Keystone XL: Politics and Predictions

The Mexican government’s introduction of its energy reform proposal on August 13 is evidence of the exciting times in which we are living regarding North American energy production. The Mexican initiative also reminds us that President Barack Obama’s decision to grant or deny TransCanada, an international firm based in Canada, a permit to build the Keystone XL (KXL) oil pipeline is still pending.
 

The decision, which many speculate could be made this fall, refers to a 1,170-mile pipeline that would run from Alberta, Canada, to Steele City, Nebraska, capable of transporting upwards of 800,000 barrels per day (bpd) of heavy crude oil derived from the Canadian tar sands. From Nebraska, the oil would travel through additional TransCanada-built pipelines to Port Arthur, Texas, home to a number of large oil refineries—among them the largest in the United States.
 

The president faces a difficult decision. The pipeline has been the subject of unending controversy since its construction was first proposed in 2008, but why?
 

Q1: What issues are at stake?
 

A1: The construction of the Keystone XL pipeline has stirred public debate, largely because of a pair of political issues: North American energy security and global environmental protection.
 

Environmentalist Argument: The pipeline’s opponents tend to focus on the environmental impact of petrochemicals generally and tar sands production specifically. On one hand, the tar sands produce a very heavy, energy-dense oil, with the extraction and refinement process more carbon intensive than that of any other fossil fuel. Estimates of the annual environmental impact of the extraction, transport, and refinement of oil enabled by KXL vary widely. And while efforts have come a long way in making the process of retrieving tar sand oil less polluting since its early days—and will likely continue to improve—none deny that the process will emit significant carbon into the atmosphere over the project’s expected 50-year lifespan. KXL opponents cite these emissions and their expected contribution to global climate change as a grave threat to U.S. interests. In their view, the United States should forego KXL and the tar sands product it would bring entirely, channeling resources instead toward the production of renewable energy, or even toward less carbon-intensive natural gas.
 

Pragmatic Environmentalist Argument: Even among those who worry over the project’s environmental impact, some argue that KXL must still move forward. Generally, this group believes that with or without the new pipeline, the abundant tar sands deposits in Alberta will be developed—and the extraction companies already set to begin removing as much as 4.2 million bpd of heavy oil from those deposits will simply look for another customer and means of transport, with markets in Asia frequently cited. A recent study commissioned by the U.S. Department of State, responsible for recommending a course of action either way to President Obama, listed three other proposed pipelines—none of which would carry crude to the United States—and truck, rail, and shipping as potential alternative means of transport for Canada’s oil. Should those alternatives to KXL prove viable, the pipeline’s proponents argue that the project is the best option, as refinement of Canadian crude elsewhere would be still more environmentally degrading than similar processes here, given that U.S. and Canadian standards for oil production are among the most stringent in the world—and improving.
 

Energy Security Argument: Much of the crude oil processed by refineries on Texas’s Gulf Coast is oil from the Middle East and Venezuela. By relying on these countries for the crude oil that drives the U.S. refining market—not to mention U.S. energy consumption—the United States theoretically makes itself vulnerable to their regional circumstances and their leaders’ whims. KXL proponents argue that building the pipeline is important because even as it benefits Texas refineries, it does more for our country’s national security. None suggest that the pipeline would ensure U.S. energy independence entirely. It would, however, shift the object of U.S. energy dependence away from countries notoriously opposed to U.S. objectives and toward one of our neighbors, who happens to be one of the closest allies we have in the world. Despite an abundance of oil supplies, U.S. oil hit a two-year high above $112 on Wednesday (August 28). For the last week, the global oil market has been dominated by worries about a military strike on Syria—in retaliation for alleged use of chemical weapons by the Syrian government on its citizens—and spillover effects of a strike, especially if Iran or Saudi Arabia, countries entangled by proxy on opposite sides of the Syrian conflict, were to get more directly drawn into the conflict, increasing the chances of a supply interruption. By facilitating the transit of Canadian oil in the midterm, particularly in the context of our expanding energy partnership with Mexico, the United States can insulate North American consumers from the effects of a supply interruption in the Middle East or anywhere and maximize North America’s energy production into the foreseeable future.
 

Energy Security Skeptics Argument: This group labels the energy security argument as overblown, largely discounting the role of North American energy production that depends on an inherently expendable resource. In the long run, so they say, the best way forward if we want to prioritize energy independence is to focus our considerable efforts on cleaner energy—and particularly renewable resources like wind and solar power.
 

Q2: What if the pipeline is not built?
 

A2: If the Obama administration decides not to move forward, it may have little impact on Canada’s ability to sell its oil to the United States. In fact, as oil production in the United States’ northern midwest has boomed in recent years, producers have used other avenues in transporting oil: namely, rail and trucks.  Awaiting the KXL decision, these producers have been forced to use rail and trucking to move oil that otherwise would flow through KXL. By this logic, Canadian producers could follow this path, and shipment by these methods will only continue to grow if no pipeline is constructed.
 

This reality makes opposition to the pipeline on environmental grounds more difficult to sustain. By all appearances, this oil is going to be developed and exported, whether by pipeline, rail, or trucks. If this is so, it seems to make sense to do it in the most environmentally responsible manner. Using rail or trucking will only serve to compound the carbon emissions of the project. Sure, the pipeline comes with its own set of environmental risks, but when compared to those of the other methods, it stands out as the most environmentally responsible—not to mention efficient—manner.
 

Q3: What is the likely path forward?
 

A3: Ultimately, the construction of KXL has proved so contentious because those on either side of the debate operate under fundamentally different background assumptions. Energy security and environmental protection are both, without a doubt, important for our national security—and both issues are at stake here. That much is clear.
 

What’s harder to determine, though, is the magnitude of each effect. Do the pipeline’s assumed energy security benefits outweigh the dangers the project poses to the environment, or do the former dwarf the latter?
 

That question, in many respects, depends on one’s core beliefs. Energy security, environmental impact—the importance of both is difficult to measure. But for better or worse, one would tend to think that any short- to mid-term threat to the security of the continent’s uninterrupted access to the resources that underwrite every aspect of our lives—especially with the current instability in the Middle East and the threat this may pose to oil shipping lanes through the Suez Canal—would be a clear and immediate concern and make approval of the pipeline more likely. You wouldn’t expect to see these kinds of developments with Canada.
 

Conclusion: Today the conversation regarding the need for energy to be central to intra–North American relations will be prompted by worries about a military strike on Syria and the spillover effects of a strike, especially if Iran or Saudi Arabia, countries entangled by proxy on opposite sides of the Syrian conflict, are drawn more directly into the conflict, increasing the chances of a supply interruption of oil coming to the United States. In this context, the pipeline’s potential for increasing North American energy output and facilitating its movement—and, by extension, for bolstering U.S. national security—leaves the United States with the clear choice to move forward with the project. 
 

But it’s important to remember that the discussions of energy security and climate change do not end with the first barrel of pipelined in tar sands oil that arrives in Port Arthur. The Obama administration has gone to great lengths to prove its mettle as a force for environmental protection, making efforts to establish itself as a global leader in the fight to lower carbon emissions. President Obama is likely to continue efforts—with or without a pipeline—to create a diverse energy basket for the United States made up renewables and conventional fuel. These efforts are appropriate. But until that day arrives, reality dictates that the United States must prioritize access to oil. So why not work with a friendly neighbor, a consistent energy supplier, and partner in efforts to lower carbon emissions in the process?
 

Carl Meacham is director of the Americas Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Jillian Rafferty, intern scholar with the CSIS Americas Program, provided research assistance.