Oil Sands Fact Check Report
Ever since the State Department released its Draft Supplemental Environmental Impact Statement (SEIS) in March finding that Keystone XL will not significantly increase greenhouse emissions because Canada will still develop its oil sands, Keystone XL opponents have attempted to utilize everything in their playbook to try and undermine the report.
Their efforts ramped up even more after President Obama stated in his climate agenda speech that approval of Keystone XL hinges on a finding that the pipeline will not significantly increase greenhouse gas emissions. As he put it, “Allowing the Keystone pipeline to be built requires a finding that doing so would be in our nation’s interest. And our national interest will be served only if this project does not significantly exacerbate the problem of carbon pollution. The net effects of the pipeline’s impact on our climate will be absolutely critical to determining whether this project is allowed to go forward. It’s relevant.” Of course, as OSFC pointed out during the President’s speech, the State Department has said unequivocally, on more than one occasion, that it won’t.
Opponents’ latest efforts come by way of letters, first by opposition groups, and then by Congressman Waxman and Senator Whitehouse, which ask the State Department to provide another draft assessment because they didn’t like the result of the previous ones. As OSFC pointed out in response to these letters, opponents are simply “recycling tired, debunked material in an effort to further delay a decision on the Keystone XL pipeline.”
Additionally, as opposition groups grasp at straws to undercut State’s assessment, they are also devising outlandish theories that some of their allies in the press are eager to repeat. In fact, one media outlet went as far as to say that opponents’ claims mean “game over” for Keystone XL.
OSFC’s latest debunk takes a look at many of these claims and sets the record straight.
Claim #1: Keystone XL will increase greenhouse gas emissions.
Not true. In fact, if Keystone XL isn’t built, global greenhouse gas emissions are likely to increase because more oil sands crude would be refined in countries like China where current emissions standards are not as strict as those in the U.S.
In its 2013 draft assessment, the State Department found that Canada will develop its oil sands “with or without the project.” It continued: “[A]pproval 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.” The State Department’s 2013 assessment offers a similar conclusion to its 2011 assessment of Keystone XL, which found that, “from a global perspective, the project is not likely to result in incremental greenhouse gas emissions.”
On a lifecycle basis, greenhouse gas emissions from oil sands are comparable to other average crudes refined in the United States. According to Cambridge Energy Research Associates (CERA), 70 to 80 percent of greenhouse gases are emitted during the combustion of fuel in an engine, so the vast majority of emissions remain the same regardless of whether the crude comes from Canada, Nigeria or California. Remember also that Canada accounts for only 2 percent of global greenhouse gas emissions and emissions from oil sands are a small fraction of that.
Claim #2: Other pipelines are stalled and therefore Canadian oil sands won’t get out if Keystone XL isn’t approved.
What has received less attention in this debate is the fact that, according to the State Department, if Keystone XL is rejected, many other pipelines – those that are already in use and those that are planned – would also play a significant role in transporting Canadian crude. Other pipeline operators, including Enbridge and Kinder Morgan Canada, are actively pursuing pipeline projects to move more western Canadian crude to the market. Keystone XL is just one of six pipeline projects under development to transport Canadian oil sands: there are two pipeline routes to the west, two to the south, and two to the east.
Recently opponents seized on a report released by Goldman Sachs, which they say claims that Canadian oil sands would not be transported if Keystone XL isn’t approved because other pipelines are facing roadblocks. A closer look at the report, however, shows something quite different:
“While we see significant demand for Canadian heavy crude oil in the United States, in particular in the Gulf Coast region, the main question at this time is whether sufficient pipeline takeaway capacity will exist that crosses the Canada/ US border, with Keystone XL (TransCanada) and Alberta Clipper (Enbridge) the key projects to watch, in our view (Exhibits 1-4). In the event that either the Keystone XL newbuild or Alberta Clipper expansion (or both) encounter further delays, we believe risk would grow that Canadian heavy oil/oil sands supply would remain trapped in the province of Alberta”
Note that the report is not saying that oil sands won’t get out, but that Goldman believes “risk would grow.”
Also of note, Waxman and Whitehouse, in their letters, claim that pipelines are stalled and therefore oil sands transport will face setbacks, but then simultaneously argue that “Keystone XL is one of several recent proposals for pipelines and pipeline expansions to bring tar sands crude into the United States. When these projects are considered on a cumulative basis, the increase in U.S. carbon pollution is even more drastic”. Here they are conceding that oil sands will travel via pipeline regardless of what happens with Keystone XL.
Claim #3: Rail is too expensive and not feasible for oil sands transport.
As the State Department found, “Approval or denial of any one crude oil transport project, including the proposed Project, remains unlikely to significantly impact the rate of extraction in the oil sands, of the continued demand for heavy crude oil at refineries in the U.S. 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.”
Joe Oliver, Canada’s Minister of Natural Resources, put it this way: “Several of the project’s opponents believe it would be a decisive body blow which would keep the oil sands in the ground. That’s simply wrong.”
At least nine oil sands producers will be increasing their crude rail shipments in 2013 – some by as much as 5 times more than in 2012 – as companies continue to hedge their bets as to whether President Obama will approve Keystone XL, according to the State Department.
Over the past two years, Canadian oil sands producers have built over 15 rail loading facilities with a capacity of 240,000 bpd and have invested in the construction of over 28,000 new insulated rail tank cars – specifically designed for the transport of bitumen – which, as the State Department found, “provide evidence that industry considers shipping railbit or bitumen to be an economic option, and that it can be employed in large quantities.”
Canada’s largest train operator, the Canadian National Railway, is planning to expand its rail capacity to meet the growing demand for transporting crude oil. As Reuters reported: “Shipments of crude by rail in the United States have surged to an estimated 340,000 barrels per day (bpd) in 2012 from around 11,000 bpd in 2007, according to data from the Association of American Railroads. If rail shipments in Canada are added, the volume could top 400,000 bpd, more than 4 percent of North American crude production and equal to a new, large pipeline.”
Claim #4: Experts disagree with the State Department evaluation that oil sands will be developed even if Keystone XL is not built.
Waxman and Whitehouse include a number quotes from those who have claimed that without Keystone XL oil sands will not be developed, but they ignore the fact that numerous officials and analysts believe the oil will be developed and transported regardless of Keystone XL’s fate.
Just to name a few:
Jason Bordoff, director of Columbia University’s Center on Global Energy Policy, and until recently a White House energy adviser, said over the weekend: “Just a few years ago, there was this perception that the boom in rail transport was a temporary phenomenon until new pipelines came on. I think there’s a recognition now that’s not the case, because of more flexibility, because of more capital intensive, because you don’t need to undergo as deep environmental reviews. Rail is going to be a significant way we move oil around North America for the foreseeable future.”
Former Secretary of Energy Steven Chu recently said, “Let me put it this way: I do think that oil in Canada [oil sands crude] will get out and be used.”
Assistant Secretary of State Kerri-Ann Jones agrees: “Approval or denial of any one crude oil transport project, including this proposed project, really remains unlikely to significantly impact the rate of development of the oil sands, or the continued demand for heavy crude oil in the U.S.”
Gary Doer, Canada’s Ambassador to the United States: Ambassador Doer told Platts Energy Week that even if current pipeline projects are blocked, “oil will get to market.” “We’ve got a delay in British Columbia, and controversy in D.C.,” said Doer. “[But] it’s not a question of whether this oil comes into the United States. It’s a matter of how.” View the entire interview HERE.
Katherine Spector, executive director of commodities strategy for CIBC World Markets Corp: “The market will find a way. The market is always looking for opportunities to take advantage of significant price differentials,” she said, noting Western Canadian crude trades at a “pretty tremendous” discount over U.S. oil. “Rail has so far been part of that way,” of getting Canadian crude to market, as the State Department reviews TransCanada Corp.’s proposal to build the Keystone XL pipeline linking Alberta crude with Gulf Coast refineries. But now, “it’s a question of timeline,” Spector said. “Does it take so long that perhaps other options become viable?”
Joe Oliver, Natural Resources Minister of Canada: “Several of the project’s opponents believe it would be a decisive body blow which would keep the oil sands in the ground. That’s simply wrong,” he said in remarks at the Center for Strategic and International Studies.
Geoff Hill, head of Deloitte Canada’s oil and gas practice: “There are many efforts to pursue other routes that don’t go south. You can assume some of them will be successful. We’re going to get the oil out.”
Claim #5: Keystone XL poses a serious environmental risk.
No, it doesn’t. Pipelines are widely acknowledged to be the safest and most efficient means of moving energy products overland for long distances.
All U.S. pipelines must operate under Maximum Operating Pressure limitations regulated by the Pipeline Hazardous Materials Safety Administration (PHMSA). Keystone XL will go above and beyond those requirements by adopting 57 extra safety measures, leading the State Department to declare that the project would “have a degree of safety over any other.”
Furthermore, oil sands crudes are not more corrosive than other crude oils. A new report by the National Academy of Sciences (NAS) states unequivocally that diluted bitumen (one type of oil that will be transported by the Keystone XL pipeline) is no more corrosive than any other kind of crude oil, and therefore not more likely to spill from a pipeline. As Mark Barteau, an author of the report and professor of chemical engineering at the University of Michigan put it: “Diluted bitumen has density and viscosity ranges that are comparable with those of other crude oils. It moves through pipelines in a manner similar to other crude oils with respect to flow rate, pressure, and operating temperature. There’s nothing extraordinary about pipeline shipments of diluted bitumen to make them more likely than other crude oils to cause releases.”
In a 2011 report, Canadian research group Alberta Innovates found that acid and sulfur compounds found in oil sands crudes “are too stable to be corrosive and some may even decrease corrosion.” Recent testing and studies by the American Society for Testing and Materials (ASTM) and Penspen, a group that provides studies on pipelines, support this conclusion. The State Department noted in its 2013 assessment, “[B]ased on averages of approximately 5 years, the acids [in diluted bitumen] are too stable to be corrosive under transmission pipeline temperatures.” It continues, “Dilbit viscosity is comparable to those of conventional heavy crude oils and there is no evidence of increased corrosion or other potential pipeline threat due to viscosity.” The State Department also pointed out in its 2013 assessment that it is highly unlikely that the pipeline would pose a threat to the Great Plains Aquifer: “Overall, it is very unlikely that the proposed pipeline area would affect water quality in the [Great Plains Aquifer] … “[T]here is an extremely low probability that a petroleum release from the proposed Project would affect water quality in [the Western Interior Plains Aquifer.”
Claim #6: Keystone XL will cause gas prices to rise.
This is an old, and false, line of attack, most recently being dredged up by billionaire climate activist Tom Steyer and the group Consumer Watchdog, who claimed in a report this week: “U.S. drivers would be forced to pay higher prices for tar sands oil, particularly in the Midwest. There, gasoline costs could rise by 20 cents to 40 cents per gallon or more, based on the $20 to $30 per barrel discount on Canadian crude oil that Keystone XL developers seek to erase.”
This claim is directly refuted by State Department’s Environmental Impact Statement (SDEIS) which clearly states: “Midwest product prices are derived from Gulf Coast prices, both of which are in turn driven by international (rather than U.S. inland) crude oil prices. Enabling (additional volumes of) WCSB crudes to flow to the Gulf Coast would not change this dynamic.”
Opponents of Keystone XL have also repeatedly claimed that oil sands coming into Gulf Coast refineries would simply be exported. First of all, for the United States to export crude a license from the Department of Commerce is required. Second, the State Department has found Steyer’s claim to be false. From the SDEIS: “In addition to the concerns expressed about exports of refined products, there is a question of whether the oil sands/Western Canadian Select (WCS) crude oil transported into Gulf Coast markets via the proposed Project may be simply ‘passed through’ the market and loaded onto vessels for ultimate sale in markets such as Asia or Europe. Under the current market outlooks, such an option is unlikely to be economically justified primarily due to transportation costs. Once the WCSB crude oil arrives at the Gulf Coast, the refiners there have a significant competitive advantage in processing it compared to foreign refiners because the foreign refiners would have to incur additional transportation charges to have the crude oil delivered from the Gulf Coast to their location.”
What is true is that the recent spike in gas prices has been attributed to turmoil in less stable parts of the world. Importing oil from Canada, rather than from less stable regions, could help ensure stability of gas prices and keep price shocks from occurring.
Claim #7: Conflict of Interest Charge is “Game Over” for Keystone XL.
Two opposition groups, Friends of the Earth and the Checks and Balances Project, are attempting to argue that there is a conflict of interest by one of the firms hired by the State Department to help craft the latest draft environmental assessment. This assertion won over the reporter at Bloomberg News who stated in his piece, “Secrets, Lies, and Missing Data: New Twists in the Keystone XL Pipeline” that this revelation is “game over” for Keystone XL.
This is not the first time they’ve tried this – they said the same thing when State released its previous assessment and they came up empty. As Politico reported last year, “There is no evidence of conflict of interest or bias in the State Department’s review of TransCanada’s proposed Keystone XL pipeline, the department’s inspector general has found. The department did not violate its role in providing unbiased oversight, and there is no evidence that communications between State Department officials, TransCanada, the Canadian government and both supporters and critics of the pipeline violated federal law, according to the IG report delivered to Capitol Hill Thursday and obtained by POLITICO.”
About a month ago, these groups held a press conference claiming the State Department IG was now investigating conflict of interest claims regarding the latest draft environmental assessment, but as Elana Schor with Greenwire reported in her May 29 article, “Little proof to back up liberal watchdog’s IG probe claim”: “A liberal energy watchdog group today provided meager evidence to bolster its claim that the State Department inspector general is probing environmentalist complaints about bias at the private contractor assisting in a high-stakes review of the Keystone XL pipeline.”
Of note about the Bloomberg “game over” story: in a classic case of understatement, the reporter “updated” his piece to include the IG’s findings. As it now states, “Corrects to add findings of inspector general’s report on Cardno Entrix’s alleged conflicts of interest.”
Claim #8: Details on the proposed route for the pipeline are unknown.
The same Bloomberg reporter noted above also includes at the bottom of his article this line: “Which raises a final question: If no one can share the route, how can anyone approve it?” While the route is available online, we will simply note here that at least two people were able to find it, and have written at length about it. See here and here.