Five myths about the Keystone XL pipeline
By Michael Levi,
by Michael Levi After months of intense debates and protests, the Obama administration has finally decided the fate of the Keystone XL pipeline project: It’s not going to happen anytime soon. The proposed pipeline would have moved about 700,000 barrels of oil-like bitumen from the Alberta oil sands to Texas refineries each day, and oil companies and their allies lobbied hard for it — including with an ad blitz that ran during Republican presidential debates. But, in a victory for environmental activists and parts of the president’s base, the State Department has rejected the permit for its construction (though it has left the door open for its backers to reapply). Is the decision a boon for the environment or a slap at an already weak economy? Let’s separate fact from fiction.
1. The pipeline would have been catastrophic for global climate change.
For opponents of the Keystone XL pipeline, the issue was one of simple math: The project would have facilitated increased production of Canadian oil sands, and a gallon of gasoline derived from oil sands produces 5 to 15 percent greater greenhouse gas emissions than a gallon of gasoline made from a typical barrel of conventional oil. Also, they noted, Canada’s oil sands are the second-largest petroleum deposit in the world, and if burned completely, it would have been “game over” for the planet’s fight against climate change, in the words of NASA scientist James Hansen, a leading climate specialist.
That is all technically true — but it misses the point. The additional emissions generated by replacing conventional oil with the crude that the pipeline could have carried would have been no more than a small fraction of 1 percent of total annual U.S. greenhouse gas pollution. Meanwhile, it would take more than 1,000 years to burn all the oil sands, even if extraction were ramped up threefold from its current pace. The fate of the climate will be determined long before that.
2. The pipeline would have reduced U.S. reliance on oil from the Middle East.
Worries about dependence on Middle Eastern oil have long animated U.S. energy policy — and the Keystone XL pipeline would have transported more than half as much oil each year as the United States currently imports annually from Saudi Arabia.
But U.S. vulnerability to turmoil in the Middle East is linked to how much oil we consume, not where we buy it from. The price of oil is set on world markets: When convulsions in Libya sent the price of crude up 30 percent last year, prices for Canadian heavy oil (similar to what is produced from oil sands) rose by nearly 55 percent.
Some pipeline proponents also pointed out that Canadian oil currently sells at a discount compared with oil supplies from the rest of the world. Keystone XL, however, wouldn’t have led Canada to start offering greater amounts of crude at reduced prices — instead, Canadian producers would have gained more leverage and would have been able to sell their oil at the world price.
3. The pipeline would have created hundreds of thousands of American jobs.
During the debate over the Keystone project, the oil industry rolled out a series of studies claiming that pipeline construction would create 20,000 temporary jobs in the United States and that lower oil prices (they didn’t say exactly how much lower) resulting from the new crude supplies would create as many as 250,000 more jobs across the country over the long term. These numbers were cited repeatedly by politicians who supported the pipeline.
However, the first number refers to “person-years” of employment — a single job that lasts two years is counted twice; and in any case, it pales compared with the overall U.S. employment challenge. The second number is more impressive but relies on an overly optimistic estimate of how much the pipeline would have reduced global oil prices. The administration’s rejection of the pipeline will probably add less than a dollar a barrel to the long-term price of oil, hardly a decisive factor when prices are already around $100 per barrel.
Of course, there’s little question that more Canadian oil production would trim world oil prices slightly and thus help the U.S. economy. But the net impact of the Keystone XL pipeline would have been smaller than its proponents claim.
4. The pipeline would have set back the green economy.
The Natural Resources Defense Council, a key group opposing the Keystone XL project, claimed that the pipeline “is at odds with millions of clean energy jobs.” Others advanced more subtle variations: Senate Majority Leader Harry Reid (D-Nev.), writing to Secretary of State Hillary Rodham Clinton late last year, pitted pipeline construction against clean energy, asserting that “proponents of this pipeline would be wiser to invest instead in job-creating clean energy projects, like renewable power, energy efficiency or advanced vehicles and fuels.”
Clean energy is important, but these claims are unjustified. Entrepreneurs weren’t waiting on the sidelines to see what happened with Keystone XL before pouring money into biofuels or solar power. Nor were motorists putting off the choice between a Prius and a Hummer until the State Department weighed in. The future of the green economy will depend on whether the U.S. government can consistently penalize dirty energy across the economy — rather than in isolated spots such as this pipeline — as well as promote greater energy efficiency through regulation and offer direct support to sustainable-energy innovation.
5. If we don’t build the pipeline and buy their oil, the Canadians will sell it to China.
So what? World oil prices depend on how much oil is produced — not who sells what to whom. Whether the United States or China buys oil at the world price from Canada or Brazil or Saudi Arabia or Nigeria won’t affect U.S. economic fortunes. Some argue that buying oil from Canada rather than elsewhere would shrink the yawning U.S. trade deficit, since Canadians are more likely than others to spend their petro-profits in the United States. But Canada gets richer no matter whether it sells its oil to American or Chinese consumers, and its newfound wealth spills over to the U.S. economy regardless. What ultimately matters to our economy is not whether the United States or China buys oil from Canada — it’s whether Canada produces and sells that oil at all.
The fate of the Keystone XL pipeline will be of limited consequence to either long-term U.S. energy security or climate change (though its rejection will probably be ugly for U.S.-Canada relations). The Keystone decision ultimately became far more about symbolism than substance. It’s a shame that so much attention was diverted from things that matter more.
Michael Levi is a senior fellow at the Council on Foreign Relations and director of the council’s program on energy security and climate change.
Want to know more about the future of America’s energy supplies?
Steven Mufson on “The unpredictable forces behind oil prices”
Michael Levi on “Five myths about nuclear energy”
Daniel Yergin on “Oil’s new world order”