Sunday, February 12, 2012

Why the opponents of Keystone XL are wrong

I believe the fight against the Keystone XL pipeline is one of the dumbest environmental causes to come along in a long time. What is most shocking to me is how badly informed the opponents of the project are. There seem to be three main arguments against the project.

Spills from the pipeline represent an environmental hazard?

As this graphic shows, the US is already covered by thousands of miles of crude oil pipelines. They were mostly built to carry Texas and Rocky Mountain oil to the Midwest.

Kinder-Morgan's Platte pipeline already moves 145,000 bbl a day across Nebraska, right across the Ogallala aquifer. Somebody has given the environmentalists the idea that an oil pipeline would present a huge threat to the aquifer. They seem to be totally unaware that there has been an oil pipeline operating trouble free in the region for over 60 years.

The oil will all be exported?

This is wrong. As of 2010, the US was a net importer of petroleum products, to the tune of 269,000 barrels a day, which represents 1.4% of domestic demand. It is true that US refineries, particularly those on the Gulf Coast, do export some products like diesel.   The graphic shows the nine largest net buyers of oil products from the US. It turns out that a lot of US net products exports are going back to the countries that sold us the crude oil in the first place.

 The US has many of the world's most sophisticated refineries, and they can handle heavy, high sulfur and/or acidic crude oils which most refineries won't touch. Mexico in particular produces a lot of high sulfur heavy crude from their Cantarell field. They send it to the US for refining, and then buy back some of the gasoline, diesel and jet fuel produced. Why don't the Mexicans build their own refineries? Because producing oil is far more profitable than refining it!

What about places like Singapore? It turns out almost all of their purchases are fuel oil. This is a nasty substance which is only used by power plants and large ships. Our electricity generators are moving away from it because natural gas is now much cheaper.

80% of what Japan buys is petroleum coke. This is a coal-like byproduct of the refining process, which the Japanese use in cement furnaces. Almost all of what Holland imports is diesel. These exports are offset by imports of gasoline from other parts of Europe. Diesel cars are very popular in Europe, so they have a surplus of gasoline.

That leaves Panama and Chile as the only regions actually taking energy out of the US market. Both countries have strong trade links with the US and neither has any oil of their own.

In the past year US product exports has gone up, and in November 2011 the US had net exports of  778,000 barrels/day, or 4% of domestic demand. This was due to surging fuel demand from Latin America, especially Mexico. China also started importing our petroleum coke, which they will use as a coal substitute.

The bottom line here is that very little of the gasoline, diesel and jet fuel produced from the oil delivered by Keystone XL is likely to be exported. US product exports are mostly either exports of refining services or of low value products that we don't need.

We need to stop the pipeline in order to stop tar sands development?

Is this likely to work? No! With oil at $100 / barrel, the Canadians have many export options. They can build pipelines to the west or east, or they can ship by rail. What makes Keystone XL unique, is that it sends the oil and the benefits to the US. The tar sands oil is very similar to the crude that Mexico produces from Cantarell. The Cantarell field is in steep decline, and Mexican exports to the US have declined by half a million barrels/day over the past 6 years. This decline is expected to continue. Keystone XL will provide a replacement for the Mexican oil.

What about global warming?

While researching this issue I noticed something else. US consumption of oil products fell nearly 8% between 2005 and 2010, a reduction of 1.6 million barrels a day. Some of that is due to the recession, but I think that there is a real efficiency improvement as well.

Environmentalists and the Obama Administration have pushed through steep increases in auto fuel efficiency standards, so this decline is likely to continue. US coal consumption is also down about 10% over the same period. As a result, US greenhouse gas emissions are slowly moving in the right direction.

If people want to reduce greenhouse gas emissions, they need to focus on things that might work. Stopping Keystone XL will hurt the US while doing absolutely nothing to stop global warming. The Keystone XL fight is a waste of time and money for the environmental movement. Global warming is a global problem and needs a global effort lead by the US and China.

Environmentalists need to work out how to move both countries away from coal, which is cheap but has many disadvantages as a fuel. Low US natural gas prices offer an opportunity here. Enormous budget deficits in the US may offer an opportunity for introducing a carbon tax. Environmental groups also need to do a far better job of defending the science against politically motivated attack.

EIA US net imports by country and product
Lincoln, Nebraska newspaper article about the existing oil pipeline crossing Nebraska
Energy blogger Rob Rapier's case for Keystone XL
Nocera column one
Nocera column two

1 comment:

  1. The price of oil has dropped and so the push to lower costs by getting this pipeline built is even more urgent.

    The point of opposing the pipeline is to keep costs high so that alternative energy can remain competitive and we can reduce carbon emissions. Cost of oil production never includes the environmental impact of rising oceans (or various other side effect costs) and we have no effective carbon tax so this strategy is a viable one and so I don't think they are wrong. Your arguments have merit except when it comes down to keeping costs high. When the price per barrel is $100+ then let the Canadians sell it at higher transportation costs than the pipeline. We are going to oppose all new pipelines vigorously in an effort to keep their costs high.