The State Department’s Supplemental Environmental Impact Statement (SEIS) of the proposed Keystone XL pipeline permit, released on March 1, concludes that dirty tar sands oil will move to U.S. Gulf Coast refineries by rail if the pipeline is disapproved. Therefore, the State Department asserts, there will be no difference in the amount of carbon pollution emitted from the increased production of tar sands oil regardless of Keystone approval.
An in-depth analysis of this claim by Reuters reporter Patrick Rucker debunks it. Reuters determined that “Oil-by-train may not be a substitute for Keystone pipeline.” If only small amounts of the dirty tar sands oil can move to the Gulf Coast by rail, then approval of Keystone would indeed facilitate a huge increase in tar sands oil production and carbon pollution.
The Canadian government and big oil companies claim that there will be a huge expansion in tar sands oil regardless of whether Keystone is built, so its approval will not lead to an increase in carbon pollution. The SEIS declares on page ES-15:
Based on information and analysis about the North American crude transport infrastructure (particularly the proven ability of rail to transport substantial quantities of crude oil profitably under current market conditions, and to add capacity relatively rapidly) and the global crude oil market, the draft Supplemental EIS concludes that approval or denial of the proposed Project is unlikely to have a substantial impact on the rate of development in the oil sands, or on the amount of heavy crude oil refined in the Gulf Coast area.
Reuters investigated this assumption, and found it uninformed and unlikely:
Some industry officials, energy analysts and recent data raise questions about whether the industry is really eager to adopt crude-by-rail should the U.S. government rule against the TransCanada Corp pipeline.
They say train transport is so expensive that Canadian heavy crude, produced by processing bituminous sand, isn’t likely to reach Texas and Louisiana in Keystone-like quantities by rail.
The State Department report cites two industry studies to predict that 200,000 barrels a day or more of Canadian heavy crude oil will reach Gulf Coast refiners by train by the end of this year.
Officials used that figure to bolster their argument that the oil industry has already decided rail is a good option for moving oil sands crude. “Limitations on pipeline transport would force more crude oil to be transported via other modes of transportation, such as rail, which would probably (but not certainly) be more expensive,” the State Department said.
But one of the sources for the 200,000 barrels per day estimate, Calgary investment bank Peters & Co, says its forecast was misunderstood as being for just Gulf Coast-bound oil when it included shipments to Eastern Canada and other refiners.
“We haven’t tracked exactly where those barrels are going,” said Tyler Reardon, a spokesman for Peters & Co.
And there’s more:
The other source for the number, Hart Energy, did predict in a report last year that 250,000 barrels per day of heavy crude from Western Canada would be reaching the Gulf Coast before the end of this year but its analysts are reviewing that forecast.
“Hart Energy continues to carefully monitor flows from Western Canada,” said Susan Emfinger, a spokeswoman for the Houston energy consultant.
The latest figures from the U.S. Energy Information Administration show heavy crude shipments to the Gulf Coast from Canada by rail have a long way to go to meet the 200,000 figure. They have not exceeded 30,000 barrels per day in any of the past 12 months, though they did rise by two thirds to 25,000 barrels per day in January, the last month for which there are figures, from 15,000 in January 2012.
In fact, EIA data shows that little heavy crude from Canada is reaching the Gulf Coast via any route, with about 75 percent of 33 million barrels of heavy Canadian crude being processed in the Midwest in January and only 7 percent of it being processed further south. Other destinations account for the remainder.
In other words, rail is an unlikely to move much tar sands oil to Gulf Coast refineries to replace the 830,000 barrels per day to be transported by Keystone.
Interestingly, the State Department’s finding that tar sands oil will be produced in the large amounts and exported to the United States regardless of Keystone’s construction is at odds with estimates by the Canadian Association of Petroleum Producers CAPP) — Canada’s version of the American Petroleum Institute. Last year CAPP’s “Crude Oil Forecast, Markets, & Pipelines” estimated that tar sands oil production will double between 2020 and 2030, unless Keystone XL and other proposed pipelines are not built.
In this forecast, oil sands production rises from 1.6 million b/d [barrels per day] in 2011 to almost double at 3.1 million b/d by 2020 and 4.2 million b/d by 2025 and 5.0 million b/d by the end of the forecast period in 2030. If the only projects to proceed were the ones in operation or currently under construction, oil sands production would still increase by 54 per cent to 2.5 million b/d by 2020 and then remain relatively flat for the rest of the forecast.
The Toronto Globe and Mail recently assessed the prospects for Keystone and these other proposed pipelines. It found that “Oil companies, seeking new markets, are pursuing a number of pipeline projects, with many meeting resistance from environmentalists or being mired in red tape.” The Globe and Mail concluded that Keystone and other pipeline proposals may be a “pipe dream.”
The bottom line: Contrary to the State Department’s fatally flawed analysis, the Keystone XL pipeline is essential to an increase in the production of dirty tar sands oil. Its approval would lead to an increase in carbon pollution equivalent to 51 coal fired power plants. Meanwhile, it would create only 35 permanent jobs to bring this highly polluting oil to the U.S. so that it can be refined and exported to other nations.
Keystone XL is all risk and no reward.