The recent mid-term election in America has brought the Keystone XL pipeline to the forefront of American politics again. Washington DC has enthusiasm and momentum to push through legislation that will approve the final phase of the Keystone Pipeline System: the Keystone XL. But how did America get involved between the National Energy Board’s ambition to get bitumen to China and other foreign markets? The answer is simple: Alberta is landlocked and a pipeline across America is one route to economically get the bitumen to China or other foreign markets.
China needs energy. China faces many challenges to get enough energy to keep their economy moving and producing for over 1.3 billion people. China has made some remarkable moves toward making clean energy recently when they endeavored to start building more IGCC plants for electricity production from syngas. IGCC technology with CO2 sequestration is one of the best weapons the world has to meet the energy needs we have while moving toward a hydrocarbon free future. It’s encouraging to see China invest in IGCC technology as it gives hope that someday we can see Shanghai and Beijing with air as clean as we have in our Michigan woods.
China has invested over $10 billion into Canadian energy exploration. We remember when EnCana was exploring the Michigan Basin that PetroChina invested $1.2 billion into a joint venture with them. EnCana was exploring in the Michigan Basin between 2009 & 2013. Sinopec also invested $2.5 billion into Devon, who tried some Michigan Basin exploration between 2011 & 2013. China has partnered with companies like Encana, Enbridge, and Devon searching far and wide into countries like America, Canada, Brazil, and Australia to help feed their energy needs.
Proponents of KXL say it’s not true that product from KXL will go to markets outside the US. TransCanada has put out this document to dispel what they consider myths. Please read the document linked in the last paragraph closely and note that TransCanada does not own the product that will flow within the pipeline and technically has no say as to how it will be used. Notice also which figures TransCanada focuses on with respect to jobs and economic activity. Some proponents of KXL even use specific figures like 95%+ of the product will be destined for US markets. When those same proponents of KXL are asked to support specific figures like these they continuously fail to source such claims with links . If the 95%+ of KXL product will ultimately be consumed by US markets before or after refining, why not just stipulate that in any U.S. legislation? Why balk at reasonable questions with attacks on character? Many multi-billion dollar annual revenue international companies in the API consortium have a history of malfeasance and releasing information that is misleading. Why not put your money where you mouth is and just write it in the legislation?
Alberta Canada is land locked and they have bitumen and natural gas that China wants for more energy and for a return on their investment. In 2005, PetroChina signed a deal to cooperate with Enbridge on a pipeline project to ship heavy crude from Alberta to Kitamat called the Northern Gateway Pipeline (NGP). The First Nations, however, had other plans for their lands and blocked approval of the pipeline. The NGP was DOA and is still not fully approved as of this publishing. China is not happy about the unapproved NGP. The NEB has ambition to get a pipeline to a deepwater port to get Canada’s bitumen to China by supertanker. When it appeared the route west to port from Alberta was blocked, the NEB thought they might have better luck with an alternate route through America. TransCanada proposed the Keystone XL (KXL) Pipeline. The KXL would be owned by TransCanada and its purpose will be to get bitumen to a deepwater port in Port Arthur, Texas for shipment to foreign markets like China by supertanker.
The KXL has little to do with America other than geography and will have limited upside for the American economy. It will most likely have greater downside to the US economy as it would potentially cause increased fuel prices for Midwest consumers more than offsetting its limited upside. The KXL will only provide a temporary economic gain in the form of temporary construction jobs. KXL will also pose long term risks of rupture and groundwater contamination like we saw at Michigan’s Talmadge Creek in the Kalamazoo River system. The KXL will cross the Ogallala Aquifer which spans eight states, provides drinking water for two million people, and supports $20 billion in agriculture. Environmental concerns are a point of contention and delay in KXL’s approval because of the risk posed to the Ogallala groundwater system. We in Michigan were told by Enbridge that advanced monitoring systems on the 6B pipeline would provide adequate safeguarding in case of a rupture yet it was 17 hours and 843,444 gallons spilled before the spill was discovered.
Let’s take a quick look at both of these cousin pipelines the NGP & the KXL:
THE NORTHERN GATEWAY PIPELINE
The Northern Gateway Pipeline (NGP) is a twin pipeline from Bruderheim, Alberta, to Kitimat, British Columbia. The eastbound pipeline would import natural gas condensate and the westbound pipeline would export diluted bitumen from the Athabasca tar sands to the marine terminal in Kitimat for transportation to Asian markets by oil supertankers. The NGP would be 731 miles and average 525,000 bbls of dilbit west to port each day. The eastward pipeline would carry 193,000 bbls per day of natural gas condensate used to dilute the bitumen to send it back the other way. Calgary based Enbridge would develop the pipeline at approx. $6.5 billion.
THE KEYSTONE XL PIPELINE
The Keystone XL Pipeline (KXL) would be 1,178 miles and carry dilbit from Hardisty Alberta to Steele City, Nebraska where it would hook up with other pipelines that run to the Midwest and toward the Gulf Coast. The other phase of KXL would extend to Houston and the deepwater port of Port Arthur, Texas. The KXL would carry an average of 830,000 bbls dilbit per day. TransCanada would develop the pipeline at approx $5.4 billion.
Both of these pipelines would expand the market for tar sands hydrocarbons and supply would be reduced because of China’s demand. Increased demand would put upward pressure on fuel prices for Midwest energy consumers in the USA. Alex Pourbaix, TransCanada’s president for energy and oil pipelines, said in a congressional hearing that the KXL would bring energy security to the United States. But when Representative Ed Markey of Massachusetts asked if he would support legislation that guarantees that products refined from it would only be sold in the United States so US citizens could realize these security benefits Mr. Pourbaix said “No, I can’t do that”. The term now used in official jargon to describe KXL is that it would provide enhanced energy security to the US.
Canada produces 3.9 mmbod of crude as of 2012 and that is a number that continues to rise each year. Canada exports 1.6 mmbod and imports 770,300. If both pipelines were approved, it would increase Canada’s export numbers by 1.3 mmbod (or 86%) to over 2.9 mmbod. Importing into the east coast Canadian ports would remain relatively constant. This would create a large boost in Canadian GDP. The wealth created by this increased export and production would be concentrated in Edmonton & Calgary. Energy prices for Canadians might not see much downward pressure if the market expands and east coast importing remains constant. Canada’s GDP, however, will perhaps see its largest one time increase ever; this is what motivates Harper and the NEB.
This issue is more about profits through market influence and commitments made by Canadian companies with China than it is about jobs, energy security, and economic benefit for American taxpayers. These competing interests should be well understood and weighed carefully by the American people. The number of jobs created by KXL has been published in this document.
Proponents of KXL in America generally quote this passage from page 25 of the document link in the last paragraph:
During construction, proposed Project spending would
support approximately 42,100 jobs (direct, indirect, and
induced), and approximately $2 billion in earnings
throughout the United States. Of these jobs,
approximately 3,900 would be direct construction jobs
in the proposed Project area in Montana, South Dakota,
Nebraska, and Kansas (3,900 over 1 year of
construction, or 1,950 per year if construction took
2 years). Construction of the proposed Project would
contribute approximately $3.4 billion (or 0.02 percent)
to the U.S. gross domestic product (GDP). The
proposed Project would generate approximately 50 jobs
during operations. Property tax revenue during
operations would be substantial for many counties, with
an increase of 10 percent or more in 17 of the
27 counties with proposed Project facilities
People should also take time to read this paragraph on page 26 which is on the very next page:
Once the proposed Project enters service, operations
would require approximately 50 total employees in the
United States: 35 permanent employees and 15
temporary contractors. This small number would result
in negligible impacts on population, housing, and
public services in the proposed Project area
The NGP and KXL are endeavors between Canada, China, and other foreign markets. US legislators are only involved because the US owns the land between Northern Alberta and a deepwater port in Texas. Some US legislators are stumping about jobs related to KXL and have accepted campaign contributions from supporters of KXL legislation. The jobs to build the KXL are temporary jobs. The highest paying jobs among them are for Canadian expats. For our news organizations and lawmakers to focus so closely on the American job creation aspect of this pipeline is short sighted, myopic, and does not address much larger economic issues that have longer term impacts like increased gas prices for US consumers.
Once the pipeline is complete KXL jobs will decrease over 99.9% from 42,100 down to 35. Some ads in supporting approval of KXL say if you don’t support KXL, you don’t support the United States workforce and job creation for Americans. This is a disingenuous accusation and diverts attention from larger issues at play like the cost of cleanup. Clean up can be very difficult if a pipeline ruptures in the summer like we had in Kzoo, but summer cleanup conditions are still much better than if an oil pipeline ruptures under ice. Cleanup costs are considered worst case scenarios when a pipeline ruptures during the winter near flowing water under ice. During the winter, environmental remediation costs can be nearly incalculable to measure or forecast depending on downstream flow and how much oil was spilled.
Long after the pipeline construction jobs are gone, the KXL bitumen pipeline will continue to pose financial risk to the American taxpayer because of increased environmental remediation cost risk. Environmental remediation costs on Enbridge’s 6B in Michigan are already at 20% of the total investment of what KXL would cost and 6B poses less potential risk than KXL.
Bitumen is like black peanut butter or molasses. If you have some in a jar and turn that jar upside down, it will move very slowly. So how do you get bitumen to flow in a pipeline? You turn it into dilbit. A dilbit is a bitumen diluted with one or more lighter petroleum products, typically natural-gas condensates such as naptha. Diluting bitumen makes it much easier to transport, for example in pipelines. In the case of a spill or rupture in the pipeline, the lighter volatile petroleum products in the dilbit separate from the heavier bitumen and evaporate. If this happens in water, like we saw at Talmadge Creek in Kalamazoo, it can make the clean up much more costly because the heavy bitumen sinks in water soon after the naptha is gone. This increases the risk to people and industry that depend on uncontaminated freshwater.
In Michigan we saw Enbridge spill 843,000 gallons of dilbit into the Kalamazoo River, which is a tributary of Lake Michigan. Heavy rains caused the river to overtop its banks. Oil was carried over 35 miles downstream. Complete islands were removed from the Kalamazoo River and restored during remediation efforts to decontaminate the river. As we have seen again and again with oil spills over the years, the original estimate for cleanup costs in 2010 was light. Here we are at the date of this publication and the total costs for cleanup are now at $1.21 billion and climbing. Even with the extensive four-year effort and $1.21 billion dollars spent, random oil turds will lurk for decades in the Kalamazoo River that feeds Lake Michigan. Costs related to sectors damaged by contamination like agriculture, fishing, and tourism cannot be estimated.
The greater environmental and economic risk lies not in the pipeline owner cleaning up any potential spill but in the possibility of a company going bankrupt when they did not plan on a $1.21 billion cleanup. This is just a reality; a pipeline can fail. If companies fail and fall into bankruptcy as a result of these costly cleanup efforts, the environmental remediation costs become the taxpayer’s burden. Ask your local legislators about this topic to understand their viewpoints. If you don’t know your local legislators very well and you want to learn more about them you should check out sunlightfoundation.com.
The NEB wants to increase the market for its natural resources to expand and grow the Canadian economy. China needs energy and has invested in Canadian natural resources. Private companies that finance campaigns for US legislators hope the legislators they helped get elected will allow them to use public resources for private profits. As citizens we should want to see China, Canada, and America do what’s best for their and our energy needs, the environment, and their citizenry. But, as Americans we should also understand well whether economic benefits serve our public interest or moneyed and monopolistic interests by asking smart questions.
China’s endeavor into more IGCC electricity plants and CO2 sequestration is a great way to produce a lot of cleaner energy while removing all 3 of the most notorious coal associated pollution concerns. We want to help our friends in China and Canada and do our best for American economic interests. Expanding bitumen infrastructure and growing dependent upon it is an unsustainable long term energy solution. We should encourage technology sharing with regard to coal and lignite gasification and CO2 sequestration while we work toward the solar production of pure hydrogen from water for all of our stationary and transportation energy needs. We can power all of the world’s energy needs without bitumen and should work to decrease our dependence on it over time whether the pipelines are approved or not.
The technology to power the world’s energy needs from fuel cells and H2 from water is here now. Although we’re many years from having the infrastructure to make all of our energy from sun & water, we must take steps toward making the clean & renewable energy future stronger by encouraging job creation in this new sector of energy infrastructure and follow Japan & Korea’s lead. We can meet the world’s energy needs with near term solutions like IGCC plants and CO2 sequestration. Natrual gas and synthetic natural gas show more economic upside toward graduating to a post hydrocarbon economy than do crude oil; and specifically bitumen. We can make all the hydrogen we need from many different sources. All countries would require zero energy imports which could substantially reduce military spending which is approx 21% of our federal budget. Working with our friends in Canada and our friends and trading partner in China, we can build a stronger economy and environment by working toward phasing out products like bitumen as a fuel source sooner than later and bringing cleaner energy solutions to everybody. It’s the smartest thing for protecting our groundwater and our energy future for generations to come.
Please check up on the sources linked in this document and ask questions. Ask your congressmen, congresswomen, and governors the following questions:
- With regard to job creation, what percentage of the jobs created as a result of KXL approval will remain after construction of the pipeline is complete?
- With regard to energy security, I would ask the same question Ed Markey of Massachusetts proposed: would you be willing to support US legislation that would require KXL bitumen to be refined and consumed by US consumers until America is energy secure/independent before allowing its export?
- With regard to energy prices for US consumers ask your legislator: what do you expect will happen to US consumer fuel prices if tar sands capacity to US refineries remains constant while market demand increases by 1.35 million bbls per day due to export?
- With regard to a rupture or spill, ask: if the owner of the pipeline receives bankruptcy protection from remediation costs, who would cover the upwards of $1 to $1.5 billion price tag on environmental remediation and lost revenue from other affected sectors?
- With regard to a rupture or spill on an international or state border, who would act as an authority to manage environmental remediation efforts?
Ask your legislators and governors about these questions and make sure you’re satisfied with their answers. It is up to all of us to protect our fresh water resources for a prosperous economic future and clean fresh water for future generations.
The full suite of Final Supplemental Environmental Impact Assessment documents for Keystone XL is located here.
This document, which was also quoted above, is relevant and has a publish date of January of 2014. This document is being quoted heavily by supporters and detractors of KXL.