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Controversy over Meaning and Timing of Oil Pipeline Report

TransCanada says their proposed pipeline could free the U.S. of Middle Eastern oil imports. Opponents say DOE's report shows the pipeline is not needed

By Elizabeth McGowan

Feb 4, 2011

The report also states that more Middle Eastern oil will flow to the U.S. if Canadian authorities allow companies to build a pipeline from Alberta, through British Columbia, to the Pacific Coast. That’s because it would be cheaper to ship oil via pipeline to the Pacific where it can be transported to Asia by tanker than it would be to pump it through the Keystone XL to the Gulf Coast.

According to the report, those savings on shipping would translate to oil companies earning at least $2 more per barrel by selling to Asia.

"The critical factor is losing oil to Asia, not increasing import capacity into the United States," Blackburn said about insights from the report's authors. "We've already rolled out two brand new red carpets for Canadian oil. A third won’t make a difference for years, if ever, especially if the Chinese roll out a more appealing red carpet in the meantime."

Confining oil sands oil to North America would benefit consumers' wallets, Blackburn said, but oil companies eager to fill their own pocketbooks are pressuring Canadian and U.S. governments for coastal access.

Building Keystone XL would serve to bolster Gulf Coast refineries, he said, adding that Midwestern refineries would likely expand if the proposed pipeline is nixed.

Why the DOE Study is Useful

The Ensys study is fair because it covers the territory requested by the State Department, Barratt-Brown said, but it is far from complete.

"I think the DOE report is very helpful overall because it makes the point that this tar sands pipeline is not needed," she said, adding that the country already has two pipelines to accommodate Canadian oil sands — though neither one extends to the Gulf Coast. "The tradeoffs are too great and the report puts a fine point on that."

Specifically, she noted that it doesn't make any sense to rush to approve a pipeline with an expected lifespan of 50 years. Mining operations not only compromise Alberta’s boreal forests — a geography she referred to as the "Northern Serengeti" because of its tremendous biological diversity — but it also threatens the Ogallala Aquifer that Nebraska and other surrounding states count on for drinking water and agriculture. 

A yes or no on Keystone XL's future won't come Friday at a meeting with a prime minister intent on chatting up both Canadian oil and pipeline company interest in expansion of the tar sands, Barratt-Brown said.

Instead, she concluded, the decision will be informed by a mix of factors — the Ensys study, the revised environmental impact statement, the input of Congress and "the growing chorus of voices along the pipeline route afraid for their land and water, and in the refinery communities in the Gulf already struggling for cleaner air."

DOE Report

The DOE study DOES NOT say that mid east crudes will replace Canadian crudes if XL isn't built. It says (all else equal) mideeast crudes will replace canadian crudes if the Western pipelines (Gateway, TransMountain) ARE built. The report states this clearly "Essentially, the more WCSB crude moves to Asia, the more MiddleEast crude (displaced from Asia) moves into the USA" (p.103).

So the priority for those concerned about reducing Mideast oil imports to the US should be to reduce demand and stop the Western pipelines, not to start XL.

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