The bitumen will flow, one way or the other. That is essentially the conclusion of the U.S. State Department’s environmental assessment of the Keystone XL proposal. This one pipeline, or any other, won’t change the rate at which Alberta’s oil sands are exploited.
It is just what the Canadian government and the oil industry wanted to hear. It means U.S. President Barack Obama’s decision is not about more greenhouse-gas emissions. It’s just a pipeline. By his own criteria, it gives Mr. Obama the green light to approve it.
But still, lurking in the minds of the Conservative government’s decision-makers in Ottawa, is a nagging question: Is there another shoe to drop?
One safe bet is that Keystone politics are not over. Opponents who have made Keystone XL a symbolic test of Mr. Obama’s approach to climate change will not judge the debate ended. They successfully pressed Mr. Obama to put off a decision once before, in 2011.
Will he punt it again, until after U.S. midterm elections this fall? Would he try to wrest new environmental regulations from Prime Minister Stephen Harper as a quid pro quo? After all, his own former ambassador to Canada, David Jacobson, said Canadian environmental action helps sell such decisions. Or will Mr. Obama find other reasons to block it?
For the moment, there’s no signal of any of that, Canadian government sources say. It’s wait and watch. The U.S. government, according to assistant secretary of state Kerri-Anne Jones, still has to fit this “technical” assessment into broader international efforts on climate change and energy security. The options are left open.
But they have been narrowed. On the key question of the impact on greenhouse-gas emissions, it’s fairly clear.
It’s not that it finds no impact from oil sands fuels. Greenhouse-gas emissions from this source are rated 17 per cent higher than the average barrel of oil used in the United States, and 2- to 10-per-cent higher than alternative heavy crudes. But the report concludes that in almost any case, one pipeline has little impact, because the oil sands bitumen will be shipped somewhere anyway.
If Keystone XL is not built, there might be new or expanded pipelines to Canada’s West Coast, followed by tankers to Asia, or a west-east pipeline to Canadian refineries and East Coast exports. The report warns those projects still face legal and political hurdles in Canada – but even if all are blocked, there is the railway. Oil-by-rail capacity is already expanding rapidly, and can, if demand is there, ramp up loading facilities and rail cars to carry extra production.
In one way, that is a victory for Mr. Harper’s all-out support of multiple pipelines and oil-by-rail: His policy signal that the oil sands will be developed, and its products shipped, one way or another, is heard in this report. But mostly, economics is driving the oil to market.
In only one scenario, according to the report, might Keystone XL have a real impact on oil sands development: if prices fall to $65-$75 a barrel, the point at which oil sands projects are near break-even, no new pipelines have been built, and rail transportation becomes costly.
Environmentalists fighting Keystone have seized on that as reason for Mr. Obama to block it. That scenario that should be the goal, they say: where conservation and green energy reduce demand and prices for oil, and constraints are set on oil-by-rail and new pipelines. But the State Department assessment treats it as unlikely.
It all makes it harder for Mr. Obama to say no. But it does not make it obvious that he will say yes, at least not soon. Pressure will come from Republicans in Congress, allied with the oil industry and business groups, and Mr. Harper’s government. But he has delayed before, and can delay again, until after November’s elections.
In the meantime, UN Secretary-General Ban Ki-Moon has convened a September climate-change summit, asking countries to set out post-2020 goals for reducing greenhouse-gas emissions. If Keystone XL is still hanging in the balance, Canada’s emissions record and future targets could fuel Washington’s Keystone politics anew.Report Typo/Error