Obama's Decision to Punt on Oil Pipeline Pleases Almost no One
November 11, 2011 5:40 PM
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Anti-pipe folks say he's just "kicking the can" to boost election hopes, pipe supporters say he's killing jobs
In one fell swoop the President of the United States (POTUS) Barack Obama managed to infuriate Canadians and Republican U.S. politicians alike. Those are typically mutually exclusive feats, but his decision to bow to activist pressure and shelve the development of a critical oil pipeline is drawing criticism from both sides.
I. To Oil Sand, or Not to Oil Sand, That is the Question
Dubbed the Keystone XL pipeline, the pipe in question was supposed to stretch 1,700 miles across the U.S. plains, transporting process oil sands crude -- a low to mid-grade crude to U.S. refineries in Texas for procesing into fuel (the initial removal of sand would occur at local facilities in Alberta).
Currently the Alberta tar sands are underutilized due to insufficient refining capacity. Meanwhile refineries in Texas sit idle due to insufficient domestic oil supplies. The pipeline would have remedied both problems, pumping the equivalent of 700,000 barrels a day (249.2m barrels a year) into the U.S. market.
The U.S. uses 19.15m barrels/day, so the new supply would offer approximately 3.7 percent of the domestic demand. While that may sound trivial, it would allow the U.S. to potentially entirely drop one of its more hostile sources of foreign oil, such as Venezuela (806,000 barrels/day) or Iraq (637,000 barrels/day).
Aside from the
direct savings in life and financials stability
that could yield, the pipeline also offered more benefits. According various studies the construction would create between 5,000 and 20,000 jobs. It would also give $5B USD in new tax revenue.
The pipeline could completely eliminate American dependence on volatile Iraqi oil, a dependence that has cost the lives of many American servicepeople. [Image Source: Dalje]
Like everything in the world, though, there was a perceived downside for these gains. First, the pipeline would likely cross through personal property dropping local value. Second, it could potentially elevate local risks of toxic oil spills -- a major public fear in the wake of the
2010 Deepwater Horizon oil spill
Last, but not least oil sands require a more intensive separation process than standard oil. The cost of getting all that sand out is a 10 to 30 percent emissions hike in greenhouse gases [
]. As you might guess, the amount of emissions is tied to the cost of the refining process, so the final number would like be closer to a 30 percent increase, than the lower estimate.
However, that emissions hike occurs largely at the extraction level, meaning that as long as Alberta finds
to sell/ship its crude to, the emissions hit will be taken, regardless of whether that someone happens to be the U.S. It's unclear whether the pipelines environmentalist adversaries realize this and are just morally opposed to being involved.
Recent studies have shown that in the last decade
global temperatures flatlined
, even as greenhouse gas emission continued to rise. Yet many environmentalists and their powerful political allies remain convinced that the long-term trend will be continued warming. Many of these parties predict a doomsday "runaway warming" scenario, in which soaring temperature amount to mass humans deaths.
Groups like 350.org, Bill McKibben, Bold Nebraska's Jane Kleeb, and Friends of the Earth decried the potential environmental (mostly global warming) impact of the pipeline and threatened to drop support for President Obama if the project was granted a speedy approval. If these groups sound familiar, they're among those who attacked the POTUS on
his support of modern nuclear power
-- pressure that the President Obama caved to in the wake of
Japan's Fukushima nuclear accident
Further threats to the project came from the Republican-controlled Nebraska State Senate, which
looked to take legal action
[PDF] to block the pipeline. The state senators were upset about the oil pipe crossing the state's key water supply (aquifer).
It didn't help that the State Department received
[PDF] that the pipe operator TransCanada (
) -- the pipeline company -- had a business relationship with the "independent" contractor hired by the State Department to conduct the review. The pipeline supporters saw their attacks on the President regarding
insider actions with "green" firms like Solyndra
turned back on them.
robocalls erroneously indicating public support
also have been circulating around the blogosphere, damaging the momentum for approval.
II. POTUS Caves to Pipe Critics, "Kicks the Can" to 2013
As an apparent result of these cumulative protests the Obama administration has
punted the approval process
two years out. The State Department announced this week, that approval "could be completed as early as the first quarter of 2013."
The key words there are "could" and "2013". The State Department primarily blames the Nebraska state government, commenting, "Given the concentration of concerns regarding the environmental sensitivities of the current proposed route through the Sand Hills area of Nebraska, the Department has determined it needs to undertake an in-depth assessment of potential alternative routes in Nebraska."
But it's seems likely the decision also had something to do with the Obama administration fearing the loss of votes in the upcoming 2012 presidential elections.
President Obama faced enormous pressure, even from his own staff.
Department of Energy
Secretary Steven Chu (Ph.D) was reportedly fearful that the project would kill alternative energy jobs and investment. He pointed to a
that the project would result in net job loss due to a negative impact on the alternative energy sector.
A Cornell University report broke with most analyses, claiming the pipe would cost jobs.
[Image Source: Cornell University]
III. Obama Receives Most of the Punishment, Little of the Praise for Choice
Ironically the move is earning the President less support than he may have hoped. While Daniel Kessler, spokesperson with Tar Sands Action,
, "This is a major victory. It's a testament to the thousands of people who came out to protest in the streets, and we think the president responded to that," other critics scoffed at the decision.
Glenn Hurowitz, a senior fellow at the activist think tank Center for International Policy, writes in a piece in
The Huffington Post
, "This is an extraordinary achievement for the thousands of grassroots activists... [but] I'm a little dismayed at suggestions that this kick-the-can decision means environmentalists will enthusiastically back President Obama in 2012. Is the price of an environmentalist's vote a year's delay on environmental catastrophe? Excuse me, no."
Meanwhile opponents are pointing their barbs primarily at Obama, overlooking the activist and local political action.
American Petroleum Institute President Jack Gerard, "This decision is deeply disappointing and troubling. Whether it will help the president retain his job is unclear, but it will cost thousands of shovel-ready opportunities for American workers."
House Speaker John Boehner
(R-Ohio) was even more pointed
, "More than 20,000 new American jobs have just been sacrificed in the name of political expediency. By punting on this project, the president has made clear that campaign politics are driving U.S. policy decisions -- at the expense of American jobs."
In short, as with many of his recent actions President Obama finds himself receiving most of the punishment, but little of the praise for actions he set in motion. In trying to walk the tightrope of pleasing both sides, he has badly slipped -- many anti-pipe advocates are reprimanding the President for merely shelving rather than killing the decision, while the pipe's supporters are attacking the President for shelving the product.
President Obama faces criticism from all sides for the way he punted on the pipeline approval. [Image Source: JEWEL SAMAD/AFP/Getty Images]
TransCanada is disappointed, but hasn't given up on the pipe. It's sunk $1.7B USD into steel, which will now sit in warehouses for two more years. Company president and CEO Russ Girling optimistically comments, "We remain confident Keystone XL will ultimately be approved. This project is too important to the U.S. economy, the Canadian economy and the national interest of the United States for it not to proceed."
One poll [
] found 85 percent of Americans to strongly or moderately agree with taking advantage of oil sands. The poll was sponsored by the American Petroleum Institute, but it was conducted by the respected Harris Interactive agnostic metrics firm. If those numbers are even close to reality, the president may be in trouble should he be pitted against
a strongly pro-oil sands candidate like Ron Paul
If the U.S. chooses not process Alberta's oil, there's already someone stepping up to the plate to take its place -- China. It's
looking to pour billions
to building an alternate pipeline to west coast of Canada for affordable shipping to Asia. The only thing standing in its way? You guessed it -- local property holders and environmentalists in western Canada -- who are apparently just as eager to block the project as their American counterparts.
The U.S. State Department
The Huffington Post
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RE: I don't always see eye-to-eye on Obama...
11/16/2011 3:37:22 PM
Here is a source that suggests that developing the Tar Sands does have a set of repercussions that are serious enough to warrant concern.
"Oil sands development contributes elements toxic at low concentrations to the Athabasca River and its tributaries"
According to an article in the
Christian Science Monitor
the extra processing that goes into making the oil extracted from Tar sands suitable for use in current refineries as adds about 24 dollars to the cost of a barrel as of 2006
"However it's extracted, all bitumen has to be transformed into oil in a process called upgrading. There are several different steps in upgrading, all of them using a lot of energy, usually natural gas. Itcosts $23 to $26 a barrel - depending on the project - to produce light oil from sticky goo of the oil sands."
link is here
Seeing as how the article is 5 years old it can be guessed that the cost would come down by now. However the additional costs of making sure extra pollutants from extracting the usable oil from the bitumen are contained may make up for the reduction in costs of the main processes.
You're right in that we are not looking at a comprehensive long term energy solution. At least most of American citizens aren't.
I think that the article in the December 16th 2007 issue of
detailed a plan for moving to a mostly Solar means of producing energy by 2050 is a very good read that isn't clouded by alarmist rantings.
If I recall correctly, it's been a few years since I read the article The plan incorporated other sources of energy that included nuclear, natural gas and a few others as intermediate sources as a transition solar power.
Of course no one in public office thinks on that long of timeline anymore so we're basically stuck...
RE: I don't always see eye-to-eye on Obama...
11/16/2011 8:10:52 PM
Good reply. The article you mention has been disputed by, among others, Alberta's own version of the EPA, the ERCB (actually a department who keeps an eye on the energy sector specifically, due to its importance to our province). Also, the main author, David Schindler, is an American, with a background in zoology, and was a Rhodes scholar at Oxford. He is naturally biased against the type of massive projects that oilsands development requires, and like all scientists going after grant money, is more inclinded to find problems and crises that warrant further research (and extra funding, of course).
Numerous other studies over the years have found no added pollution in the waterways caused by the mining or upgrading operations. There are numerous natural oil seeps into the rivers of the area -- the local natives used to use the seeping bitumen exposed by river erosion as waterproofing. Also, the most recent, and biggest developments, use 100% recycled water for extraction and upgrading, and produce no effluent. In addition, a Utah company has discovered a method, using natural citrus solvent I believe, that will totally eliminate the need for massive tailings ponds (an eyesore, and PR boon for environmental propagandists).
You mention the added costs of converting bitumen to light crude. This still holds true, and something like a third of natural gas production in the province currently goes towards heating water to produce the steam needed for SAGD, CSS, and other steam assisted recovery techniques, as well as heating needed for upgrading and refining. This is troubling, and nuclear plants would help solve the problem (at least in the static facilities, as fission plants produce steam primarily -- this could be used directly without the need for electrical generation), however rabid, irrational environmentalists, ignorant NIMBYs, and cowardly politicians have prevented this solution from coming to fruition.
Oil and natural gas are still very abundant resources, but I am totally for the pursuit of new energy sources. We should be saving our hydrocarbons for better uses like plastics and other petroleum based products. Sadly, our democratic systems prevent any real long-term planning, and private investors naturally don't like to bet on companies who's success is based on technology that has yet to be invented. I would advocate investing government oil & gas revenues on research towards fusion or other technology that would pay back great dividends when hydrocarbons are no longer economically suitable for energy uses, but instead our government squanders the money on a bloated public sector and its greedy unions.
RE: I don't always see eye-to-eye on Obama...
11/16/2011 11:23:32 PM
I'll have to look into the concerns that you bring up over David Schindler.
I'll do more research in regards to that matter and read the studies that reported that proper extraction of oil from bitumen doesn't increase pollution in water.
As far as nuclear goes there are unanswered concerns about the use of it as a source of power.
For example as far as I know fully insuring new nuclear power plants are expensive enough that private insurance companies would not be willing to accept the risks and the burden for insurance would have to fall on a government agency.
Another concern is the fact that extracting and processing does cost resources and those costs may go up as uranium reserves are depleted.
Reactors that use thorium as a fuel may mitigate those concerns however.
I do suggest that you read the Scientific American article I referenced that outlined a multi-decade plan to reduce our dependence on fossil fuels while maximizing the use of Solar Energy when ever possible.
The article doesn't suggest that fossil fuels would be done away with completely but used for niche purposes where their advantages outweigh the advantages of using energy produced through other sources. Nuclear energy is also mentioned as a nearer term solution that can be used until solar energy technology becomes efficient and cost effective enough to be used much more widely than it is today.
What I liked about it when I read it is that it struck me as taking a realistic long view when it comes to suggesting a viable way to transition to energy sources that have less chances of being the sources of catastrophic accidents.
I agree that unfortunately our representatives in government do not plan or make decisions with long term planning in mind.
However, I disagree that public sector unions are particularly worthy of being singled out for blame when it can be pointed out that the private sector can be shown to have enough of their own greedy bad actors. It is a debate for another time though.
RE: I don't always see eye-to-eye on Obama...
11/17/2011 8:30:01 PM
The reason that the bitumen extraction and upgrading cannot possibly cause waterway pollution is because they recycle the water used in the plants. There is literally no effluent outflow into rivers like in stereotypical old fashioned industrial estates. The newest projects don't even need tailings ponds (large dugouts lined with multiple layers of non-permeable membranes, or even concrete).
It infuriates me when people complain about our (Canadian) industry practices, with sensationalist media coverage as their only source of knowledge on the subject. Nobody mentions how for example, in the Persian Gulf, if a well produced less than 2000bbl/day, they'd just let it flow into the water. Or how in Nigeria, BP seriously contaminated whole river deltas through sheer laziness, with the government turning a blind eye, starving local populations of the fish depend on to live.
I will try to find the article you mention, sounds interesting. Solar power has obvious promise, it just needs a bit more development to really become practical. China has the clear upper hand in such developments and cheaper manufacturing, due to their lack of concern for the environment and workers, and their national-socialist style of government that can sink billions without an electorate to worry about.
As far as the public sector unions I am talking about, it is a problem Americans have only just begun to get a taste of. For example, Alberta has a population of about 3.7 million, and a provincial budget of $38 billion! 50% goes towards our public-funded healthcare monopoly, with wages, pensions, and benefits consuming 75% of the health budget. Not only that, they get yearly wage increases of about 6% (double the private sector average), and indexed pensions. Before massive government reforms in the early 90's, Crown Corporations ran all sorts of things like telephone and utilities, and even liquor stores! Two of my uncles who worked for the government and have been retired 10 years currently make more money from their public-funded pensions than I do, and I work in the "greedy" oil patch! That is clearly not sustainable. Norway, similar to Alberta in size, population, and oil-production, has managed to save a whopping $500 billion in the same amount of time that we have saved a measly $14 billion. America would be well advised to prevent the "bureaucracy from expanding to accommodate the expanding bureaucracy."
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