Canadians are now watching and waiting to see whether Keystone XL will be granted a Presidential Permit, which is required due to the fact that the pipeline will cross the Canadian-U.S. border. Many Canadians have been following the maelstrom of controversy raised by the proposed project in the United States, amongst politicians—and the general public—particularly regarding the premise that oil sands crude is “dirty oil” and should not be allowed into the United States. What is perplexing about the debate is the fact that Canada already transports significant amounts of oil sands crude into the United States through other pipelines. Indeed, approximately half of all Canadian crude oil exports to the United States are already derived from the oil sands. This amounts to about 650,000 bpd. Keystone XL therefore does not involve the transport of a new product into the United States. Rather, it merely represents another pipeline transporting more of the same product.
Canadian politicians are for the most part strongly supportive of Keystone XL. Provincially, Alison Redford, the premier of Alberta, is a staunch supporter. At the federal level, Conservative Party Prime Minister Stephen Harper and Canada’s minister of Natural Resources, Joe Oliver, have invested considerable time and effort into promoting the project. While Canada’s official opposition party, the New Democratic Party, opposes the project, its criticism has focused less on environmental issues than on the economic benefits of alternative ways of bringing Canadian oil to market. Finally, the newly elected leader of the Liberal Party, Justin Trudeau, has recently come out strongly in favor of the project.
Americans should consider three points as they continue to debate the environmental and economic merits of Keystone XL. First, Keystone XL is only one of several pipeline options that Canada is considering to increase exports of oil sands crude. Second, Alberta has recently taken a number of steps to address and monitor the environmental impacts of oil sands development. Third, Canadian oil sands crude compares well, in terms of greenhouse gas (GHG) emissions, to other sources of U.S. oil imports and to coal.
Canada’s pipeline options
Alberta is currently experiencing an oil sands bubble. There is too much product for the existing pipeline infrastructure. Keystone XL is simply one option to enable the transport of additional oil sands crude. Other pipeline options include two proposed projects that would move oil sands crude west and one that would ship it in an easterly direction.
The western pipeline options currently include Enbridge Inc.’s Northern Gateway Project (Northern Gateway) and Kinder Morgan Energy Partners LP’s Trans Mountain Expansion (TM Expansion). The eastern pipeline option currently includes TransCanada’s East Coast Pipeline proposal (East Coast Project).
Northern Gateway would involve the construction of two new pipelines between central Alberta and the town of Kitimat, on the coast of British Columbia. One line would carry an average 525,000 bpd of petroleum products west from Alberta to the Pacific Coast. The other line would carry on average 193,000 bpd of condensate east. (Condensate is a low-density mixture of hydrocarbon liquids used to thin petroleum products for pipeline transport.)
Northern Gateway is presently undergoing environmental assessment hearings before a Joint Review Panel (JRP). The JRP is required to release its recommendation report by December 31, 2013. Thereafter, the government of Canada will decide whether the project should receive final approval.
The TM Expansion would involve the expansion of the existing Trans Mountain line, which stretches between Edmonton, Alberta, and Burnaby, British Columbia. The proposed expansion would create a twinned pipeline and increase the capacity of the system from 300,000 bpd to 890,000 bpd. As with Northern Gateway, the TM Expansion must receive regulatory approval before work can begin. If approved, it could also potentially open up Asian markets.
The East Coast Project would involve the conversion of TransCanada’s mainline natural gas pipeline system from natural gas to oil, to enable the shipment of oil sands crude to eastern markets in Canada and beyond. TransCanada’s mainline extends from the Alberta-Saskatchewan border east to the Québec-Vermont border and connects with other natural gas pipelines in Canada and the United States. The East Coast Project would require the conversion of significant existing pipeline infrastructure, which is currently underutilized for the transport of natural gas, and the building of a new pipeline from Quebec to Saint John, New Brunswick, home to Canada’s largest (300,000 bpd) refinery. The East Coast Project is considered as a way to bolster Canada’s own energy security. Ironically, notwithstanding that in 2012 Canada was home to the world’s third largest crude-oil reserves (proved reserve of 173.6 billion barrels), Canada imported more than 600,000 bpd to supply its eastern refineries.
With these other pipeline options on the table, Canada is set to expand development of the oil sands regardless of whether Keystone XL is approved. This point is highlighted by the U.S. Department of State’s Draft Supplementary Environmental Impact Statement (SEIS), which notes that even if Keystone XL is denied, in light of the other pipeline proposals within Canada, oil sands production is unlikely to be significantly impacted. Accordingly, if Keystone XL is rejected and Canada proceeds with other pipeline options, the United States may have missed a significant opportunity to further secure its energy supply.
Alberta’s recent efforts regarding environmental impacts
Alberta has made efforts to be proactive in its approach to the regulation of GHG emissions and other environmental issues. In 2007, Alberta became the first jurisdiction in North America to legislate GHG emissions reductions for large industrial facilities by passing the Specified Gas Emitters Regulation, which requires all facilities in Alberta emitting over 100,000 metric tons of carbon dioxide equivalents (CO2e) per year to reduce their emissions intensity by 12 percent below their base line intensities. Facilities that fail to meet these production efficiency targets have the option of buying Alberta-based emissions offset credits or emissions performance credits, or paying $15/metric ton of CO2e over their reduction targets into a fund that supports projects and technologies aimed at reducing GHG emissions in the province. Alberta’s minister of Environment and Sustainable Resource Development, Diana McQueen, has recently indicated that the province is contemplating a new target that would require oil sands emissions reductions of 40 percent below base line intensities and involve a cost of $40/metric ton of CO2e on those companies that do not comply.
Alberta is also focusing on water contamination and water use issues, including the reduction of tailings ponds associated with certain oil sands mining projects. It also recently introduced a regional plan that governs development within the oil sands region. The plan is predicated upon cumulative effects management. Mandatory government actions will occur if emissions meet or exceed specified regional thresholds. These management actions can range from the imposition of additional operating conditions and restrictions, to actual reductions or capping of emissions output. Finally, in response to criticisms that existing monitoring data for the oil sands region is difficult to obtain and compare, Alberta and Canada have recently entered into a joint monitoring program. The monitoring results will be available to the public in an open, transparent, and consistent manner so that everyone can better understand the environmental impacts associated with oil sands development.
Environmental impacts of oil sands crude
From a Canadian perspective, the GHG emissions of oil sands crude often appear to be subject to unfair criticism and skewed statistical analyses. On average, oil sands crude production does release more GHGs than many other forms of oil extraction, but the difference is exaggerated if comparisons are restricted to the extraction and processing aspects only (“well-to-tank” basis). Based solely on “well-to-tank” calculations, oil sands development is said to be four, or even five, times more GHG intensive than conventional oil. An alternative means of comparison is on a “well-to-wheel” basis. Calculations on a “well-to-wheel” basis compare the amount of GHG emissions released throughout the life-cycle of oil, including emissions associated with its extraction, processing, transport, and ultimate consumption in vehicle engines. The last category is important because the combustion of gasoline emerging from vehicle tailpipes accounts for more than 70 percent of life-cycle GHG emissions on a “well-to-wheel” basis. These vehicle emissions are the same, regardless of the crude oil from which the gasoline is derived. A recent Congressional Research Service report that summarizes several GHG emissions studies indicates that on a “well-to-wheel” basis, oil sands crude is 14–20 percent more GHG emissions intensive (as opposed to four to five times more) than the weighted average of U.S. transportation fuels.
The consulting firm Cambridge Energy Research Associates, in a recent letter written to the U.S. Department of State regarding the SEIS, stated that its findings indicate that the life-cycle GHG emissions from oil sands crude imported into the United States were only 12 percent higher than the average crude oil consumed and were actually in the same range as, and potentially lower than, Venezuelan crude oil. Those findings are significant for at least two reasons: (1) because Venezuelan crude currently accounts for the majority of heavy crude being refined at U.S. Gulf Coast refineries; and (2) because a 20 percent increase in vehicle engine efficiency (20% x 70% = 14%) would more than offset all of the excess GHG emissions associated with oil sands crude.
The GHG emissions associated with oil sands development also compares quite favourably to the GHG emissions associated with coal. Data from the U.S. Energy Information Administration shows that coal-fired power plants make up about a quarter of U.S. GHG emissions. In 2010, emissions associated with U.S. coal-fired power plants were nearly 40 times greater than emissions from the oil sands. Further, Greenpeace recently released a report that predicts and compares the GHG emissions that will be produced by 14 major resource development projects around the world. The report, which is critical of oil sands development, notes that the oil sands could be emitting 420 million metric tons of CO2e per year by 2020, from both production and consumption. However, these emissions seem insignificant compared with China. Booming coal production in China will likely create 1,400 million metric tons of additional CO2e per year by 2015.
Considering the likelihood that oil sands will be developed in some fashion, the increased environmental scrutiny of its actual extraction at the source, and the less attractive alternative of America’s continued reliance on coal, oil sands crude may not be as “dirty” as many environmental critics have argued.