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The Keystone XL Pipeline passed the House of Representatives as it should

Updated on November 15, 2014

Introduction

On November 14th 2014, the US House of Representatives passed a bill to approve the Keystone XL crude oil pipeline—which runs 875 miles from Albeta, Canada to Houston, Texas. Keystone XL pipeline will connect the refining hub in the Gulf Coast with the oil reserves in Canada and the oil production region in the United States. This crucial step promises to end 6 years of waiting for approval and enables the project to finally stand a chance of being permitted.

Proposed route of the Keystone Pipeline XL
Proposed route of the Keystone Pipeline XL | Source

Economic benefits of the Keystones XL Pipeline Project

The economic benefits of the Keystone XL project are numerous. The project expects to reduce the United States’ dependence on imported oil from hostile foreign countries and volatile regions such as the Middle East countries. With access to the Canadian safe and reliable energy source, the U.S is poised to achieve long-term energy security in the future. Also, according to U.S. State Department’s Final Supplemental Environmental Impact Statement, the project is expected to create 41,200 jobs including direct, indirect and induced jobs and $2 billion in job earnings associated with construction, indirect economic activities and induced economic activities. About 29% of the jobs would be supported in states along the pipeline routes such as Montana, South Dakota, Nebraska, and Kansas. Implementation of the proposed Project during the construction stage alone could potentially contribute $3.4 billion (or 0.02 percent) to the U.S. gross domestic product. Furthermore, the states along the pipeline routes are anticipated to receive an additional of $5.2 billion in property tax revenue [1]. Keystone XL also helps to solve the puzzling geographic differential of oil price between the central United States and the United States coasts [2].

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Justifications for common arguments against the Keystones XL Pipeline projects

Despite these obvious economic benefits, environmental advocacy groups are battling to persuade President Obama to use his presidential veto to block the project again. Environmentalists cite the fact that the existing Keystone pipeline, which also belongs to TransCanada, has already had as many as 14 oil leak incidents in less than one year of operation [3]. However, these campaigns neglect to mention that if spills do occur, most pipeline leaks involve less than three barrels of spillage, and 80% of the spills involve less than 50 barrels [4]. Contrast this figure with the capacity of oil transported per day—approximately more than 800,000 barrels—leakage incidents are comparatively minor.

Using the historical data of reported oil spills compiled by the U.S. Department of Transportation, Pipeline and Hazardous Material Safety Administration (PHMSA) from 2001-2010, the average total volume of all oil spill incidents from the proposed Keystone XL project is 1750 barrels per year. The PHMSA data also indicates that 50% of the oil releases over that period were 3 barrels or less, and less than 0.3% of them were 10,000 barrels or greater [5]. In its draft EIS for the Keystone XL pipeline project, the State Department concludes that “the probability of a large spill occurring is very low, and, consequently, risk of environmental impacts is minimal.” [6]

Another concern about the project is with regard to the greenhouse gas emission caused from the use of oil sand. In fact, synthetic crude oil from oil sands emits only between 5% and 12.5% more greenhouse gas than conventionally derived petroleum product. In addition, 70-80% of total oil sands emissions come from the downstream combustion of refined products, which are the same regardless of whether the fuel derives from oil sands or other conventional crude [7].

Comparative Crude Oil Lifecycle GHG Emissions (CO2e) by Type and Source
Comparative Crude Oil Lifecycle GHG Emissions (CO2e) by Type and Source | Source

Moreover, many people argue that in such time as now when oil price has plummeted and remained low, there is no need for oil sands in the near future. However, it is a well-known fact that oil price is very volatile in the short-term and there is no reliable way to predict it in the long term. After decreasing to its lowest level in 2008, oil price has since then picked up, at some point reached almost $110/barrel for West Texas Intermediate oil, and stayed over $80/barrel for most of the time.

West Texas Intermediate Crude Oil Prices from 1985 - 2014
West Texas Intermediate Crude Oil Prices from 1985 - 2014

Furthermore, while the Obama administration seems to have turned its back on a new source of oil produced by one of the United States’ staunchest allies, there are plenty of other markets willing to embrace oil sands. In April 2010, Sinopec, a state-owned Chinese company, paid $4.65 billion for ConocoPhillips’ 9% stake in Syncrude Canada Ltd, signaling China’s ambition to support the new-found abundant energy potentials [8]. In February 2012, another Chinese state-owned company, PetroChina, acquired 20% of the stakes in a Royal Dutch Shell PLC shale-gas asset in Canada, giving the Chinese company access to the untraditional fossil fuel sources in Canada. India also has its eye on Canadian oil sands, with its Ministry of Petroleum and Natural Gas calling Canadian crude a “target area.” [9] Hence, the United States’ rejection of oil sand only hurt the domestic energy customers without reducing oil sand production and the greenhouse gas emission.

"At some point, President Obama has to realise that his blockade of the Keystone XL pipeline is forcing American consumers to depend on volatile oil-rich regimes and is hurting our diplomatic relationship with our top trading partner - Canada," House Foreign Affairs committee chairman Ed Royce

Conclusion

In short, if the Obama administration is truly interested in creating jobs and helping American families, the Keystone XL project is a great place to start. Even if he refuses to allow the project this year, in 2015, with the pressure from the newly-elected Republican House of Representatives, this matter will certainly be brought up again.

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Footnotes

[1] http://growvalleycounty.com/files/Keystone_Benefits_US_LR.PDF

[2] http://www.econbrowser.com/archives/2011/04/brentwti_spread_1.html

[3]http://www.vancouversun.com/business/environmental+agency+line+Keystone+pipeline+TransCanada/4952119/story.html

[4] http://www.transcanada.com/pipeline_safety.html

[5] Supplemental Draft EIS, p. 3-98, http://www.keystonepipeline-xl.state.gov/clientsite/keystonexl.nsf/04_KXL_SDEIS.pdf?OpenFileResource

[6] U.S. Department of State, Draft Environmental Impact Statement for the Keystone XL Oil Pipeline Project, Appendix P, “Risk Assessment,” April 16, 2010. p. 4-6.

[7] Canadian Oil Sands Primer, August 2009, http://www.env-ne.org/public/resources/pdf/ENE_Canadian_Oil_Sands_Primer_20090810_final.pdf

[8] The Challenges and Potential of Canada’s Oil Sands, Cecilia Jamasmie. http://magazine.mining.com/issues/1009/PDFWeb.pdf

[9] http://www.platts.com/RSSFeedDetailedNews/RSSFeed/NaturalGas/6826730

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    • Ben Zoltak profile image

      Ben Zoltak 2 years ago from Lake Mills, Jefferson County, Wisconsin USA

      I'm disappointed such a clever mind has been seduced by dirty energy. The Keystone XL pipeline will not create anywhere near the amount of jobs declared in the report you cite. It will not create energy independence from "hostile countries".

      According to Independent Senator Bernie Sanders from Vermont the XL pipeline will only create a few dozen jobs. It will mainly create massive profits for a few American billionaires, China and Canada. It will leak, as all pipelines leak. Clean up is never complete, the toxic sludge, especially that of tar sand oil, stays in the environment for many years poisoning human beings.

      In particular the Keystone XL pipeline will jeopardize the Ogalala aquifer which provides %30 of the United State's agricultural water supply as well as drinking water!

      Don't believe the propaganda America! XL is dirty energy at it's worst!

      Ben Zoltak