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Keystone XL Pipeline Update

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In August, 2011, I posted an article about the TransCanada Keystone XL pipeline, oil sands it is designed to move, its proposed route, and the U.S. government’s role in its progress. In September, 2011, I posted an article about how the House of Representatives passed a bill calling for it to be completed (North American-Made Energy Security Act – H.R. 1938), but the Senate will not pass it. Now I propose to update its progress and the environmentalist lawsuit it has attracted.

State Department’s Role

Approval of the Keystone XL pipeline rests with the U.S. State Department since the pipeline will cross an international border. The State Department, in an environmental impact statement released August 26, 2011, said that the Keystone XL Pipeline will have no significant impact on water and other natural resources along its proposed route. Tomorrow, October 7, 2011, The State Department is scheduled to hold a final hearing on preliminary approval of the pipeline, granted in August, 2011, to TransCanada Corporation. Before construction and operation of the pipeline expansion can proceed, Obama, through the U.S. State Department’s permitting process, must grant final approval of the project. As of today, October 6, 2011, President Obama has not approved nor disapproved the pipeline. A decision from him is expected by the end of the year.

Jobs versus Environment

Building the pipeline will create 20,000 jobs, according to pipeline supporters, which include labor unions and business groups. However, environmentalists and green energy advocates see the move as increasing US dependency on one of the dirtiest kinds of fossil fuels. Some landowners and politicians in states through which the pipeline will run fear that a spill will contaminate local aquifers, and affect the Ogallala Aquifer. Further, environmentalists say, the pipeline will cross a wetland ecosystem in Nebraska called the Sandhills.

The proposed pipeline passes through Montana, South Dakota, Nebraska, Kansas, Oklahoma and Texas, receiving support from the governors of all the states along the route except Nebraska. Nebraska Governor Dave Heineman has said, “I want to emphasize that I am not opposed to pipelines. I am opposed to the proposed Keystone XL Pipeline route because it is directly over the Ogallala Aquifer.”

Environmentalists Lawsuit

Three conservationist groups contend in a lawsuit that U.S. officials illegally allowed TransCanada to begin preparing the route for its proposed Keystone XL pipeline from western Canada to Texas. The lawsuit, filed by the Center for Biological Diversity, the Western Nebraska Resources Council, and Friends of the Earth, alleges that the U.S. Fish and Wildlife Service allowed TransCanada to prematurely disrupt the environment.

The lawsuit says federal officials have allowed TransCanada to mow native grasslands along the route, and to relocate American burying beetles, an endangered species. TransCanada was allowed to mow delicate native grasses in the Sandhills of Nebraska and to relocate the American burying beetle, the lawsuit alleges. TransCanada spokesman Shawn Howard said that it mowed some grass as part of efforts to protect and move some of the protected beetles. In every case where mowing was done, the company received permission from landowners, and he said mowing doesn’t constitute construction.

If We Don’t Build It, China Will

Environmentalists who think that blocking the Keystone XL pipeline will stop development of the oil sands are incorrect. Last year, China’s state owned Sinopec bought into Syncrude for $4.7 billion. Cnooc bought bankrupt OPTI Canada for $2.1 billion. Husky Oil, though still a Canadian company with large oil sands holdings, is controlled by Victor Li, son of Chinese billionaire Li Ka-Shing. China will finance pipelines to carry oil sands to the Pacific coast. Last month pipeline builder Enbridge announced that it has enough interested oil companies to start planning of a $5.5 billion pipeline to carry oil sands crude from Alberta to Kitimat, British Columbia. Sinopec said that it is willing to finance the project.

Regardless of Obama’s decision whether or not to authorize the pipeline, the oil will likely be produced. His disapproval means that oil sands will go to China and other countries. A subsidiary of the China National Oil Company has already offered $2.1 billion to buy a Canadian oil sands producer in Calgary. Pro-pipeline observers say what environmentalist groups fail to comprehend is that Canada selling oil sands to China, India, and other countries will have no environmental benefit for the United States, but what it will do is cost this country thousands of high-paying jobs, and increase U.S. energy dependence on oil produced by unfriendly and/or unstable regimes.

But that’s just my opinion.

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  • Igor

    I´m against the XL pipeline on National Security and financial grounds (I also believe that the jobs projections are grossly exaggerated, and are characterized by double-counting, but I´ll leave that for another day).

    XL is bad for national security because it does little to alleviate our energy problems. We must look elsewhere for energy sources that will layoff against oil requirements.

    All oil is fungible. Every American should have that written across the inside of his windshield so he can read it everyday driving into work. All oil extracted from the earth is interchangeable once it is extracted. It does not bear a brand, as a cow might. All oil goes into a common virtual pool. There is no way, for example, to sequester oil for domestic use, and even if a nation were to attempt to do so by military means the attempt would be subverted by shifts in the international oil market, which are basically a (close to ) ideal free market. Thus, Ghaddafi of Libya, whose country has prodigious reserves of oil, could NOT subsidize cheap petrol for Libyans by sequestration, but only by granting huge subsidies to drivers to counteract high pump prices (as determined by free international markets). Of course, the money to do that derived from relatively high crude prices to the fungible international market.

    Every barrel of oil (from whatever source, since oil is fungible) from Canadian tar sands will go 80% to foreigners! Only 20% will benefit US consumers! That´s because the US only uses 20% of all oil drilled anywhere. China uses about 30%, and I can´t recall what India uses (it´s easily available on the EIA website). But both of those countries are using a higher percentage every year, while our percentage decreases. Therefore, the future benefits of more oil will fall more and more to foreigners.

    Oil companies are 60% owned by foreigners. The stocks are publicly traded on international markets. Therefore, when we subsidize an oil company by $50billion it represents a $30billion savings to foreign investors. That´s $30billion less capital they need to put in.

    The oil companies, Chevron, Exxon, Valero, pay zero corporate taxes while getting high profits. That´s another subsidy that goes 60% to foreign investors.

    The USA will certainly be required to provide direct and indirect subsidies for the construction of XL, whether for direct costs like construction, or indirect costs such as lost property value (opportunity cost) for land seized by imminent domain.

    There will be other subsidies such as lost value for fresh water usage (about 4 to 8 gallons of fresh water are required for every gallon of tar sands oil). USA Citizens will pay for this one way or the other.

    The Ogallala Aquifer will be de-valued by contamination to a large extent (we already know that other such pipelines leak freely and depreciate the waters they run thru). This will cause great financial damage to the Nebraske agri-business which is a mainstay of USA food production, so food costs to US consumers will rise drastically.

    The paltry results simply do not justify the costs to American citizens. It´s a very poor ROI.

  • Igor

    The XL pipeline is a boondoggle, and it´s easy to see that it will primarily benefit foreign oil consumers and foreign investors at the expense of the USA Taxpayer.

    Who could possibly be in favor of such a bad deal for Americans? Well we don´t have to look far: Hillary and friends


    5 October 11
    Hillary Clinton’s Keystone XL Crony Lobbyists Problem

    Hillary Clinton and the State Department have the final word on whether to approve the Keystone XL tar sands pipeline, unless President Obama intervenes. The influence of tar sands industry lobbyists connected to Hillary Clinton is finally getting some media attention, but there is still more to this story.

    Clinton’s State Department is finally complying with a FOIA request for documents, after a lawsuit filed in May by three watchdog groups over an alleged lack of transparency regarding contacts with TransCanada lobbyist Paul Elliott, a former staffer on Hillary Clinton’s presidential run. Elliott has earned at least $310,000 as TransCanada Pipelines’ in-house lobbyist to influence Congress and several federal agencies, including the State Department, on the Keystone XL pipeline.

    However, the tar sands industry’s use of former Clinton associates to lobby on the controversial project extends beyond Mr. Elliott. DeSmogBlog has uncovered seven other influencers or lobbyists with ties to Clinton and Obama who have lobbied on behalf of tar sands interests for approval of the Keystone XL pipeline.

    These lobbyists are spread out over three firms, including one that was the largest single source of funds of any corporate entity to Clinton’s 2008 presidential run. Included in their midst is a lobbyist with close ties to top Obama adviser David Plouffe, and a former Koch Industries operative now lobbying for the Koch-friendly Keystone XL project.

  • Igor

    The XL jobs claims are greatly exaggerated.

    Grist summary

    …However, these tremendous-seeming jobs claims are based entirely on a report by the Perryman Group [PDF], commissioned by the pipeline’s owner TransCanada, whose results have been described as “dead wrong” and “meaningless” by Council on Foreign Relations fellow Michael Levi and environmental economist Andrew Leach, neither of whom oppose the construction of the pipeline.

    The only independent analysis conducted of the American job-creation potential of the Keystone XL pipeline finds that between 500 and 1,400 temporary construction jobs [PDF] will be created, with a negative long-term economic impact as gas prices rise in the Midwest and environmental costs are borne:

    Here’s the TOC from the Cornell report, available at Cornell XL report

    Table of contents
    1-Introduction
    2-Main Findings
    4-TransCanada Will Spend $3 to $4 Billion in the US, Not $7 Billion as Claimed
    7-KXL Will Generate 2,500-4,650 Construction Jobs
    8-Most Jobs Created Will Be Temporary and Non-Local
    11-KXL Steel Manufactured Outside the United States

    15-Construction Services: Engineering/Design/Technical/Support
    17-Perryman Study Deeply Flawed and Provides No Sound Basis for Jobs Claims
    22-Total (Direct, Indirect, and Induced) Jobs from Keystone XL
    27-KXL Will Have Minor Impact on Unemployment Levels
    28-Four Ways Keystone XL Could Be a Job Killer

    35-Conclusion: Employment Potential from KXL is Little to None; Decision should be based on other factors