The Keystone XL Tar Sands Pipeline: What You Need to Know

Construction of the Keystone XL pipeline will greatly diminish the chances of preventing a global climate catastrophe.  Its direct impact on climate is very substantial— the equivalent of seven coal-fired power plants operating continuously or having 6.2 million cars on the road for 50 years, according to Environmental Protection Agency calculations.  Moreover, its construction will give investors the go-ahead for additional projects to extract the rest of Canada’s most accessible tar sands reserves — emitting fully half of the total carbon that can be emitted globally if the planet is to avoid crossing the flashing red line of the average 3.6°F temperature increase.

Looking beyond Canada, the proven coal, oil, and gas reserves of fossil-fuel companies — without counting unconventional oil like that from tar sands — would release five times more carbon than can be released if we want to remain under the 3.6° line. Clearly, a lot of that carbon must remain in the ground. We should start with tar sands.

Why Pick on Tar Sands?

Extracting and using tar sands oil produces up to 37 percent more carbon than even conventional oil. The Canadian tar sands oil that can be readily extracted with current technology would use up half the estimated “carbon budget” all by itself.[1]  That’s why NASA scientist James Hansen has said that exploiting Canadian tar sands reserves will mean “game over” for the planet. Stopping the Keystone XL pipeline will likely kill other tar sands projects because economic and political concerns in Canada and the US indicate that the future of the industry hinges on that pipeline. In order to compete with cheaper fuels, the industry needs to get their land-locked product through America’s breadbasket to the Gulf of Mexico for export.

Won’t the Tar Sands be Developed With or Without Keystone XL?

No. In fact if the tar sands industry really thought it would be able to ship tar sands oil directly to other countries without the pipeline, it wouldn’t be spending so much time and money to get the pipeline approved. The truth is, other pipeline proposals face strong political opposition in Canada, are much smaller, and are in much earlier stages of development than Keystone XL. A pipeline to the Canadian West Coast is opposed by a majority of British Columbians, and by over 100 of Canada’s First Nations bands, which can block easements over their lands that lie in the pipeline’s route.

The industry plans to triple its tar sands oil production if it can do so profitably. Because it is more expensive than other oil to extract, new mines are only profitable at a price of $85-95 per barrel, and expansion of existing mines is only profitable at prices above $60 per barrel. Currently, tar sands oil is selling for $50-60 per barrel.  Market analysts say the price is likely to stay low unless the Keystone XL pipeline is built, and concern that it won’t be approved is already causing tar sands investors to back off. In short, blocking Keystone will not only prevent extraction of all the oil that the Keystone pipeline would transport to the coast for refining and export, it will also undermine the commercial viability of tar sands so much that investors would stay out of the field entirely.

The converse is also true.  Once a pipeline is built, that part of the cost is “sunk,” and the economics of whether it makes sense to extract the oil change.

Rail is not a viable economic alternative for tar sands producers

The State Department’s draft Supplemental Environmental Impact Statement erroneously estimates that it will cost producers about $15.50 a barrel to ship by rail. In reality, the only tar sands producers that are successfully getting crude from Alberta to the Gulf via rail and barge are doing so at a cost of over $30 per barrel. The high breakeven price for new tar sands projects cannot bear the high cost of rail. The projects are not economically viable after tacking on an additional $30 in transport costs.

The Jobs Argument

Pipeline proponents claim the pipeline will create many thousands of jobs.  However the State Department review shows that Keystone XL will only create 35 permanent jobs and 3,900 construction jobs with only 10 percent of the total workforce hired locally. This dirty energy project is not an economic recovery plan and is not worth the risks to our health, waters, and climate.

April 2013