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Memo to the White House: Approve Keystone XL

The US must secure its energy supply, support its economy and sign up to more Canadian oil, starting with a new pipeline

Stop the Keystone XL pipeline project and you stop Canada’s oil sands. Stop the oil sands and you stop a global shift to unconventional oil, forcing consumers to find other, greener ways to fire their cars and propel their aeroplanes. We can’t burn all of the bitumen beneath northern Alberta’s wetlands; to do so would release too much stored carbon dioxide (CO2) and kill efforts to stop catastrophic climate change.

Boiled down, those are the arguments the oil sands’ many opponents are using as they press the White House to reject TransCanada’s proposal to build a $7 billion oil pipeline from Hardisty, Alberta, to Texas’s Gulf coast refineries (PE 4/11 P26).

The cacophony coming from both sides is growing noisier ahead of a decision expected in November. There are compelling arguments both against and in favour, but invariably they have little to do with the operation of a pipeline.

TransCanada gains nothing from higher oil prices – it receives a fixed toll for shipping – and it’s not responsible for emitting the greenhouse gas that causes climate change, just as McDonalds isn’t the reason people are fat. As the firm’s chief executive Russ Girling complained to Petroleum Economist this summer, XL has become a proxy for the larger squabble surrounding oil-sands development (PE 8/11 p39).

But it’s naive for savvy corporate types to think the future of the oil sands isn’t the issue under a debate for which the terms have largely been set by the activists. And these XL fighters are an odd group with an unreal take on the world. The pipeline is a “terrible idea”, says Mark Ruffalo, like fellow protestor Daryl Hannah one of many Hollywood actors whose livelihood doesn’t depend on construction projects in the US Midwest, such as XL. “It’s time for us to get off fossil fuels.”

Such a simplistic approach hasn’t stopped these activists from tapping higher powers for spiritual support. Last month, the Dalai Lama and Archbishop Desmond Tutu joined the chorus against the pipeline, giving the campaigners a seal of moral virtue. These gasoline-guzzling A-listers know an easy target when they see one.

After Macondo, beating on the oil industry is barely a fair sport anymore. Ruffalo, deploying his deep knowledge of pipeline construction, trench protection and modern welding practices, reckons a pipeline spill from XL is “inevitable”, although federal authorities say the line would face tougher operating rules than any other on the continent.

Hollywood, meet geopolitics

Step away from the emotion of the fight, though, and the arguments against XL look delusional and parochial. The West is on the edge of a severe economic downturn. Strong oil prices – a reaction, in large part, to tightness in the global supply demand balance – could help push the world back into recession (PE 9/11 p2). The US is unique among the big oil-importing countries, because it has easy access to a stable and almost inexhaustible supply of oil from a steadfast ally just across the border.

Although the oil sands are already the largest single source of US imports, turning down TransCanada’s pipeline will end that trend. It may also exacerbate another problem. Cushing, Oklahoma, the landing point for imports into the Gulf states, is awash with crude (PE 6/11 p19). But insufficient pipeline access out of the hub means refiners in the Gulf can’t access the oil. This has supported high gasoline prices; another drag on the US’ efforts to fend off recession.

XL would provide that needed capacity from Cushing. It would also support development of the US’ own prolific unconventional oilfields in the Bakken, by providing an outlet for that new and growing source of domestic oil. Both developments would help the US economy. For now, both depend on XL.

Ruffalo, Hannah and others may not know it, but new reliable, secure supplies of oil – right on your door step – aren’t easy to come by these days. Turning down 1 million b/d of oil through XL won’t mean US import needs fall by the same amount; it will just mean more imports are required from less-stable suppliers. If the activists would prefer their oil to come from Saudi Arabia, Nigeria, Angola, Russia, Iran, Venezuela or Libya, they should say so. Such geopolitical realities don’t feature in the activists' thinking, although they may influence the White House.

Dirtier than what?

XL’s opponents are instead focused on the green debate, arguing, in the words of Democratic congressman Henry Waxman, that the project would increase the US’ reliance on the “dirtiest source of fuel available”.

Their objections are true, in part. Strip mining is ugly. Trucks and shovels have destroyed large swathes of Alberta’s wetlands and restoring them, as the miners must, takes years. The projects use a great deal of water. And the mines leave behind toxic lakes of residue, blighting the landscape and endangering local nature (PE 9/11 p44). Alberta’s government has been a reluctant regulator of this, always a day late and a dollar short.

And the oil sands belch CO2 into the air. Even on the so-called well-to-wheels basis – industry lobbyists’ preferred method of calculating oil-sands emissions – the projects are dirtier than conventional fuels used in the US (although, according to some studies, not by anything like the margin activists claim – PE 11/10 p32).

But rejecting XL won’t change any of this and may even make matters worse. The US won’t have a monopoly on oil-sands exports forever. China also wants Alberta’s bitumen. At least one pipeline to the west coast of Canada will eventually be built, opening the Asian market and rewarding the Chinese firms that have built up positions in the oil sands since 2005.

Ceding influence in the oil sands to China wouldn't serve the US' strategic interests. And it certainly wouldn't help green the oil sands, especially when China’s own environmental standards are well below North America’s.

Get your own house in order

As a long-term partner in the future of the oil sands, the US would exert new influence over the way they are developed. XL would give it that – and bring other benefits, too: ending the bottleneck at Cushing; underpinning development of the Bakken; lowering costly imports from less-reliable exporters; and, promises TransCanada, yielding new jobs and tax receipts in weak regions of the economy.

If greenhouse gases are truly a priority, activists should first deal with lower-hanging and far juicier fruit, starting with the US’ addiction to coal-fired power generation, which dwarfs the oil sands’ contribution to climate change. At the same time, however, approving XL should go hand in glove with efforts to lessen the US’ greed for oil. A long-term energy policy would promote natural gas and renewable energy over coal; support the electrification of transport; and relentlessly tighten fuel standards.

Such a strategy may one day render the pipeline obsolete. But in the decades until then, the White House must secure its energy supply, support its economy and sign up to more Canadian oil, starting with a new pipeline.

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