The Risks and Rewards of Keystone XL

 

Takeaway

  • Building more rails and pipes gives us a more responsive, dynamic market that can smooth out price spikes and respond quickly to supply cutoffs.
  • Domestic pipelines are safer and environmentally preferable over the alternatives—such as Chinese refineries.
  • Proper protections for the environment need to be in place now, as the effects may not shows until decades later. 

Amid the back-and-forth in Congress recently over the Keystone XL pipeline, which will ship fuel from Canadian oil sands to Texas to be processed and sent to global markets, it’s become increasingly hard for Texans and Americans to form an opinion on the project.

The pipeline is worth supporting, but only with the right kinds of environmental protections in place.

Six years ago, when the XL project was proposed, oil was more than $100 per barrel and rising. The economy was suffering, and the nation was in desperate need of multibillion-dollar capital projects. The pipeline looked like a solution to both vexing problems.

Today, oil is less than $80 per barrel and falling, and the economy has improved. (Note: This article was originally published November 23, 2014.) The pipeline would be just one more major construction project among many others. And the permanent jobs created by the pipeline — in the dozens, not thousands — don’t look that impressive. Making things less urgent, most of the states where the pipeline would cross have low unemployment rates.

If global oil prices keep dropping, production in the oil sands will drop, too, reducing the need for the pipeline. And while the pipeline awaits a permit, competitors, namely oil trains, have quickly filled the void, undermining some of the alarmist claims that failing to build the pipeline will inhibit production

The energy-security arguments have also shifted. Years ago, energy imports from the Middle East were growing, and Canadian oil seemed like the easiest way to reverse the trend. Today, we’ve realized that domestic oil production is an easier pathway to reducing Middle East imports.

With all of these changes, it would seem that the pipeline is no longer necessary. But there are economic and national security arguments for why it’s still worth pursuing.

Although the connection between the pipeline and reducing Middle East imports seems weaker than before, it’s in our national interest to maintain a strong relationship with Canada, our largest trading partner. Its prosperity is in our nation’s interest. 

Investments in energy infrastructure also generally yield benefits for all of us. Building more rails and pipes gives us a more responsive, dynamic market that can smooth out price spikes and respond quickly to supply cutoffs. Done the right way, a robust midstream sector — the storing and transporting of oil and gas — helps producers sell energy with better margins and helps consumers buy energy at lower prices. 

The environmental risks, however, haven’t changed in the past six years. Carbon is still bad, and water quality risks are still prevalent. To the environmental community, the pipeline looks like a 1,200-mile fuse to a Canadian carbon bomb. And it looks risky for the sensitive aquifers that underlie its path. Instead of the line in the sand, it’s the pipeline in the sandhills. 

But if we have to choose between sending oil sands by pipe to relatively clean Texas refineries versus by rail to relatively dirty Chinese refineries, the Texas option wins every time. It’s safer and environmentally preferable. 

So how do we capture the economic and security benefits of the pipeline while also acknowledging the very real environmental effects? Two ways: Put a price on carbon, and set up a safety fund to pay for regular inspections of the pipeline. 

The pipeline’s risk to water quality won’t come when it’s built or when it first turns on. It’ll be decades later, when the pipes are at greatest risk of failing. We should set aside money now to pay for those inspections later.

Debate over the pipeline will likely flare again in Congress next year, and with proper protections for the environment in place, the project will still be worth supporting.

Note: This article was originally published on Texas Tribune and is reposted with permission. 

 

Disclaimer

The views expressed are those of the author and not necessarily The University of Texas at Austin.
 

About The Author

Michael Webber

Associate Professor, Mechanical Engineering, Cockrell School of Engineering

Michael Webber is the Deputy Director of the Energy Institute, Josey Centennial Fellow in Energy Resources, Co-Director of the Clean Energy...

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