The main beneficiary of President Obama’s decision to veto construction of the Keystone XL Pipeline is neither the climate, nor the environment, nor even the knee-jerk Greens who have been conducting their delusional vendetta against it.
It’s the Burlington Northern Railroad.
The railroad, presumably along with some smaller lines, will transport the 850,000 barrels per day of Canadian oil sands synthetic crude that otherwise would have been moved by the pipeline from Alberta to refineries on the Gulf Coast.
The cancellation will neither stop nor slow the growth of Canadian oil sands production, according to Kevin Birn, the director of IHS Energy, a Houston-based consultancy that follows the Canadian oil sands industry.
“IHS research has consistently shown that oil sands production does not hinge on any one infrastructure project and alternative projects and rail exist,” he told Oil & Gas Journal, an industry publication. “IHS continues to expect over 800,000 barrels per day of new supply to come online by 2020 from existing projects relative to 2014. This will raise total oil sands production to 3 million b/d in 2020,” Birn said.
As a result, cancelation of the pipe line “will have no material impact on greenhouse gas emissions,” he added.
Notice that the IHS estimate of 2020 oil sands production is based on new supply “from existing projects” — projects that are on-going despite the plunge in global oil prices. In other words, low oil prices aren’t going to stop the growth in oil sands output, any more than cancelling Keystone XL is.
Nor is demand for oil apt to do anything but go up between now and 2020. By the end of 2020 the world’s population will have grown by roughly 400 million — with most of the growth coming in countries like China, India and Brazil, which are industrializing as fast as they can pour concrete and buying cars as fast as they can write checks.
And when it comes to adding the capacity to haul the added crude, the railroads can do it while barely breaking a sweat. The entire 850,000 barrels a day can be hauled out of Alberta by only about a dozen additional 100-car unit trains a day.
Shipping oil by rail costs about $10 a barrel (compared to about $5 a barrel for shipping it by pipeline). So the railroads stand to gross roughly $8.5 million a day in transport fees, or about $3 billion a year, from moving the oil that would have otherwise been shipped via Keystone XL.
So who, besides the railroad, benefits from cancelling the Keystone XL?
The Quasi People’s Republic of Venezuela maybe.
Canadian oil sands synthetic crude is considered “heavy” oil — oil that is composed of proportionately more carbon and less hydrogen than the “light” crudes extracted from U.S. shale deposits, which have proportionately less carbon and more hydrogen in their composition. The Keystone XL would have delivered Canadian syncrude to refineries in Texas and Louisiana that are currently getting a similar grade of oil from Venezuela, whose reserves of heavy oil in the Orinoco oil belt nearly match Canada’s. Those refineries were optimized to handle heavy oil at a time when no one expected a glut of light oil to be produced from shale in the U.S.
“The Keystone XL decision does not mean less oil sands overall, but it may complicate oil sands access to the U.S. Gulf Coast where there is substantial refining capacity for heavy types of crude,” Jim Burkhard, IHS Energy vice president said. “The number one beneficiary of all this will be Venezuela and other suppliers of heavy oil that ship to the Gulf Coast by tanker (which is cheaper than either rail or pipeline transport). Venezuela heavy crude is similar to oil sands in both quality and greenhouse gas intensity and will continue to be consumed by U.S. refineries in the absence of access to Canadian crude oil.”
Opponents of the Keystone XL argue that the process of producing synthetic crude from the Canadian oil sands produces about 17 percent more CO2 than conventional oil extraction. So does the process of producing synthetic crude from Venezuelan heavy oil.
The only difference between importing syncrude from Canada and syncrude from Venezuela is that when we buy oil from Canada billions of dollars a month are sent to an American friend and ally, whereas when we buy crude from Venezuela billions of dollars a month are sent to a malignantly anti- American Marxist regime.
In rejecting the pipeline, Obama said “America is now a global leader when it comes to taking serious action to fight climate change. And frankly, approving this project would have undercut that global leadership.”
No it wouldn’t have.
America is a global leader when it comes to taking serious action to fight climate change alright — but it’s not because of any action on the part of the eco-poseurs in Obama’s administration and the U.S. environmental movement. It’s because the American oil and natural gas industry, through the use of horizontal drilling and multi-stage fracking unlocked an ocean of natural gas which is displacing coal in the generation of electricity in the U.S. Substituting natural gas for coal in U.S. power plants has slashed the amount of CO2 produced annually by the production of electricity by 372 million tons since 2007.
Rejecting the pipeline is not a signal to world leaders the U.S. is serious about acting on climate change. It is a signal that Obama will take actions damaging to U.S. economic and national security interests for the sake of meaningless environmental symbolism.
This opinion column does not necessarily reflect the views of Boulder Weekly.
