Recently, Canadian Oil Sands Chief Executive Officer Marcel Coutu explained to Bloomberg why he and other big shot oil executives have been lobbying U.S. politicians so hard for the approval of the Keystone XL pipeline, which would ferry more than 800,000 barrels of tar sands crude to the Gulf Coast. Coutu had participated in a Canadian Association of Petroleum Producers (CAPP) lobbying junket in February, and another trip is being planned for this month.
The first reason is money. The Keystone XL pipeline is a vital component of the tar sands industry’s plans. Without it, it will be hard for Big Oil to double production of tar sands crude by 2020. With no way to transport the extra crude to markets in the U.S. and beyond, there would be no point in spending all that money to turn bitumen into a crude form of oil. This, Coutu said, has had a chilling effect on investment and share prices.
Canadian Oil Sands shares have risen just two per cent this year, while Cenovus’ have fallen seven percent and Imperial Oil’s are down 6.2 percent. Keystone XL, says Todd Kepler, a Calgary-based oil and gas analyst at Cormark Securities, would increase share prices for oil producers by as much as 20 per cent.
That's a big deal worth millions of dollars.
The second reason is, apparently, a concern for the truth. “In large part, we go [on endless lobbying trips] to get the story straight,” Coutu told Bloomberg. “The problem is, environmentalists are not held to the same standard of proof as public companies like us are.”
This is an interesting take on the search for truth in the battle over the future of the Keystone XL pipeline, especially since it comes from a leader in an industry long criticised for its lack of connection to or concern for the truth. To see whether Couto's claim has any merit, let’s look at the way the oil industry talks about the costs and benefits of the Keystone XL pipeline, and tar sands development in general, to see how high their standards of proof really are.
The story Couto and his colleagues in the oil industry like to tell (with the help of Canadian politicians) about Keystone XL is one of few risks and enormous rewards. Keystone XL, they claim, will not increase greenhouse gas (GHG) emissions, but it will enhance U.S. energy security and create as many as 20,000 jobs.
Besides, they argue, if U.S. President Obama doesn’t give TransCanada the presidential permit it needs to begin construction, they’ll find other ways of getting the oil to the Gulf Coast by other means. With other pipeline proposals stalled in Canada and the U.S., they point largely to rail as industry’s Plan B to transport tar sands crude to refineries in Oklahoma and Texas.
The greenhouse gas myth is easy to debunk. While the U.S. State Department’s draft Supplemental Environmental Impact Statement (SEIS) does conclude that Keystone XL will not increase GHG emissions, this finding already has been challenged by an agency that knows better – the Environmental Protection Agency (EPA). In its comments on the draft SEIS, the EPA found the SEIS deficient, in large part because Keystone XL would contribute 19 megatonnes of GHGs to the atmosphere annually.
This is largely because turning bitumen into tar sands crude is three to four times more greenhouse gas intensive than conventional crude. So much for higher standards of proof.
The EPA also weighed in on the claim that rail could deliver the planned increase in tar sands production southward, which Coutu’s comments indicate potential investors already view as spurious.
“The discussion in the DSEIS regarding energy markets, while informative, is not based on an updated energy-economic modeling effort. The DSEIS includes a discussion of rail logistics and the potential growth of rail as a transport option, however we recommend that the Final EIS provide a more careful review of the market analysis and rail transport options. … recognizing the potential for much higher per barrel rail shipment costs than presented in the DSEIS. This analysis should consider how the level and pace of oil sands crude production might be affected by higher transportation costs and the potential for congestion impacts to slow rail transport of crude.”
The reality is that rail can't replace pipelines—at least not without a massive, expensive and time-consuming investment in new rail infrastructure. In spite of rapid growth over the last few years, Canada’s National Energy Board estimates that only 47,000 barrels per day of oil was exported by rail from Canada to the US in 2012, which is less than six per cent of the capacity of the proposed Keystone XL pipeline and less than one per cent of the production capacity of all tar sands projects that have been approved or under regulatory review.
There is no way rail can replace Keystone XL, and Coutu’s comments indicate the oil industry already knows this. But that doesn’t stop tar sands companies from claiming otherwise in the public square.
As for energy security and jobs, these claims have been widely debunked, too. According to the U.S. Department of Energy’s original assessment in 2011, Keystone XL would divert Canadian oil from the U.S. Midwest to the Gulf Coast, where most of it would be refined and exported, not retained in the U.S. In return, the Midwest would get the gift of higher gasoline prices, because the price of oil would increase.
In fact, because the United States is awash in tight oil, and with energy consumption declining, there is little need for more of Canada’s dirty oil or the Keystone XL pipeline.
TranCanada, meanwhile, claims that Keystone XL will create 20,000 jobs, as well as more than 100,000 “indirect” jobs. The reality is somewhat different, as you might have guessed by now. According to the U.S. State Department, Keystone XL will create no more than 6,000 temporary jobs and—wait for it—just 20 permanent jobs.
Meanwhile, the University of Nebraska predicts that Keystone XL will experience 91 major spills over the 50-year lifetime of the pipeline.
TransCanada has experienced major problems with its first Keystone pipeline, which has already leaked 14 times in its first year of operation along the U.S. section alone.
Conclusion? Don’t believe anyone whose paycheck depends on what version of the truth comes out of his mouth. Investors, like CEOs, aren’t all that concerned with accurate and appropriately contextualized information. All they care about, as Coutu makes abundantly clear, is getting as much oil to the highest bidder as quickly as possible, the truth be damned.
Image Credit: Kris Krug via flickr