How the Keystone XL pipeline would help the US, and why some oppose it

The Obama administration announced on Thursday it was delaying construction of the Keystone XL oil pipeline, a proposed Canadian project so rich in promised jobs, tax revenues, and oil imports that its approval seemed assure. But the proposal to bring crude oil from Alberta’s tar sands to refineries in Texas involved a pipeline traversing America’s heartland, including an environmentally sensitive region atop the vital Ogallala aquifer.

Delaying the project to examine an alternative route around the aquifer appears the safest political move for the moment, though it won’t give President Obama immunity from criticism. Here is some background on the pipeline project.

What is the Keystone XL pipeline and what will it carry?

Demonstrators march with a replica of a pipeline during a protest to demand a stop to the Keystone XL tar sands oil pipeline outside the White House on Sunday in Washington. (Evan Vucci/AP)

The proposed $7 billion extension of an existing pipeline running from Alberta to refineries in Illinois would be, at 36 inches in diameter and 1,900 miles long, the largest single pipeline in North America.

Construction of the Keystone XL would actually consist of connecting two new sections to the existing Keystone pipeline traversing the Great Plains. If approved, it will carry “dil-bit,” or diluted bitumen, an acidic crude oil derived from tar sands mixed with a diluting agent that allows the resulting combination to flow more easily through the pipeline.

The dil-bit will flow from the Western Canadian Sedimentary Basin in Alberta, the largest and richest source of petroleum in North America, to refineries and distribution terminals in Nederland and Port Arthur Texas, two crude oil distribution hubs near the Gulf coast.

The pipeline will also tap American crude extracted from the Bakken oil shale formation in the Williston Basin in Montana and North Dakota. An uplink to the Keystone XL is planned for Baker, Mont., at the southern tip of the Bakken formation.

How much oil will the pipeline transport, and who gets it?

The existing Keystone pipeline is currently carrying an average of 500,000 barrels per day (bpd) to Illinois refineries, short of its capacity of 590,000 bpd, according to TransCanada. The proposed “XL” extensions will be capable of transporting an additional 700,000 bpd, boosting the network’s overall capacity to 1.3 million bpd, says company spokesperson Terry Cunha.

For the American market, the increased capacity could mean an additional 255 million barrels of oil per year imported from Canada, already America’s largest single foreign supplier at 720 million barrels in 2010.

The companies that harvest the crude from the oil sands and pay TransCanada for its transport – Marathon, Shell, Conoco Phillips, Valero, and Suncor among others – say the extension would give them greater access to domestic markets and allow them to ship a higher volume of oil.

Before Thursday’s delay, TransCanada had expected oil to start flowing in 2013.

How would the US benefit from the proposed pipeline?

It comes down to energy security and jobs, supporters say. TransCanada is predicting that 20,000 new jobs will be created for the pipeline’s construction. An additional 118,000 indirect jobs will follow for ancillary support businesses in each state, the company estimates. Supporters say the jobs will not be concentrated just in the states the pipeline passes through, but in other states that produce the materials, such as the piping and pump motors.

The company also promises to deliver more than $5 billion in property taxes each year for the six states traversed by the pipeline.

The pipeline would improve US energy security by providing more oil from a friendly, stable, and reliable neighbor, while reducing US dependence on imports from regions that have shaky environmental regulations and political climates, such as Venezuela and the Middle East, Keystone XL supporters say.

The pipeline would also transport up to 65,000 bpd from the Bakken deposits.

Canada is already the largest supplier of oil into the US and growing, pumping supplying 2.6 million barrels per day on average in 2011, more than it did the previous year and more than double that of Mexico, in second place with 1.2 million barrels per day. Supporters say the pipeline will ensure that Canada maintains its leadership in the years to come.

What is TransCanada’s safety record?

TransCanada has experienced spills in recent years, including on the existing Keystone pipeline, leading environmentalists to say the company can’t be trusted to maintain a pipeline as extensive as the Keystone XL. The company says the spills mainly occurred at pumping stations, suggesting that the pipelines themselves have maintained their integrity. Experts say leaks from the actual pipe have the greatest potential for spillage rather than leaks at pump stations, which are more easily controlled. TransCanada says no pipeline breaks took place in 2010.

An environmental impact statement from the State Department, which is quarterbacking the pipeline permit process because it involves a foreign country, says the existing Keystone pipeline experienced 14 spills since June 2010. The key here is the volume: Seven were 10 gallons or less, two were between 300 and 500 gallons.

The worst spill, of 21,000 gallons, was in May 2011 following a valve failure at a pumping station in Sargent County, N.D. A second leak, of 430 gallons, occurred later that same month in Doniphan County, Kan.  TransCanda responded to both leaks by shutting down the entire pipeline system for two weeks to give the company time to replace fittings.

Adding to environmentalists’ concerns, diluted bitumen is typically a heavy, acidic crude that critics say can result in pipeline corrosion, which makes it more vulnerable to leaks. However, the oil and gas industry, including TransCanada, says this mixture is comparable to the same type of diluted crude that has already flowed into the US from Canada for more than a decade.

The State Department estimates that the maximum the Keystone XL could potentially spill would be 2.8 million gallons along an area of 1.7 miles. By comparison, the 2010 Gulf of Mexico oil spill released 210 million gallons into the environment.

How is the pipeline being received in states that will be affected by the project, and what is the source of local opposition?

The pipeline extension will travel through Montana, South Dakota, Nebraska, Kansas, Oklahoma and Texas. The reception in each of these states is mixed, with support and opposition to the project crossing party lines.

Opposing the project is an unlikely mix of interests: farmers, ranchers, and environmental groups, all of whom worry about the effect any leak would have on the land.

Unlike other Republican governors, Nebraska Gov. Dave Heineman had asked Obama to block the pipeline on the grounds it risks the health of the Ogallala aquifer, a major source of fresh drinking water for people in the region as well as for livestock and agriculture.

Governor Heineman says he will support the project if the pipeline is rerouted to avoid the aquifer, 65 percent of which is in his home state.

Other opponents say the corrosive tar-sand-derived crude is difficult to clean when spilled. And environmentalists point to an even broader concern, saying that extracting petroleum from tar sands creates more greenhouse emissions than conventional oil production, releasing more carbon into the atmosphere and accelerating global warming.

Regulation is also an issue. The Gulf of Mexico oil spill revealed the cozy relationship between federal regulators and the oil and gas industry; opponents worry that the same will happen here and that the Transportation Department’s Pipeline and Hazardous Materials Safety Administration is too small to handle a project as large as Keystone.

The coalition pushing for the pipeline is just as unlikely: unions and business leaders, both of whom say the pipeline will boost local economies and create jobs. 

So why did the administration delay approval of the project?

Demonstrators march with a replica of a pipeline during a protest to demand a stop to the Keystone XL tar sands oil pipeline outside the White House on Sunday, Nov. 6, 2011, in Washington. (Evan Vucci/AP)

The State Department said it “needs to undertake an in-depth assessment of potential alternative routes in Nebraska” to address the “environmental sensitivities” of the current route.

The president issued a statement that acknowledged the environmental concerns as well as questions that had been raised about the State Department’s vetting process.

But it may all just boil down to election-year politics. It would have been hard for Obama to avoid paying some political price.

A green light would have meant the president would likely become a convenient target of the protesters currently storming the nation’s major financial districts. They would say his decision was further evidence he is less interested in limiting greenhouse gas emissions and endorsing an energy policy that reduces the demand for fossil fuels than he is serving the interests of big oil companies.

However, Obama likely had more to lose if he stood in the project’s way. Campaign foes would say he was working against the national interest by harming energy security and preventing job creation, the same argument that worked against him when he declared a moratorium on deepwater drilling in the Gulf of Mexico after last year’s oil spill.

As it is, his decision to delay the process came under immediate fire from House Speaker John Boehner of Ohio, who called the move “a thinly-veiled attempt to avoid upsetting the President’s political base before the election.”

“More than 20,000 new American jobs have just been sacrificed in the name of political expediency,” Mr. Boehner said. “By punting on this project, the president has made clear that campaign politics are driving US policy decisions – at the expense of American jobs.”