Column, 615 words

Pipeline to Nowhere

Cheap oil is bankrupting the financial rationale for building the Keystone XL.

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When Maria van der Hoeven summed up the 20-year outlook for global energy investment in London last year, she identified a couple of daunting challenges.

The amount of money required by 2035 is a staggering $48 trillion, the International Energy Agency chief and former Dutch economy minister said. And it’s not clear how many of those trillions of dollars will power climate-friendly options.

“Will policymakers succeed in steering investment towards a cleaner, more secure energy system — or are we locking in technologies and patterns of consumption that store up trouble for the future?” she asked.

There’s no better example of what van der Hoeven meant by “storing up trouble for the future” than the Keystone XL pipeline.

Keystone XL Pipeline

shannonpatrick17/Flickr

After years of being flustered by President Barack Obama’s procrastination, the pipeline’s conservative backers in Congress are trying to force him to greenlight this conduit for some of the world’s dirtiest, most expensive, and most dangerous oil.

The House recently voted in favor of building the 1,200-mile pipeline for the tenth time. The Senate is poised to approve it too. Although dozens of Democrats are siding with Republicans in favor of this boondoggle, those lawmakers lack the votes, so far, to override the veto Obama has threatened.

Senator John Hoeven, a North Dakota Republican and a leading Keystone XL proponent, has turned into a broken record touting what he calls “vital energy infrastructure legislation.”

Despite their matching names and obsession with all things energy, Hoeven and van der Hoeven are polar opposites. She’s a leading player in the effort to wean the world off its dependence on oil, gas, and coal. He’s a “drill, baby, drill” type.

There are many good arguments against the $8-billion pipeline on environmental and labor grounds. People like 350.org founder Bill McKibben and groups like Media Matters need no help explaining them.

Here’s another reason why the pipeline shouldn’t be built: It’s a waste of money.

First, plunging oil prices matter. A lot. They’ve sunk below $47 a barrel, losing more than half their value since last June. Saudi Arabian Oil Minister Ali al-Naimi declared a few weeks ago that he doesn’t care whether oil goes as low as $20 a barrel, a 16-year low. It just might.

By some estimates, a barrel of oil must fetch at least $95 for profits to be extracted from Canada’s tar sands. It’s impossible to say when prices will rebound to that level or if companies will give up on that oil patch, leaving the Keystone XL without much (if any) heavy crude to move.

Ultimately, there could be no oil to haul from Alberta to Louisiana to be refined — or not, if the U.S. scraps its ban on exporting crude — and then shipped to, say, China.

More importantly, tar sands oil production may stop within a few years even if it does prove profitable. You see, global climate talks are heading in a direction that’s likely to result in countries and companies leaving large amounts of oil, gas, and coal in the ground.

A new study published in the journal Nature spelled out where and what kind of fossil fuels would need to be left unexploited. Its authors predict that virtually all Canadian tar sands oil production will stop by 2020.

If it’s built by then, there’d be nothing for the Keystone XL to transport. As a pipeline to nowhere, it would become a monument to wasting colossal sums of money on dirty-energy infrastructure.

John Hoeven should listen to Maria van der Hoeven. If he did, he’d realize the benefits of losing this political battle.

Columnist Emily Schwartz Greco is the managing editor of OtherWords, a non-profit national editorial service run by the Institute for Policy Studies. OtherWords.org.

  • DFinMOzarks

    There are far more logical reasons for not going through with the KXL pipeline than there are arguments for finishing it. To start with, there is the fact that the reason that TransCanada wants to go nearly 2000 miles through the best farmland in the US with a pipeline to the Gulf coast instead of going around 800 miles to the Pacific coast in British Columbia is simple. The Canadian public refuses to allow it. They want no part of that eyesore and potential greasy source of pollution going through their pristine Canadian Rockies. That would be far cheaper and easier for TransCanada but unlike the US, their politicians are not nearly as pliant …A.K.A. ‘sold out’.

    TransCanada is also on record as saying the vast majority of this crude will be for export to China or elsewhere. It’s simply too dirty to refine or use in the US. Our pollution requirements are such that we require sweet low sulphur crude. So if we aren’t going to benefit from it here in the US, who is? That’s easy. It’s big US oil companies. They will get paid well for the efforts of their lobbyists to make this happen. You might ask yourself, why take the risk? The answer again is simple: like the big banks, there is no downside to big US oil going forward with this. They have already greased the skids (no pun intended) for this to happen without risk to them. If this massive pipeline ruptures or is shot up by vandals (as has happened many times to the Alyeska pipeline in Alaska resulting in numerous spills) they will have very limited cleanup responsibility or financial risk. As the banks have done, they will collect all the potential gains themselves and subjected all the risk to the public who will pick up the majority of the tab if (when) there is a calamity …as there always is. The only way this is going to change is if our country is ever lucky enough to elect a president like Teddy Roosevelt who makes these ‘too big to fail’ companies assume the risks that there ventures entail or divest into smaller more solvent companies that will play the game fairly with the public.

    • http://wolfessblog.wordpress.com power to the peons!

      I live in Nebraska and we have one of the largest fresh water aquifers right where the proposed pipeline is supposed to go — imagine the damage that would be done WHEN that pipeline starts to leak. Oil companies are notorious for doing what they do as cheaply as possible so the CEOs can pocket more of the profit, so if this pipeline is built we can count on major catastrophes happening within the first few years after its completion.