The Keystone XL pipeline is irrelevant
The Keystone XL pipeline will make no measurable contribution one way or another to global climate change, Rapier writes. The arguments against it convey a false impression of the most important drivers of global carbon emissions.
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The time element is one that I feel pretty much everyone overlooks. Climate change activists argue that we are in an emergency situation. But in an emergency situation, you don’t spend your time and energy on things that might have a tiny impact a century from now. Your greatest focus should be on those that can address the emergency as quickly as possible.Skip to next paragraph
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In the next section, I explain why I feel that even though the potential climate impact is insignificant, Keystone XL is irrelevant in any case.
Why Keystone XL is Irrelevant
One of the contentious issues in the debate over the Keystone XL pipeline is whether the oil from the Alberta oil sands will get to market even if the pipeline isn’t built. “The rail system doesn’t appear to be capable of moving Keystone XL volumes” is a popular claim among Keystone opponents. When I ask why they believe this, the response I get is generally based on anecdotes by oil companies and pipeline companies, for instance, suggesting that the pipeline is an absolute necessity in ramping up oil sands production. Or, they argue that rail is simply too expensive to be an alternative method of transport. This is a perfect example of a theory being directly contradicted by data.
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In the US and Canada we have already seen oil transport by rail increase by about one million barrels per day (bpd) over the past 5 years. This scale-up is greater than the 830,000 bpd the Keystone XL would transport at full capacity. Bakken oil is now being railed to refineries on the East Coast, West Coast, and Gulf Coast – and if you listen to the earnings calls or investor presentations from various refiners, they plan to continue expanding this practice. Four years ago there was essentially no oil being shipped by rail from the Bakken. Two years ago, approximately 50,000 bpd was being shipped by rail. Today that number is 640,000 bpd — 71% of the crude oil production in North Dakota — and rising rapidly.
There is nothing special about the US rail system that enabled it to ramp up the transport of crude oil so rapidly. It simply responded to demand as Bakken production exploded and oil producers sought access to lucrative and distant markets. The reason is not — as some Keystone XL opponents have claimed — because there is anything special about the light oil from the Bakken that makes it easier to transport. The reason simply comes down to the differentials (as explained below).
Five years ago, these arguments could have been just as easily applied to the Bakken: production would be constrained because there was simply no way rail could ramp up fast enough to move the Bakken crude out of North Dakota. And of course shipment by rail would be too expensive. Yet it did ramp up, because the explosion in production depressed the price of Bakken crude relative to more widely traded waterborne crudes like Brent, and this created a tremendous incentive for refiners to move that product to coastal refineries one way or another.