The Science of Keystone XL

Mark Green
Posted January 15, 2015

Facts and science over politics. That’s the way energy policy should be made. Too many policy matters in the energy space are being hijacked by politics. The Keystone XL pipeline is one example, as are some of the regulatory initiatives the administration is pushing right now. That’s not the way to craft good energy policy.

Keystone XL has been stuck on the drawing board more than six years because it was turned into a political football by the White House. Cross-border pipelines like Keystone XL historically have gained approval in 18 to 24 months. We’re at 76 months and counting for political reasons, not because of compelling scientific and economic analysis – as advanced in the five reviews conducted by the U.S. State Department.

Keystone XL finally has reached the debate stage in the Senate, but the White House is threatening to veto legislation that would advance the project. More politics, more delay, more missed opportunity for American workers and U.S. energy security. API President and CEO Jack Gerard during a conference call with reporters:

“The White House will shortly have another opportunity to show it is willing lead on energy, based on facts over politics, when the Senate passes the Keystone XL pipeline bill. Facts established by the president’s own State Department support building Keystone XL.”

More Gerard:

“The Keystone XL legislation under Senate consideration will be one of the most bipartisan bills to reach the president’s desk in years. After five positive environmental assessments through six years of exhaustive review, plus his own repeated calls for infrastructure investment, President Obama has no justification to veto the middle class jobs and energy security advances Keystone XL will deliver, and last week the Nebraska Supreme Court removed the last remaining excuse. It’s well past time for the government to stop delaying a process that should have taken 18 to 24 months and let the market work.”

Next the Senate will work, with debate expected over the next several days. We hope for a “clean” pro-Keystone XL bill for the president to consider. A number amendments to the legislation may be proposed, but the best course is to send a strong, bipartisan bill to the president’s desk.

While some amendments deal with other important issues, some are partisan, ideologically poisoned proposals intended to pick political fights instead of advancing an infrastructure project that enjoys strong support from the American public – 65 percent in Fox News’ latest poll. Some examples:

Climate Change – Declaring human activity contributes to higher greenhouse gas emissions

Keystone XL is not about climate change. The latest State Department environmental review – like four others before it – declared that no significant environmental impact will result from the pipeline’s construction, its operation or from the oil sands development the project will help facilitate. State’s analysis found that Keystone XL will have no bearing on oil sands development and thus negligible environmental effect, climate or otherwise:

… approval or denial of any one crude oil transport project, including the proposed Project, is unlikely to significantly impact the rate of extraction in the oil sands or the continued demand for heavy crude oil at refineries in the United States based on expected oil prices, oil-sands supply costs, transport costs, and supply-demand scenarios.

State found that bringing oil sands to market via U.S. refineries is best for the environment compared to rail or barge and is more cost effective, which ultimately benefits consumers. Canada accounts for only 2 percent of global GHG emissions, with oil sands just 0.1 percent of global emissions, which International Energy Agency Chief Economist Fatih Birol recently described as “completely peanuts.”

Market Distortion – Banning the export of crude oil transported by Keystone XL as well as the export of refined petroleum fuel products originating from that crude

In its final environmental review, the State Department confirmed Keystone won’t be an oil export pipeline:

Once (oil sands) crude oil arrives at the Gulf Coast, Gulf Coast refiners 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

Refined products are valuable commodities which, if exported, would bring overseas wealth into this country – just like any other American-made product that is allowed to find markets abroad. This helps the U.S. trade balance while supporting refining sector jobs – good-paying jobs that support individual families and communities. And remember, Keystone XL also will carry domestic light sweet crude from the U.S. Bakken region.

Backers of blanket prohibitions like this clearly misunderstand the way markets work – benefiting American industries and workers. Such prohibitions only serve to keep the free-market system from working properly.

President Obama talks often about doubling U.S. exports. Energy exports – crude oil, liquefied natural gas and refined product – will help reach that goal, supporting thousands of U.S. jobs in engineering, manufacturing, construction and the operation of export infrastructure.

Artificial Job Creation – Require that for every job created by Keystone XL, an equal or greater number of jobs is created through clean energy investments

Industry isn’t against clean-energy investment, having invested $81 billion in greenhouse gas-mitigating technologies between 2000 and 2012 – more than the federal government ($79.7 billion) and nearly as much as other U.S. private industries combined ($91 billion), according to a study by T-2 and Associates.

This effort is an obvious attempt to muddle the Keystone XL debate, which should be about advancing a privately financed, shovel-ready project that would support thousands of U.S. jobs. It’s not about dreaming up a reason to for new government subsidies, again distorting the marketplace using taxpayer dollars.

It’s interesting, given the dismissals by the president and others of Keystone XL’s jobs as “temporary” jobs, that some now would try to connect artificial job creation via government subsidy to pipeline jobs.

Tangential Issues – Increase funding for the Low Income Home Energy Assistance Program (LIHEAP)

Again, the Keystone XL debate isn’t about a government assistance program. It’s about bringing more North American energy to market, which is the best way to help keep energy costs down for all Americans. Building the Keystone XL pipeline will help do that, bringing upwards of 830,000 barrels of oil per day to U.S. refineries.

We welcome a Senate debate that will advance the Keystone XL – one that’s based on fact and science and starts to move this project out of the den of partisan politics into the real world, where it can benefit America in terms of jobs, economic growth and energy security. Gerard:

“All the excuses are gone. … make the decision. It’s very clear this is in the national interest, just like the (analyses of the) four dozen other pipelines that cross the U.S.-Canadian border have concluded, and we just hope the president will move on. It’s a chance to work together in a bipartisan way.”