Will a pipeline like this one in Alaska soon run tar sands oil all the way to refineries on the Gulf Coast?>> Concern mounts that a Canadian company’s plan to transport more tar sands oil across the continent will cause environmental harm and fail to make a dent in U.S. energy prices.—
For TransCanada, the timing couldn’t have been worse.
First, there was BP’s runaway well in the Gulf. Then, on the night of July 25, the steel skin of a 30-inch-wide oil pipeline split open in a wooded stretch of southern Michigan. By the time the flow had stopped, upwards of 1 million gallons of toxic crude had disgorged into a nearby creek and polluted the Kalamazoo River.
TransCanada doesn’t own the ruptured pipeline — it belongs to the company’s top rival, Enbridge. But the spill in Michigan and the disaster in the Gulf have led both the public and regulators to cast a more skeptical eye on what once looked like a sure thing: TransCanada’s plan to build a $12 billion network of pipeline that would roughly double the capacity connecting Canada’s vast — and highly controversial — tar sands oil reserves to U.S. refineries.
TransCanada’s project is massive. Construction is already finished on two of three stages of a new network which, if fully built, would span some 3,800 miles (that’s equal to the distance from New York City to Denver and back again, with some to spare). Still on the drawing board, and now perhaps in jeopardy, is Keystone XL, the project’s final and, at $7 billion, most costly section.
If built, Keystone XL will thread a 36-inch wide pipe across two Canadian provinces and six U.S. states, ending after 1,661 miles at refineries on Texas’s Gulf Coast. To begin construction however, the Calgary-based oil pipeline company needs an okay from the Department of State, which oversees energy infrastructure crossing the border. The agency has already approved the first two sections in the upper Midwest, and TransCanada hoped to get the final go-ahead by year’s end.
Things have changed, though. On top of worries from BP’s disaster, the Michigan spill has heightened anxieties about the environmental risks posed by tar sands oil in particular. Echoing the public’s mood, congressional opposition to the pipeline project is rising. On June 23, 50 members of Congress sent a letter to Secretary of State Hillary Clinton criticizing her department’s draft evaluation of the environmental risks posed by Keystone XL. Federal authorities that approved earlier stages of the project are now throwing up challenges to the final leg. “Keystone XL is attracting heightened scrutiny not just from the agencies but businesses and lawmakers,” says Susan Casey-Lefkowitz, director of international programs at the Natural Resources Defense Council.
Until now, national security has trumped other concerns in the State Department’s evaluation of tar sands pipelines. And in some respects, the Gulf spill has only boosted the pressure to develop the Alberta tar sands. If offshore drilling is reduced, as some have called for, more oil could be imported from unreliable allies such as Venezuela and Saudi Arabia to make up for it. In this light, Canadian officials and industry players have promoted the tar sands as a secure, nearby, and plentiful source of energy. At the June 30 opening of the second stage of its Keystone network, Hal Kvisle, TransCanada’s president and CEO, emphasized its potential for “significantly improving North American energy security.”Yet a lot of what would flow through the Keystone network could actually be bound for lucrative overseas markets, not used to meet U.S. needs. By connecting its pipeline to Houston, TransCanada is delivering its crude to a refining center that sends finished gas, diesel, and other fuels to international markets. A substantial share of the tar sands oil will likely be refined and sold as diesel to European drivers, according to an analysis by Greenpeace, given higher fuel prices in Europe.
Other market realities are undermining the emphasis on national security, most of all softening U.S. demand. Oil prices were near an all-time high in 2008 when plans for TransCanada’s new network were unveiled. Yet because of the global recession, oil prices have fallen back below $80 per barrel, leading many tar sands developers to cancel projects that would have increased the flow into the pipeline. These projects may never happen now. Because tar sand deposits require so much energy to “cook” the oil out of the sands, they are among the world’s most expensive new sources of oil to develop. A new tar sands deposit costs twice as much as a new well in Saudi Arabia. Some analysts contend that, between conservation efforts in the United States and lower-cost overseas sources of new oil, it will not make economic sense to develop new tar sand supplies in the foreseeable future.
Reflecting these market concerns, on July 2, the Energy Department raised questions about the economic need for the pipeline: The fact that two existing tar sands pipelines are not running at capacity “ensure(s) that there is enough pipeline oil from Canada for some years.” Nor is the pipeline likely to lower oil prices, the agency says, given its small volume relative to total U.S. consumption.
Fundamental environmental criticisms persist, with pipeline safety at the top of the list. Even as Enbridge continues to clean up the spill on Michigan’s Kalamazoo River, it faces charges that executives responded improperly to warning signs of degradation on the 41-year-old pipe. Tar sands oil is more corrosive than standard crude because of its high levels of sulfur. Spills of tar sands oils can also do greater harm to the environment than standard crude, says Kate Colarulli, coordinator of the Sierra Club’s Dirty Fuels Campaign. In addition to sulfur, the oil is loaded with higher levels of toxic heavy metals. And because it is so thick, chemical additives are needed to keep tar sands crude flowing. The composition of the additives is considered proprietary, so the companies disclose few details of what’s in them. The Keystone XL would put at risk a critical source of drinking and irrigation water, says Colarulli, since the pipeline snakes above much of the Ogallala Aquifer, a vast underground reservoir of water that straddles eight states in the Great Plains. “Raw tar sands crude is the dirtiest oil on Earth,” says Colarulli. “If Keystone XL is built, sooner or later, a spill will happen.”
Until recently, environmental concerns had failed to slow TransCanada’s progress. But on July 16, the Environmental Protection Agency labeled a draft environmental impact study submitted by the State Department on the Keystone project as “inadequate” — its lowest possible rating. In a letter, Cynthia Giles, EPA’s assistant administrator for enforcement and compliance assurance, said health impacts from “air emissions from refineries and the potential contamination of drinking water supplies from an oil spill have not been fully evaluated.” Nor does the environmental study adequately address the project’s potential impact on climate change, wetlands, and birds. Giles requested that the State Department produce a revised draft study to address her agency’s concerns and seek further public comment.
If that happens, TransCanada will again face complaints about both the environmental toll of tar sands extraction and risks posed by the pipeline itself. To harvest tar sands, miners first have to raze tracts of old growth Canadian forests to expose oil-bearing sandy soils. The tar-like, oily sands then have to be “steamed” — either in the ground or once shipped to a plant — to create liquid oil, a process that consumes huge amounts of energy and water and leaves behind pools of toxic tailings.
The cost to the climate is also high. Compared with conventional oil, generating a barrel of refined oil from tar sands crude consumes about three times the energy and emits about 80 percent more greenhouse gases. The draft environmental impact study also acknowledges the new pipeline will boost routine emissions of air pollutants. “At every stage — from extraction, to transport and processing — tar sands oil is substantially more harmful to the climate” than conventional oil, says NRDC’s Casey-Lefkowitz.
New complaints may emerge too. TransCanada faces allegations that it may have unknowingly used defective steel in Keystone I, the project’s first stage. Federal testing found that batches of piping made by Welspun in India, and imported to the U.S. during 2007 and 2008, contained substandard steel, says Paul Blackburn, an attorney at Plains Justice, a non-profit that compiled the data from federal documents acquired through a Freedom of Information Act request.
The defective steel was identified after a number of pipelines burst during routine safety tests required by the U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA). Seven pipelines were investigated as a result of the failures, according to PHMSA documents. The Keystone project is not mentioned, despite reports that about 47 percent of the pipeline was constructed using Welspun pipe during the period of concern, Blackburn says.
Plains Justice has requested that PHMSA investigate TransCanada’s existing projects and require them to operate at lower pressures until they’re cleared. “The XL pipeline should be delayed until PHMSA prepares a report on how bad steel slipped through industry safety nets,” he says, “then fixes these quality control problems.”
It remains to be seen how EPA’s comments will affect the Keystone XL project, but on August 5, the company rescinded a long-standing and controversial request to operate Keystone XL at pressures about 10 percent higher than are currently permitted for the type of pipe proposed in TransCanada’s project. According to its original timeline, the company hoped to win approval this year, begin construction in 2011, and start operating before 2014. TransCanada officials have conceded that the delays could push a final decision into next year.
EPA has no authority over the State Department’s final decision on whether to allow the pipeline to proceed. But if agency officials feel their concerns haven’t been addressed, they can refer the decision to the White House’s Council on Environmental Quality, which has the power to resolve interagency disputes. The State Department said in a statement that it would delay any decision “until all necessary steps of the environmental review and interagency consultation process have been completed.” In an election season, with BP’s spill still fresh in the public’s mind and President Obama pushing alternative energy, the Sierra Club’s Colarulli says, the White House is more likely to take a tough stance.
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