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Jeffrey Simpson (Brigitte Bouvier for The Globe and Mail)
Jeffrey Simpson (Brigitte Bouvier for The Globe and Mail)

Jeffrey Simpson

Keystone a green light? Not so fast Add to ...

The U.S. State Department gives green light to the Keystone XL pipeline. That was the tenor of the media coverage and headlines after the department’s report was released last week.

Read one way, that interpretation was plausible. Read another, it was not. The conflicting interpretations, based on a reading of the document rather than spin from the Harper government and the oil industry, show why Keystone XL remains unsettled in Washington. The reason is not all politics, as is frequently asserted, although politics obviously plays a role.

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The State Department’s detailed, lengthy and professional final report (no wonder it took so long to produce) argues that Alberta’s bitumen oil would be sent somewhere, somehow because demand for oil exists. Keystone XL or not, bitumen oil would be exploited and used.

If the U.S. nixed Keystone XL, affirms the report, bitumen oil would be shipped south by rail, or rail and ship. Or it would be sent by pipelines to Canadian coasts for export. Since bitumen oil would be used by somebody, blocking pipeline shipment to Gulf of Mexico refiners would not affect total greenhouse gas emissions. Hence the green-light interpretation.

However, the report knocked the props from under two long-standing claims of the bitumen industry and its salespeople in the Ottawa and Alberta governments. Bitumen oil is dirty oil, and the State Department report explains why.

First, on a life cycle basis – extraction to combustion – bitumen oil produces 17 per cent more greenhouse gas emissions per barrel than crude oil refined in the U.S. Combustion by vehicles results in about the same GHGs-per-barrel, but extracting bitumen produces far more GHGs than other kinds of oil.

Second, bitumen oil produces more GHGs than the other sources of heavy oil from Venezuela and Mexico now being used in Gulf refiners. Bitumen advocates had insisted Alberta oil would replace existing heavy oil from elsewhere with no increase in emissions. This oft-repeated claim is not true, according to the State Department.

Bitumen oil shipped via Keystone would produce somewhere between 1.3 and 27.4 million metric tonnes more carbon a year than heavy oil now being used in the Gulf refineries – the equivalent of emissions from 270,833 to 5,708,333 passenger vehicles, or from 0.4 to 7.8 coal-fired power plants.

The report concedes these are very large variants. They range from negligible to significant. Saw off the differences, and the result still remains that Alberta bitumen oil will produce more emissions than heavy oil now being used, and many more emissions than from conventional crude.

If the Obama administration wants to focus only on emissions within U.S. territory, and not on global emissions, it could argue that saying no to Keystone will help cap emissions in the U.S. If Keystone goes through, emissions from its oil will rise compared to other sources of heavy oil and, of course, from conventional oil.

President Barack Obama has already correctly minimized the job-creation impact of Keystone. The State Department says that an impressive 42,100 jobs would be created for two years during construction. After that, there would be 50 (!) permanent jobs and GDP would rise 0.02 per cent.

So, for more greenhouse gas emissions on U.S. soil, a risible number of long-term jobs and a tiny boost for economic growth the Obama administration should think of Keystone as a “slam dunk,” in Prime Minister Stephen Harper’s words?

The arguments for and against Keystone XL, as this report shows, are much more finely balanced than Canadian salespeople have suggested. What’s clear is that the dirtiness of bitumen oil remains a problem in warding off concerns in the U.S. and Europe about its use.

Alberta has a policy to reduce the intensity of energy use by 12 per cent for companies emitting more than 100,000 tonnes. They pay $15-a-tonne into a technology fund for any emissions above this level, or purchase credits or offsets.

Unfortunately, this level of payment means the money in the fund grows too slowly. Also, overall bitumen production will rise so that even with this tax GHG emissions grow. This growth has caught the world’s attention.

As for the Harper government, it has promised regulations to reduce emissions from the oil and gas industry for so long that any ministerial reference to the subject is a standing joke.

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