Discussion - Oil & Gas

DISCUSSION: Pipelines or Rail? Implications of the new Keystone Report

The pending decision on the Keystone XL Pipeline is perceived as a precedent-setter for defining the US government’s commitment to balancing the environment with economic development. Anti-Keystone protests at the White House are a very visible example of public environmental interest in the matter. These manifestations are particularly significant when tied to President Obama’s climate change speech last year, in which he stated that the pipeline would not be approved if it were shown “to significantly exacerbate the problem of climate change”.

One of findings of the US State Department’s recently released Environmental Impact Statement for the Keystone XL Pipeline is that approval of the pipeline would have little impact on the pace or scale of oil sands development. The report states that “the dominant drivers of oil sands development are more global than any single infrastructure project.” Though it estimates that oil sands would produce about 17% more greenhouse gases than the reference crude oil (figure below), it states that preventing the construction of the pipeline would not prevent these greenhouse gases from being emitted into the atmosphere [1].


The Keystone report also states that shifting the oil capacity of the Keystone XL pipeline to transport by rail could result in a higher number of oil spills and a larger volume of leakage per year [2]. It also predicts that carrying crude oil from land-locked Alberta by rail instead of by pipeline could result. In an average of six additional rail-related deaths per year. This is particularly significant in light of several recent events, including the derailment of an oil-carrying train in Quebec last year that killed 47 people and January’s oil-carrying train derailment in Pennsylvania, which have heightened public concerns about the safety of oil transport by rail.

The outcome of the decision on the Keystone XL Pipeline will have significant implications for both US rail industry and pipeline developers. The management of environmental opposition to the Keystone XL pipeline and increased concern about the safety of oil transport by rail may be key indicators for increased oil pipeline development. A question that remains is how consumers would benefit from the cost reduction in pipeline transportation versus rail.

DISCUSSION: How will the US transport its – Canadian – oil? What are key indicators for the outcome of the pending decision on the Keystone XL Pipeline? How will consumers benefit from the cost difference of oil transportation by pipeline versus rail? What are the implications of US leadership in global warming and energy policy?

written by: Sabina Martyn/ edited by: Celine Rottier

  1. http://keystonepipeline-xl.state.gov/documents/organization/221190.pdf
  2. http://keystonepipeline-xl.state.gov/documents/organization/221135.pdf

6 replies »

  1. Sabina,

    Good questions. Two points: I’m not sure the environment and economic development have to occupy opposite ends of a scale needing balance. There are plenty of environmentally “friendly” technologies that increase economic development. Secondly, the assertion by the State Department that the tar sands will be developed regardless is based on an assumption of oil prices that keep extraction “in the money.” Approval of this pipeline would lower the shut down price of extraction thus ensuring more tar sands get removed and ultimately combusted. This is acutely troublesome given the IPCC’s recent statement about the need to transition to a low carbon economy.



    • I agree with you, Brandon, that the environment and economic development are not necessarily mutually exclusive. But with the loud opposition to the environmental implications of Keystone, I think it’s also important to look at the implications of what the alternative (rail) would be. If the pipeline isn’t built, is it possible that the same end result in terms of extraction would take place – just transported via a more extensive rail network? Also, as oil sands drilling digs deeper for yield, or if climate policy becomes more robust, is it possible that the price of extraction could in fact rise?

  2. I think it a mistake for the “environmentalists” to oppose Keystone and other oil and gas projects. Already (although not always evident to those outside the industry) renewable generation has slain coal, nuclear, and soon natural gas electricity generation. It becomes untenable for utilities to propose 40-year assets that take 5-15 years to build in an environment of 5% to 10%/year falling renewables LCOE’s. Yes, I know we need better storage and different architectures….
    We need to stay focused and make the same kinds of technological advances in the transportaiton sector in order to reduce oil usage. This is both a a national security and environmental issue. The idea of attacking oil and gas projects is a bad one…..oil and gas are where the money are, American’s do NOT want their automotive transport conveniences upset, and the industry therefore has very strong political support when it counts….and they can hit back strongly when attacked (figuratively).
    Ultimately, cost and functionality will drive a transition off of oil in the transport sector, and we need to get on with that as opposed to creating powerful enemies unnecessarily.

  3. Agreeing with what Brandon said about achieving economic and environmental benefits at the same time, wouldn’t biofuels offer a very attractive alternative and solve the Keystone XL Pipeline issue entirely?
    – especially new generation biofuels (cellulosic ethanol feedstocks) could be produced much closer to US population centers and thus wouldn’t require long-distance transport (mega projects)
    – job creation inside the US instead of in Canada in operations but also in R&D
    – decreased dependence on foreign oil
    – decreased CO2 emissions (even below conventional oil)

    • Thomas, while biofuels offer hope, they haven’t been able to be produced at a scale that is large enough to significantly displace petroleum consumption. Perhaps there could be a distributed model of biofuels production instead of large scale.

      Sabina, you are correct: the alternatives to a pipeline could be vastly more dangerous. But, I don’t agree with the premise of the statement. Must the Canadian tar sands be developed and exploited, especially given the acute dangers associated with climate change?


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