Posts tagged “Keystone Pipeline”
Bloomberg and others have reported that in August the Canadian Prime Minister sent a letter to President Obama, proposing to work with the US to reduce greenhouse gas emissions from the oil and gas sector as a way to facilitate US approval of the Keystone XL pipeline (KXL.) The only surprising aspect of this story, if accurate, is that it has taken so long for so obvious a solution to be floated. If, as I believe, opposition to the pipeline has little to do with potential spills and local rights of way, and everything to do with the emissions profile of Canadian oil sands crude — accurately or not — then environmentalists should welcome this overture.
All CO2 Is Equivalent
You would never know it from protest slogans conflating all types of air pollution as if they were identical, but the characteristics and effects of greenhouse gases (GHGs) like CO2 are very different from the smog-forming emissions from automobile tailpipes or the sulfate pollution from coal power plants. For that matter, air containing 400 ppm of CO2 (0.04%) is no more harmful to breathe than pre-industrial air with 280 ppm of CO2. More relevant to the current topic, it is also a fact that the climate consequences of each ton of CO2 emitted to the atmosphere are the same as for every other ton, regardless of where they are emitted or from what source. While scientists can distinguish CO2 from fossil fuel combustion from the CO2 you just exhaled, based on differences in the ratio of carbon isotopes they carry, the effect of these on global warming is essentially identical.
Attention Shifts to Pipeline’s Potential Benefits
Over the weekend the New York Times carried an interview with President Obama in which he commented on the merits of the Keystone XL pipeline project. The Washington Post suggested that these remarks “give opponents reason for hope.” While confirming that the White House’s main objective criterion for making this decision was still the pipeline’s greenhouse gas impact, the President also speculated about the project’s job-creation potential and the ultimate destination of the crude oil it would carry. This appeared to endorse arguments raised by opponents of the project. These issues deserve more than the dismissive treatment they received in the interview.
Estimating Keystone’s Employment Impact
With regard to the number of direct construction jobs that the northern leg of the Keystone XL Pipeline (KXL) might create, I don’t know whether the right number is the 2,000 the President cited or the tens of thousands estimated in an earlier State Department study. Either way, his administration lacks credibility on this subject. This is the White House that devised a new metric of “jobs created or saved” for assessing the impact of its 2009 stimulus measures. It has also routinely touted projects with “green jobs” potential, not just in terms of their direct employment gains, but also their indirect job creation estimated via generous multiplier effects.
Either indirect jobs are always relevant, in which case KXL would create far more jobs across the economy than the President seems willing to admit, or they also aren’t relevant to justifying clean energy and other, more favored infrastructure projects. In any case, his reported ”chuckles” at 50-100 new permanent jobs struck me as unseemly for a President still contending with unemployment over 7.5 percent in the fifth year of this recovery.
A year ago, President Obama, under pressure from a deadline set by House Republicans, rejected the application of TransCanada for the Keystone XL pipeline that would pump Canadian crude from Alberta to the American gulf coast.
With a new decision on the Keystone XL pipeline due in the first quarter of 2013, according to the State Department — a date that may slip according to some observers — it is useful to assess the actual effects of not building the Keystone pipeline on Canadian oil production and North American energy markets.
Stopping the Keystone XL pipeline was touted as a big win for environmentalists, who had set their sights on Keystone XL as a big target. As Bill McKibben often quotes NASA scientist James Hansen, using the entire resources of Canada’s oil sands would mean “game over for the climate.” Once complete, Keystone XL would have a capacity of up to 1.1 million barrels of diluted bitumen per day – 54% of Canada’s total bitumen production (note: bitumen is the crude product from production in the oil sands). So, for groups like McKibben’s 350.org, the goal of stopping the pipeline was to slow and eventually stop the exploitation of Canada’s tar sands. The thought was that if environmentalists could stop the building of the Keystone pipeline, they could prevent Canada from having a market for their oil, and thereby production would slow and eventually stop.
Even as a decision from President Barack Obama about its future, the Keystone XL Pipeline has hit another snag in construction thanks to an oil-savvy landowner in Texas.
A judge in the southern state has ordered that TransCanada Corp., the company behind the building of the continent-spanning oil pipeline, must stop work on a stretch of the line that will run beneath property owned by Michael Bishop for two weeks, due to that man’s challenge of the pipeline’s intentions. (Read More: Obama Under Increasing Pressure to Make Keystone XL Decision)
With the 2012 presidential election behind him, President Barack Obama is under increasing pressure to make an official call on the Keystone XL project once and for all, even as protests around the country opposing the pipeline increase in their fervor.
Obama is facing pressure from all sides concerning the fate of the project, one that would see a pipeline stretch from Canada through the Midwestern United States in order to easily transport crude from Alberta’s oil sands to refineries in Texas.
The Keystone XL pipeline project may be facing stiff criticism from environmental groups, but that isn’t stopping Canada’s ambassador to the United States from betting a six-pack of beer on its approval.
Ambassador Gary Doer took his bullish stance as he gave a speech at the Johns Hopkins University’s School of Advanced International Studies in Washington, D.C. on Monday. His confidence comes as polls in the United States show increasing public support for the project, even as environmental protectionists strive to sway government officials towards declining the cross-border permit that would be necessary for the pipeline. The pipeline is intended to pump oil retrieved from Alberta’s oil sands to Gulf Coast refineries in Texas, to proceed.
In this week’s episode of R-Squared Energy TV, I answer the following questions:
- What are the chances that electric vehicles will be more than a boutique item, and will make up a noticeable portion of cars on the road by 2020?
- Do you agree with the recent report from the Natural Resources Defense Council (NRDC) that building the Keystone Pipeline will raise gasoline prices?
In a development that should not have come as a surprise to Econbrowser readers, TransCanada announced on Monday that it would proceed with the portion of the controversial Keystone pipeline expansion that would connect Cushing, Oklahoma to the Gulf of Mexico. Because this part of the project does not cross the U.S.-Canadian border, it does not require approval from the U.S. State Department.
During my interview last week with Alan Colmes (embedded below), a few points were discussed that warrant some elaboration.
The first is the conversion from winter to summer gasoline, which I have written about in more detail at Why Summer Gasoline Means Higher Prices. Just to be clear, this is an underlying reason that gasoline prices rise at this time every year, but it is not the reason that gas prices are higher today than they were at this time last year. We started the year at a higher level for other reasons, but summer gasoline explains why — even if you took the geopolitical factors out of the equation — that gasoline prices will normally rise from about February to May and then fall from August to November. We do notice this especially in election years, and use it to confirm our belief that politicians or oil companies are influencing prices to win elections.
Here’s my suggestion for how to become rich: buy low and sell high.
It’s a strategy that works for individuals, and can work for the entire nation as well. If you can figure out a way to find resources whose value in their current use is not very great– in other words, if you buy low– and redeploy them somewhere else where their value is much greater– in other words, sell high– then you will not only add to your personal wealth, you will be creating new wealth for society as a whole. The process of allocating resources to their most efficient use is the heart of what drives economic growth. The fact that individuals have a strong personal incentive always to be looking for better ways to do that is the primary factor responsible for the standard of living that we enjoy today.
Let me give a concrete example of what I’m talking about. On Friday, you could buy a barrel of light, sweet crude oil produced in North Dakota for less than $81. On that same day, oil refiners in Port Arthur on the coast of Texas were paying around $110 to import a similar grade of oil produced in Nigeria. That’s $30 worth of incentive to you to try to figure out a way to transport oil from North Dakota to Port Arthur in order to replace a barrel of imported Nigerian oil with Williston sweet. As a nation, if we could divert some of the resources we are currently devoting to pay for oil imported from Nigeria, and use them instead to enable the Port Arthur refinery to get its oil from North Dakota, we will become richer.
Buy low, sell high.
So there’s a very concrete mission. How can you go about implementing it?