Keystone “Wheel Still in Spin”
February 4, 2014
The release of the State Department’s Environmental Impact Statement on the proposed Keystone XL tar sands pipeline initiates the final stage in the permitting process: the 90-day National Interest Determination. The multiple reasons to oppose granting a construction permit include an overriding national interest in forestalling the development of a major new fossil fuel source that will exacerbate global climatic disruption and undermine the transformation of the energy system to decarbonized sources.
The Final Supplemental Environmental Impact Statement (SEIS) on the KXL project remains essentially unchanged from the earlier Draft SEIS in contending that the pipeline would not significantly alter total global emissions of greenhouse gases. The SEIS concludes that, with or without the KXL pipeline, the Canadian tar sands will be extracted and transported to market. Jeffrey Sachs, director of the Earth Institute at Columbia University, notes (Keystone: The Pipeline to Disaster) “the tragic, indeed fatal, flaw of the State Department review”:
The urgent planetary need is clear. The world has to wean itself from fossil fuel dependence in the coming 20-40 years. We simply can’t go on drilling, excavating, and burning every ton of coal, oil, and gas the fossil fuel industry finds. If we do so, the basic “carbon arithmetic” of CO2 buildup spells disaster. …
Using climate science, it is possible to calculate the tolerable limits on total future fossil fuel use. The basic idea is the need for the world to adhere to a “carbon budget,” meaning the total amount of fossil fuels that can be burned while avoiding global warming by more than 2-degrees C.
The State Department Environmental Impact Statement doesn’t even ask the right question: How do the unconventional Canadian oil sands fit or not fit within the overall carbon budget? Instead, the State Department simply assumes, without any irony or evident self-awareness, that the oil sands will be developed and used one way or another. For the State Department, the main issue therefore seems to be whether the oil will be shipped by pipeline or by rail. The State Department doesn’t even raise the possibility that the pipeline should be stopped in order to keep a lid on the total amount of unconventional fossil fuels burned around the world.
So now we come to the battle over the National Interest Determination. The SEIS is a big step in the process, but in releasing it, the State Department stressed that the wheel is still in spin on a final decision on the permit. The Washington Post reported:
[State Department] officials cautioned that they are still weighing whether the project would meet the test of President Obama’s broader climate strategy.
The report “is not a decision document,” said Kerri-Ann Jones, assistant secretary of state for oceans and international environmental and scientific affairs. “This document is only one factor that will be coming into the review process for this permit” sought by TransCanada, an energy giant based in Calgary, Alberta. …
Jones, the State Department official, said the report “presents considerable analysis, but it does not answer the broader question about how a decision on the proposed project would fit into the broader national and international efforts to address climate change or other questions of foreign policy or energy security.”
She added that the study relied on assumptions about pipeline capacity, oil prices and transportation and development costs that were “uncertain and changeable.” …
“Secretary Kerry is just really beginning his involvement in this process,” Jones said. “There is no timeline for his deliberations.”
The State Department website for the Keystone XL project outlines this procedure:
The Presidential Permit review process now focuses on whether the proposed Project serves the national interest, which involves consideration of many factors including: energy security; environmental, cultural, and economic impacts; foreign policy; and compliance with relevant federal regulations and issues. During this time, the Department will consult with, at least, the eight agencies identified in Executive Order 13337: the Departments of Defense, Justice, Interior, Commerce, Transportation, Energy, Homeland Security, and the Environmental Protection Agency.
A 30-day public comment period begins on February 5, 2014 and will close on March 7, 2014. During this period, members of the public and other interested parties are encouraged to submit comments on the national interest determination to http://www.regulations.gov.
In a departure from all of its previous environmental reviews, State recognized there are conditions under which Keystone XL would enable substantial tar sands expansion and associated climate emissions. According to State, if proposed tar sands pipelines continue to be blocked and oil prices remain relatively low (both real possibilities), the approval of Keystone XL would enable more than 830,000 bpd of tar sands expansion which would bring a major climate impact. According to the State Department, at prices below $75 a barrel, the cheapest tar sands expansion projects will be vulnerable to cancelation without Keystone XL. While the State Department seems to conclude this scenario is unlikely, the facts suggest otherwise:
Lower oil prices are likely
While State believes that the low oil price scenario is unlikely (projecting WTI prices to exceed $105 by 2020), the markets are placing big bets that State is wrong.
The traders at the Chicago Mercantile Exchange (CME), where futures contracts for WTI are bought and sold, believe State’s “low oil price” scenario in likely. The cost of a barrel of WTI shows a consistent decline from its current price of $97.00 a barrel to reach $73.00 by December 2019. The International Energy Agency concurs with future traders, estimating that oil prices will decline by about $20 a barrel over the next five years. These oil prices, which assume c business as usual climate policies, would still put the cheapest tar sands expansion projects in jeopardy making transport by rail unprofitable.