with stranded supply, said Jon Rozhon of the Canadian Energy Research Institute (CERI). Rozhon presented the findings of a recently released CERI report exploring the projected economic impact of KXL. According to the report, should KXL be built, the United States’ GDP would gain more than 130 billion dollars over the next 10 years. Rozhon noted that Illinois, California, and Texas stand to gain the most economically from KXL. On the other hand, said Rozhon, the United States would stand to lose 46 billion dollars over 10 years if KXL were not built, with the U.S. Midwest affected most if the project was denied.
Jim Kimball of the International Brotherhood of Teamsters said that the most important benefit of KXL is job creation. Kimball described a bleak outlook for the U.S. economy, noting unemployment in the country currently stands at 9.1 percent and that 46.5 million Americans live below the poverty line. KXL, said Kimball, is exactly the type of project the United States needs to endorse in order to create job growth, generate economic stimulus, and develop badly needed new infrastructure. He noted KXL would create thousands of jobs in the U.S. construction sector—a sector that currently suffers from an unemployment rate of roughly twice the national average.
Despite the projected economic benefits, concerns have been raised over KXL’s environmental impact. Anthony Swift of the Natural Resources Defense Council echoed the concerns of Stockman, stating that U.S. oil demand is in decline and that KXL would be built merely to export oil out of the United States. He also maintained that U.S. approval of KXL would spur increased development of the oil sands at a time when countries should be shifting investment toward renewable sources of energy.
Swift pointed out that the pipeline’s proposed route over the Ogallala Aquifer poses a threat to a crucial source of drinking water for two million Americans. The aquifer also supplies one third of U.S. water used for irrigation. Swift maintained that TransCanada is inexperienced in constructing and maintaining oil pipelines. In fact, he noted, TransCanada’s Keystone 1 pipeline was recently shut down by U.S. regulators after spilling 23,000 gallons of oil in its first year of operation. He added that the environmental incidents surrounding Keystone 1 is evidence that more research is needed to determine the effect of diluted bitumen on pipelines and the behavior of diluted bitumen during an oil spill.
Jim Burkhard of IHS-CERA provided insights on the future of North American oil production. Since 2008, noted Burkhard, the United States has increased its domestic production by 1.1 million bpd - a figure that far exceeds any other country in the world. As Canada and the United States continue to increase their production, new pipeline infrastructure will be desperately needed to transport a greater supply of oil, said Burkhard. He explained that refineries in the U.S. Midwest will hit a saturation point of oil supply within the next couple of years. KXL would help alleviate this current supply glut by allowing oil from Canada and elsewhere in the United States (such as oil from the Bakken formation in North Dakota) to reach Gulf Coast refineries. Burkhard rejected claims that KXL would raise U.S. gas prices, noting economic logic suggests that more supply would actually lower price at a given demand point. Burkhard closed by stating that while the oil sands are often accused of producing as much as three times more carbon emissions than conventional sources of crude, IHS-CERA’s own life-cycle GHG analysis found that emissions from the oil sands are closer to 6 percent higher than other sources of oil consumed in the United States.
A spirited Q&A session was held following panel presentations. Several participants echoed Stockman’s view that climate change must factor more heavily in any discussion involving national and energy security. Participants agreed that climate change was a grave issue, but some maintained that change toward renewable energy will be a transition that takes considerable time. One participant noted that much of the controversy over KXL would have been averted if the United States had a policy framework outlining clearer roles for fossil and renewable energy in the country’s energy mix. If a consensus was reached in the discussion, it was that the United States should work toward creating a comprehensive energy strategy. On the economic front, some skepticism was expressed that KXL could generate the tens of thousands of jobs that some studies have claimed. One participant responded that the number of jobs created by KXL is irrelevant. Given the tough economic climate, the United States should endorse projects that will generate jobs, regardless of the exact number.
U.S. Senate (R-ND)
U.S. House of Representatives (D-TX)
Global Oil Group, IHS CERA
Jim Kimball //Director, Economics and Contracts Department, International Brotherhood of Teamsters
President, Energy Policy Research Foundation
Jon Rozhon //Senior Researcher, Canadian Energy Research Institute
Research Director, Oil Change International
Professor of Economics, National Defense University/ Adjunct Professor of Security Studies, Georgetown University,
Policy Analyst, International Programs,Natural Resources Defense Council
Luiza Savage //Washington Bureau Chief, Maclean’s Magazine
- Lorne Stockman's Presentation, "Keystone XL & Energy Security"
- Alexander Pourbaix's Presentation
- Jon Rozhon's Presentation, "Assessing the Economic Impacts of the Keystone XL Pipeline"
- * (see below) DOE Response Memo to Philip Verleger's report, "The Tar Sands Road to China"
- ** (see below) "Renewables vs. Hydrocarbons: The Energy Reality"
- *** (see below) Democratic letter of support for the Keystone XL Pipeline
- **** (see below) CERI's special edition of "Geopolitics of Energy" about the Keystone XL Pipeline
- TransCanada Set to Re-Apply for Keystone XL Permit
* The Department of Energy released a memorandum in response to a paper from Philip K. Verleger on "The Tar Sands Road to China." The memo provides data and analysis about a number of issues raised by Dr. Verleger. It concludes that exports of Canadian oil sands from Port Arthur to Asia are unlikely.
** AltaCorp Capital issued a report, "Renewables vs. Hydrocarbons: The Energy Reality" in April 2011 by John Mawdsley and Craig Espey, which assesses the national security and national interest aspects of expanding pipeline infrastructure.
*** TransCanada Corporation announced that a group of 22 Democratic members of the United States House of Representatives urged U.S. President Barack Obama in a letter to ensure that the Presidential Permit for the Keystone XL Pipeline project is issued because of the project’s economic, energy and national security benefits (October 19, 2011).
**** The Canadian Energy Research Institute (CERI) put together a special edition of "Geopolitics of Energy" about the Keystone XL Pipeline following the September 22 conference with eight of the ten panelists agreeing to contribute papers.
As the turbulent debate over the XL line chugs toward its delayed finale, with a final ruling from the Obama administration expected by 2012, its consequences for U.S.-Canada ties are a potent but delicate subplot to the drama. - "Keystone XL Tests U.S.-Canada Energy Ties as Asian Suitors Loom" by Elana Schor, New York Times, September 13, 2011.
Globe and Mail columnist Margaret Wente contends that the winner of the Keystone XL fued is jobs and security. The pipeline could create 20,000 direct new jobs as early as next year, and five times that number in indirect jobs. - "And the winner in Keystone feud is… jobs and security" by Margaret Wente, Globe and Mail, September 14, 2011.
A Globe and Mail editorial argues that the KXL pipeline is key to prosperity for Americans and Canadians as it will help to match areas of surplus oil-sands supply in Alberta to areas of surplus refining capacity on the U.S. Gulf Coast. - "Keystone XL pipeline -- key to prosperity," Globe Editorial, Globe and Mail, September 16, 2011.
Danielle Droitsch, senior advisor to NRDC's International Program, argues in a guest column in the Switchboard blog why the Keystone XL pipeline does not provide the United States with energy security. - NRDC Switchboard blog, September 21, 2011.
The Energy Information Agency released an assessment on the future growth in energy consumption. Figure 6 on page 2 presents a graph of the EIA projection.
The House Committee on Foreign Affairs held a hearing on "Rising Oil Prices and Dependence on Hostile Regimes: The Urgent Case for Canadian Oil," featuring testimony from Lucian Pugliaresi (on page 18) and from Paul Sullivan (on page 25). You may also be interested in the testimony from the National Wildlife Federation on page 57. The video of this hearing is available here.
Michael E. Webber discusses the importance of energy security and the environment in his article, "Both energy security, environment important in Keystone pipeline debate," statesman.com, October 2, 2011.
NPR’s Diane Rehm devoted a significant part of her program on October 19 to the Keystone XL Pipeline. Her guests included Juliet Eilperin, environmental reporter, The Washington Post; James Hansen, climate scientist and director, NASA Goddard Institute for Space Studies; Matthew Koch, vice president for Oil Sands and Arctic Issues at the U.S. Chamber of Commerce’s Institute for 21st Century Energy; P.J. Crowley, former U.S. Assistant Secretary of State for Public Affairs.
In his article “The Keystone XL Energy Project Is Much More Than a Pipe Dream,” author Robert L. Bradley, Jr., takes a closer look at Cornell University KXL jobs study. He examines the report’s claims and draws his own, very different conclusions.
This study refutes the claims that the proposed Keystone XL pipeline would create jobs. It concludes instead that the project would cost jobs based on a lower actual budget than what has been proposed. Additionally, the study concludes that material input for KXL will not be produced in the United States, and that the additional oil imports will not lower gas prices but raise them instead.
"U.S. may miss Keystone XL pipeline deadline," an article by Arshad Mohamme, examines the implications of a possible delay in the State Department's approval of the project.
President Obama announces that he will decide whether to approve or deny a permit for the Keystone XL pipeline, rather than delegating the decision to the State Department. - "Obama to make decision on controversial oil pipeline," by Julliet Eilperin, Washington Post, November 1, 2011.
Reporter Rob McCartney, from KETV 7 in Omaha, speaks with President Obama about whether the White House is ready to make a decision on Keystone XL pipeline. Watch the interview here.
One day after President Obama announced that he will make the desicion concerning the approval of Keystone XL, TransCanada issued their response - "TransCanada responds to Obama's Keystone XL comments," by Sheldon Alberts, Canada.com, November 2, 2011.
"Oil patch gives a dire warning to the U.S.," an article appearing in The Globe and Mail, discusses the ramifications on the trading of oil for the United States if the Keystone XL pipeline was to be rejected.
The Center for Strategic & International Studies' recent report provides insight into the process behind approval of the Keystone XL pipeline, as well as environmental, energy security, economic, and foreign policy debates surrounding the project.
Joshua Hersh, of the Huffington Post, argues that the debate over Keystone XL has focused largely on the diplomatic reasons why the pipeline is "in the national interest," while overlooking the environmental reasons why it might not be.
Six Republican senators, led by Minority Leader Mitch McConnell (R-Ky.), are tabling a bill that if passed would require the Obama Administration to approve Keystone XL within 60 days.
Erica Gies discusses the environmental footprint of oil production from Alberta’s tar sands in a Forbes article "Alberta's Tar Sands: Not So Bad?" from November 29, 2011.
"Keystone XL: Liberal Histrionics Answered with Conservative Histrionics," an article from Forbes on December 19, 2011, discusses the politics of opponents and proponents of the pipeline project.
Obama supports TransCanada’s plan to build a pipeline to bring crude oil from Cushing, Oklahoma, to the Gulf of Mexico, released in a Statement by the Press Secretary on February 27, 2012.
Sabrina Fang discusses the Congressional Research Services (CRS)'s problematic system of analysis concerning oil sands and energy. Fang explains that the comparative variables are mismatched, like comparing apples to oranges in respect to oil sands and other energy resources. This system both fails to aknowledge the improvments to Green House Gas (GHG) emissions over the past 5 years in Canada, and is equally misleading for understanding future energy policies.
Richard Harrison addresses that the decision over the Keystone XL pipeline is not only politically controversial, but that its projected output for Keystone XL alone could compromise the world's sustainability targets, raising global temperatures eleven degrees by the end of the century.
According to an article by Paul Hammel, the projected costs for the Keystone XL pipeline nearly quadruppled the intial calculations. Current estimates sit around $540 million.