The TransCanada tar sands pipeline project is bad for the economy, and worse for the environment. Yes, we talk a lot about how peak oil, more specifically oil producers’ inability to keep up with civilization’s demand, tanks the economy every time it gets too expensive.
And it’s true that the estimated 830,000 barrels a day from the Keystone XL Pipeline (KXL) would slightly (a shade under one percent of current world daily production) mitigate the issue. But so what? As the economy expands — if it’s expanding on the back of oil — we’ll just grow and outpace the additional supply and then be back in the same cycle: expensive oil, tanking economy, lower oil demand, cheaper oil, renewed economic expansion, expensive oil again, repeat.
So the argument that our own oil thesis suggests that we need the Canadian tar sands oil won’t fly. If anything, building the KXL will prolong our oil dependence and make the inevitable, emancipating transition to renewables even more difficult.
The Keystone XL pipeline project proposal will be perhaps the most key event in the recent history of either advancing or thwarting the growth of the ultimately necessary green economy. As such, it’s been very well documented. For us, the key observations are:
- Recovering tar sands requires a strip mining operation, leaving only a moonscape-like terrain in its wake
- Much of the proposed 95,000 square miles to be mined is in Canada’s boreal forest, which will be irreversibly damaged and no longer able to support its eco system and no longer able to sequester carbon
- The lifecycle of the resulting petroleum products (“well to wheel”) is as much as 82 percent more carbon intensive than is the U.S. average for conventional oil
- Leading U.S. climatologist Dr. James Hansen believes if we burn a significant quantity of Canadian tar sands oil it will become “implausible to stabilize climate and avoid disastrous global climate impacts.”
- Canadian tar sand reserves contain a few hundred gigatons of carbon: Dr. Hansen further notes that Canadian “tar sands are estimated…to contain at least 400 GtC (equivalent to about 200 ppm CO2).” Meaning if we burn all Canada’s tar sands, we will on that basis alone be committed to a total of at least 600 parts per million atmospheric carbon, a level associated with approximately 6.3 degrees Fahrenheit of global warming, causing sufficient damage to “likely impoverish much of humanity.”
- The process of getting oil from tar sands is energy intensive, requiring heavy consumption of natural gas
- The process is also very water intensive, requiring four times more water (1,000 liters of water per barrel), than conventional oil. And as the Guardian has pointed out “there are alternatives to fossil fuels but really no alternatives to fresh water.”
- Water used in the process becomes dangerously contaminated, with multiple carcinogens and other poisons, leaving toxic tailings ponds
- No surprise, then, that the Toronto Star reported last week, “Deformed fish found in lake downstream from oilsands.”
- KXL will thus almost certainly damage the key Athabasca watershed: as recently reported in Nature: “Oil-mining operations in Canada’s main tar sands region are releasing a range of heavy and toxic metals — including mercury, arsenic and lead — into a nearby river and its watershed, according to a new study…[including] 13 elements classified as priority pollutants.”
- Representative Henry Waxman has said of the pipeline that it will carry “the dirtiest source of transportation fuel currently available.”
- Track record concerns: in a letter to Secretary of State Hillary Clinton, seven U.S. senators note that the already-existing Keystone tar sands oil pipeline (which terminates in Oklahoma) “has been in operation for less than one year and has spilled 12 times.” The KXL will traverse much of America’s key watershed and farmland, and there’s no reason to expect it to perform any better.
The single KXL upside I might have cited was energy security, something along the lines of, “well at least we’re getting the oil from a friendly ally, and the dollars we’re exchanging for the oil won’t end up funding hate-teaching madrassas somewhere.” But we don’t even get that. The reason the pipe terminates in Houston is so the KXL oil or its refined products can be boarded on tankers and shipped abroad, making it difficult to see how the project lessens our dependence on OPEC.
On the contrary, shipping all this new supply offshore means that sellers such as the Saudis will retain their power to price oil in the U.S. as high as they see fit. So, effectively, the main benefits of KXL to the United States are profits to big oil (ConocoPhillips is a key backer of tar sands oil production, as may be ExxonMobil and Dutch/global oil giant Shell, but disclosure of the project’s partners is surprisingly hard to come by), and the approximately 4,000 project jobs that building the pipe will create (that number is from KXL developers’ own report to the U.S. State Dept.).
Apart from that all we get is the risk of a hosting a 1,700 mile pipe designed to make the dirtiest kind of oil available to the rest of the world. Well, that and a warmer climate, and dirtier air and water, all of which will end up costing far more than total KXL profits, in the long term. And, no question, the project will be profitable to its backers: the IEA figures there may be as many as 315 billion barrels of oil in Canada’s tar sands, and all-in costs of recovery are $40 per barrel at the high end. Oil’s currently about $85 per barrel, so…well suffice it to say the math is pretty compelling for the beneficiaries. The problem, as ever, is that the profits will be funneled to a select few while the economic costs will be borne by everyone. Another classic case of privatization of profits/public risk and loss. And all for what’s been called “the tar sands road to China.”
And 4,000 short-term jobs don’t help the economy much overall; hundreds of thousands of permanent green jobs will be far healthier for us in all ways (more on green economy jobs in later posts). And the same folks that will be temporarily employed to build the pipeline could be permanently employed to build out our renewable energy and next economy infrastructures. Green Alpha co-founder and CFO Jeremy Deems came up with a very succinct way of characterizing the KXL: “economic disaster, environmental suicide.”
Yet up against all this comes the official U.S. Department of State conclusion that the pipeline’s impacts will be “limited.” State’s KXL review could have been neither “rigorous” nor “transparent,” in spite of reports of reassurances from Secretary Clinton that “we are leaving no stone unturned in this process.” Experts at the EPA write that, on the contrary, State’s report excluded such factors as “the purpose and need for the project, potential greenhouse gas (GHG emissions associated with the project, air pollutant emissions at the receiving refineries, pipeline safety/spill response, potential impacts to environmental justice communities, wetlands and migratory birds.” Or, you know, pretty much everything.
But as far as State is concerned, it’s pipeline approved; “Keystone XL’s supporters said the State Department decision catapulted the project toward eventual approval.” Let’s hope not. Because the economic benefit, such as it is, will be to already wealthy oil and banking executives. Nice for them, but frankly pathetic up against the negative consequences. President Obama could still decline to allow the project, but that seems unlikely.
The lesson here is that it’s very difficult, and in some ways unwise, to put yourself between oil executives and potentially trillions of dollars of revenue, even if you’re the U.S. government, and especially if you want to get or stay ahead of your opponents in a race for campaign dollars. So, as always, we have to assume that there will be no top-down policy solution to prevent climate change or to advance the next economy. We have to do this for ourselves, solving it from the bottom up, developing and investing in better and cheaper forms of energy, and developing the best solutions to civilization’s looming threats.
Garvin Jabusch is the cofounder of Green Alpha Advisors, LLC and manages The Sierra Club Green Alpha Portfolio — a unique blend of Green Alpha Advisors’ Next Economy universe and the Sierra Club’s proprietary green-investment guidelines.
Crazy Markets and the Next Economy