News The House is bringing back the Keystone pipeline

[SixNein]

Thanks, gents. Good discussion for the most part here and it would be interesting to see how perspectives evolve.

To be completely honest, I think these things (Keystone XL and Northern Gateway) would meet with similar opposition, but in a different form, if the crude being transported through them was from conventional sources rather than oil sands. What I mean is that I think there is more than just GHG and other environmental issues being considered and those other issues are what is really at play. That's really all I'll touch on as it sounds "tinfoil hat"-like and I don;t want to mire the discussion in unsubstantiated claims.

My largest concern is about the price of gas. Our economy is really dependent on cheap fuel, and these unconventional forms of production really signal the end of cheap gas. Yes, GHG is also a concern; however, I believe high gas prices have the potential to do more damage in my lifetime.

I think some people believe that price will go down with the "discovery" of these unconventional sources.

 

[russ_watters]

Why don't we go straight to the source then:

This announcement is not a judgment on the merits of the pipeline, but the arbitrary nature of a deadline that prevented the State Department from gathering the information necessary to approve the project and protect the American people.

http://www.whitehouse.gov/the-press-office/2012/01/18/statement-president-keystone-xl-pipeline

While I'm sure many supporters of Obama believe he just needed more time and study to make his decision and many other supporters don't care as long as he axed it, I believe that this is the same stall/study, bury tactic Obama used to dodge debt reduction and shut down (probably illegally) the Yucca mountain nuclear waste repository.

 

[CaptFirePanda]

My largest concern is about the price of gas. Our economy is really dependent on cheap fuel, and these unconventional forms of production really signal the end of cheap gas. Yes, GHG is also a concern; however, I believe high gas prices have the potential to do more damage in my lifetime.

I think some people believe that price will go down with the "discovery" of these unconventional sources.

I agree that they will signal the end to cheap gas. The concept of why they do, however, is important to note. These unconventional resources are being sought after and produced, not because some big name companies or a federal/provincial government decided that it would be a good idea to spend more to get less and jack up the prices of crude, gas, etc... They are being sought after because conventional reserves are dwindling. Even on the conventional side, we have to drill more to produce the same (or less) as we did in the past; the return on energy is shrinking.

We've gone out and produced a great percentage of the "sweet spots" where you'd just stick a vertical well in the ground and let the crude flow. Now we are challenged to use methods to retrieve crude left behind in those sweet spots (with enhanced oil recovery techniques and waterflooding), or we need to drill the less attractive stuff found in shales, or as extremely viscous crude in the oil sands. All of these methods require advances in technology, more intensive drilling (or mining in some cases with the oil sands), greater and greater energy to extract what is left and higher crude prices in order to make them economically sound.

To try to contain my rambling in a sentence or two: It isn't the oil sands that are increasing prices; it is the dwindling supply of conventional reserves that are increasing prices for the most part. There, is of course market speculation and other factors that will influence pricing, but an overall upward trend is the result of having to spend more to meet demand.

 

[CaptFirePanda]

While I'm sure many supporters of Obama believe he just needed more time and study to make his decision and many other supporters don't care as long as he axed it, I believe that this is the same stall/study, bury tactic Obama used to dodge debt reduction and shut down (probably illegally) the Yucca mountain nuclear waste repository.

Some would say that the Yucca site was on the table at all because of equally insiduous tactics. The topic is just as controversial, I'm sure, as the Keystone XL topic but I'm not sure if fairly broad and politically biased opinions will solve anything.

 

[SixNein]

I agree that they will signal the end to cheap gas. The concept of why they do, however, is important to note. These unconventional resources are being sought after and produced, not because some big name companies or a federal/provincial government decided that it would be a good idea to spend more to get less and jack up the prices of crude, gas, etc... They are being sought after because conventional reserves are dwindling. Even on the conventional side, we have to drill more to produce the same (or less) as we did in the past; the return on energy is shrinking.

We've gone out and produced a great percentage of the "sweet spots" where you'd just stick a vertical well in the ground and let the crude flow. Now we are challenged to use methods to retrieve crude left behind in those sweet spots (with enhanced oil recovery techniques and waterflooding), or we need to drill the less attractive stuff found in shales, or as extremely viscous crude in the oil sands. All of these methods require advances in technology, more intensive drilling (or mining in some cases with the oil sands), greater and greater energy to extract what is left and higher crude prices in order to make them economically sound.

To try to contain my rambling in a sentence or two: It isn't the oil sands that are increasing prices; it is the dwindling supply of conventional reserves that are increasing prices for the most part. There, is of course market speculation and other factors that will influence pricing, but an overall upward trend is the result of having to spend more to meet demand.

How much damage do you think this will do to the world economy? We've already seen some demand destruction. America is particularly vulnerable to this imo. One could argue that the price of gas was a factor in our economic downturn.

 

[russ_watters]

Some would say that the Yucca site was on the table at all because of equally insiduous tactics. The topic is just as controversial, I'm sure, as the Keystone XL topic but I'm not sure if fairly broad and politically biased opinions will solve anything.

There is little controversy in the scientific and engineering communities over nuclear power in general or wast or the Yucca project in particular. In addition, the law designating Yucca as our waste storage site was purposely made difficult to overturn in order to keep it from being used as a political football fifteen years ago. This law is still in effect, hence the apparent illegality of the Obama administration's actions. This is a political football for Obama and some Democrats, not for Republicans. He brought it up.

Obama closed the Yucca facility and said he'd study the issue. He appointed a committee to study it and they did. So where's his new nuclear waste policy? Well, just like with his debt commission, he ignored the study when it was published. Dealing with the nuclear waste issue was not his goal: finding a way to bury debate over his actions was.

For Keystone, I see the same tactics. I don't believe for a second that Obama's decision to delay a decision until 2013 was just coincidental to the fact that he is up for election in 2012. Remember, there was nothing for the government to study - all they had to do was review an application. And the application comes with a report. It doesn't take two years to review a report and application. If the application/report were insufficient/flawed, then they should have rejected it for those reasons, asking them to resubmit (which had already happened once). Instead, Obama basically just said he wasn't going to look at it until after being re-elected.

 

[WhoWee]

Actually, the record indicates the application was filed in 2008.

http://www.keystonepipeline-xl.state.gov/clientsite/keystonexl.nsf?Open

"TransCanada Keystone Pipeline, LP (Keystone) filed an application in 2008 for a Presidential Permit with the Department of State to build and operate the Keystone XL Project."

I'm surprised it wasn't stuffed into the Stimulus Bill.

 

[feathermoon]

1) You misunderstood what I said, but I'll address your (strawman) point directly: Read the page before your quote:

Maybe I missed where 'the Gulf Coast refineries' aren't part of the US any more? They have the capability and capacity to refine the raw material from the tarsands (the actual numbers are given in that report).

2) As I referenced (in the 9/26/11 CBC article regarding protests): the cofounder of greenpeace was impressed with the reclamation and supported the tarsands development. From an American policy perspective, though, this is irrelevant because the development of the tarsands isn't contingent of the keystone XL pipeline - it will happen anyhow.

1.) You said the tarsands would benefit the U.S. if the XL was built, I showed how the XL being built would raise gasoline prices in the midwest. I don't know even know what you're talking about with the Gulf Coast refineries for.

2.) I won't speak much on the issue of Dr. Moore, everyone is entitled to their (bought and sold) opinions. I will say that's evidence of nothing. One guy who receives paychecks from the papermill industry to be a anthropogenic climate change denier says that nonnative scrub is equal or greater to pristine boreal forest? That's a JOKE.

Read this study if you're interested in the reclamation. In 50+ years of oil sands drilling, 0.2% of all land used is officially considered reclaimed for the public.

 

[feathermoon]

I wonder how economic=right for so many. Economic for whom? The company doing the drilling, when profits are higher than costs? How does this translate to the value of land to the rest of the world over the next 150 years as [if] it recovers (biotic recovery models can show forests taking hundreds of years to stabalize)?

Is the risk included in the valuation (remember how the Valdez spill resulted in mass suicides, billions in economic damages, and occurred in waters easier to navigate than the ones tankers would be in if the Northern Gateway pipeline was built)?

I cited a few issues in my last post which were unmentioned since. Here's another topic for discussion.

Deadly toxins are found in highest concentrations near oil sands upgraders.
http://www.sciencedaily.com/releases/2009/12/091207151335.htm

 

[feathermoon]

My largest concern is about the price of gas. Our economy is really dependent on cheap fuel, and these unconventional forms of production really signal the end of cheap gas. Yes, GHG is also a concern; however, I believe high gas prices have the potential to do more damage in my lifetime.

I think some people believe that price will go down with the "discovery" of these unconventional sources.

The pipeline will raise the price of fuel in America. Maximum drilling would not do anything to lower the price of fuel for decades, and then only by cents. Perhaps you should be more concerned with higher efficiency standards lowering demand for oil, which actually may put a dent in gasoline prices?

 

[ThomasT]

@feathermoon,
Many of your considerations seem to me to be thoughtful and well researched. But I think they generally run contrary to the status quo. So, I predict that this thread will be locked soon. Anyway, it seems that pretty much anything that can be said about it, pro and con, has been said. The bottom line, imho, is that it will go through sometime following the November elections. That is, it's inevitable. So, there's no point in debating the merits, or lack, of it.

 

[DrClapeyron]

The Seaway Pipeline is being purged for reverse flow set to begin early this summer. Reversing the pipeline will bring oil from Cushing, OK to the Gulf Coast of America. This is being done because the price of WTI is $20 below Brent and other world spot market prices.

http://www.reuters.com/article/2012/02/21/pipeline-operatiions-seaway-idUSL2E8DL5M520120221

 

[WhoWee]

The pipeline will raise the price of fuel in America. Maximum drilling would not do anything to lower the price of fuel for decades, and then only by cents. Perhaps you should be more concerned with higher efficiency standards lowering demand for oil, which actually may put a dent in gasoline prices?

Your basic assumption is the oil will be exported from the US - actually reducing supply in the US Midwest - correct? Wouldn't this create a greater supply on the world market?

 

[CaptFirePanda]

1.) You said the tarsands would benefit the U.S. if the XL was built, I showed how the XL being built would raise gasoline prices in the midwest. I don't know even know what you're talking about with the Gulf Coast refineries for.

The midwest and Gulf Coast refineries have a very significant effect on one another. Are you sure you know what you are talking about? Do you know where the Keystone XL is destined for?

2.) I won't speak much on the issue of Dr. Moore, everyone is entitled to their (bought and sold) opinions. I will say that's evidence of nothing. One guy who receives paychecks from the papermill industry to be a anthropogenic climate change denier says that nonnative scrub is equal or greater to pristine boreal forest? That's a JOKE.

Read this study if you're interested in the reclamation. In 50+ years of oil sands drilling, 0.2% of all land used is officially considered reclaimed for the public.

Speaking of bought and paid for opinions, The Pembina Institute is very much on that list.

You mention 50+ years of oil sands drilling when, in fact, development has been occurring for 35-40 years, most of the footprint is associated with mining not drilling, and the low number for reclamation is a result of the fact that the mining is still ongoing (so why reclaim it?).

 

[feathermoon]

Your basic assumption is the oil will be exported from the US - actually reducing supply in the US Midwest - correct? Wouldn't this create a greater supply on the world market?

While there is an excess supply in the Midwest, exporting the excess won't make a large impact on global markets. Economies of scale and whatnot (or even being offset by reduced production in other locales).

 

[feathermoon]

The midwest and Gulf Coast refineries have a very significant effect on one another. Are you sure you know what you are talking about? Do you know where the Keystone XL is destined for?

No offense, but how complex is this? There is an oversupply in the Midwest coupled with low demand, buffering it from world oil prices. The XL will alleviate this oversupply, pumping oil south. This will raise prices in the Midwest. In this regard, the Xl will have a direct negative impact on the economy. Does this make sense? Do you know what we're talking about now?

More on this. See DrClapeyron's post as well.

Speaking of bought and paid for opinions, The Pembina Institute is very much on that list.

You mention 50+ years of oil sands drilling when, in fact, development has been occurring for 35-40 years, most of the footprint is associated with mining not drilling, and the low number for reclamation is a result of the fact that the mining is still ongoing (so why reclaim it?).

Indeed. It can be difficult some times to find information sources not tainted by a bad image or money. I commiserate with you (especially if you support the industry! I daresay not many independent researchers would have a confirmation bias towards it). I would personally LOVE to hear some good news research from a Oil & Gas funded source, provided its believable.

In this case, however, the numbers I mentioned would seem safe. In fact, as the area of drilling and mining increases, the area of reclamation will proportionally decrease. Not just because mining is ongoing, but because reclamation takes time. Tailings ponds can take decades to settle alone for beginning reclamation, from what I've read, besides whether they are fully reclaimable anyway!

Mining in the Athabasca region began in 1967. Given that mining seems to be the more extreme of the extraction methods, I feel this was hardly a point worth making.


Yep, still seems like it'd be in the U.S.'s best interest to not move this project forward to me.

 

[feathermoon]

@feathermoon,
Many of your considerations seem to me to be thoughtful and well researched. But I think they generally run contrary to the status quo. So, I predict that this thread will be locked soon. Anyway, it seems that pretty much anything that can be said about it, pro and con, has been said. The bottom line, imho, is that it will go through sometime following the November elections. That is, it's inevitable. So, there's no point in debating the merits, or lack, of it.

While I'm inclined to agree with you considering part will be built anyway already. Even if the project is only delayed, that still benefits us. The longer we get from the recession before gas prices shoot up another 20-30 cents the better.

http://www.startribune.com/opinion/commentaries/117832183.html?source=error

U.S. farmers, who spent $12.4 billion on fuel in 2009, according to the U.S. Department of Agriculture, could see expenses rise to $15 billion or higher in 2012 or 2013 if the pipeline goes through.

Bad news for already rising food prices in the midst of our recovery, no?

 

[WhoWee]

While there is an excess supply in the Midwest, exporting the excess won't make a large impact on global markets. Economies of scale and whatnot (or even being offset by reduced production in other locales).

Can you please support (specifically) how pumping oil through the XL pipeline will increase both gasoline prices in the midwest and fuel in America (if you intended those to be separate). Your argument is still not clear - at least not to me.

 

[WhoWee]

We have an update.
http://www.businessweek.com/news/2012-02-28/transcanada-to-build-texas-segment-of-keystone-xl-pipeline.html

"TransCanada Corp. will proceed with building a $2.3 billion segment of its Keystone XL oil pipeline from Oklahoma to the Texas coast so that it isn’t delayed by U.S. approval for the rest of the line.

The company, based in Calgary, expects the segment to begin carrying crude from the Cushing, Oklahoma, storage hub to refineries on the U.S. Gulf Coast as soon as mid-year 2013, according to a statement today. TransCanada is separating the Cushing line from its application to President Barack Obama for approval of a Keystone expansion that will bring crude into the U.S. from Canada’s oil sands"

 

[Topher925]

Can you please support (specifically) how pumping oil through the XL pipeline will increase both gasoline prices in the midwest and fuel in America (if you intended those to be separate). Your argument is still not clear - at least not to me.

Its not really the piping of oil through the pipeline that will raise prices, its the displacement of over supplied and therefore discounted Canadian heavy crude oil produced at the refineries on the gulf coast. This issue is stated in the original 2008 application for the pipeline.

Existing markets for Canadian heavy crude, principally PADD II [U.S. Midwest], are currently oversupplied, resulting in price discounting for Canadian heavy crude oil. Access to the USGC [U.S. Gulf Coast] via the Keystone XL Pipeline is expected to strengthen Canadian crude oil pricing in [the Midwest] by removing this oversupply. This is expected to increase the price of heavy crude to the equivalent cost of imported crude. The resultant increase in the price of heavy crude is estimated to provide an increase in annual revenue to the Canadian producing industry in 2013 of US $2 billion to US $3.9 billion.

http://stopbigoilripoffs.com/documents/keystone-xl-pipeline-application-section-3-supply-and-markets/at_download/file

 

[WhoWee]

Its not really the piping of oil through the pipeline that will raise prices, its the displacement of over supplied and therefore discounted Canadian heavy crude oil produced at the refineries on the gulf coast. This issue is stated in the original 2008 application for the pipeline.


http://stopbigoilripoffs.com/documents/keystone-xl-pipeline-application-section-3-supply-and-markets/at_download/file

A pipeline will clearly increase revenues in Canada - no argument. But this will also increase the supply available for refining. Why will an increased supply increase the refined (gasoline and/or fuel) price?

 

[Topher925]

A pipeline will clearly increase revenues in Canada - no argument. But this will also increase the supply available for refining. Why will an increased supply increase the refined (gasoline and/or fuel) price?

The current Canadian crude oil being refined is over supplied, so in order to move it, its discounted. The fuel from these refineries is also sold domestically here in the US (the midwest). The pipeline would supply tar sands oil to these refineries displacing the discounted Canadian crude oil, thereby eliminating this discounted fuel from the US market. All of the fuel from the Keystone pipeline produced from those refineries, which may be over supplied as well, could be manufactured at a lower or discounted cost as you suggest (I don't know, but I would assume so). However, that fuel will NOT be sold domestically in the US.

In a nutshell, your taking away discounted fuel for the US, and giving it to some other country.

 

[Evo]

The Seaway Pipeline is being purged for reverse flow set to begin early this summer. Reversing the pipeline will bring oil from Cushing, OK to the Gulf Coast of America. This is being done because the price of WTI is $20 below Brent and other world spot market prices.

http://www.reuters.com/article/2012/02/21/pipeline-operatiions-seaway-idUSL2E8DL5M520120221

This article explains the impact on pricing in more detail.

Right now, the United States has a big glut of crude oil sitting in the middle of the country, and no easy way to move it. The combination of surging production from Canada's tar sands and North Dakota's Bakken region has overwhelmed the existing pipelines to the Gulf of Mexico, where it would ordinarily be refined and shipped onto the global market. As a result, the price of American and Canadian crude oil is trading at a steep discount to varieties from elsewhere in the world. After all, with fewer potential customers, oil buyers can dictate friendlier prices. West Texas Intermediate, which is traditionally considered a benchmark variety of crude used to price other types, is selling for about $106 a barrel. But according to Oil Price Information Service analyst Tom Kloza, oil from North Dakota has recently been selling for around $83 a barrel. Canadian crude has been trading for even less.

That good fortune might soon be coming to an end, however. Owners of the Seaway pipeline are planning to reverse it's flow in June, which will allow it to begin shipping 150,000 barrels of oil a day from Cushing Oklahoma, where most of that Canadian and North Dakotan crude is currently sitting, to the gulf. Eventually, it will be able to ship 400,000 barrels a day. If the new pipeline capacity can ease all those backed up supplies, it means prices will rise.

http://finance.yahoo.com/news/dis-united-states-gas-prices-182602059.html

 

[WhoWee]

The current Canadian crude oil being refined is over supplied, so in order to move it, its discounted. The fuel from these refineries is also sold domestically here in the US (the midwest). The pipeline would supply tar sands oil to these refineries displacing the discounted Canadian crude oil, thereby eliminating this discounted fuel from the US market. All of the fuel from the Keystone pipeline produced from those refineries, which may be over supplied as well, could be manufactured at a lower or discounted cost as you suggest (I don't know, but I would assume so). However, that fuel will NOT be sold domestically in the US.

In a nutshell, your taking away discounted fuel for the US, and giving it to some other country.

Let's assume everything you've posted is correct. What will happen when the world supply is increased with Canadian oil?

 

[WhoWee]

This article explains the impact on pricing in more detail.

http://finance.yahoo.com/news/dis-united-states-gas-prices-182602059.html

This is why I suggested we need new refining capacity around the Great Lakes.

 

[Topher925]

Let's assume everything you've posted is correct. What will happen when the world supply is increased with Canadian oil?

Thats a simple question with a very complicated answer. My speculation is that global fuel prices would remain roughly the same or have a slight decrease on average.

This is why I suggested we need new refining capacity around the Great Lakes.

This is why I suggest we don't add any new refining capacity around the Great Lakes. I've seen enough pollution and mutated fish from growing up on Lake Erie. I don't need to see Lake Michigan and Superior succumb to the same fate.

 

[mheslep]

With modern standards, it may be that displacing a lot of farm run off with a refinery or two might be an improvement.

 

[WhoWee]

Thats a simple question with a very complicated answer. My speculation is that global fuel prices would remain roughly the same or have a slight decrease on average.

At some point, a continuous increase in the world supply with a constant demand (decreasing due to fuel efficiency and alternatives and offset by increased consumption in Asia) - will result in lower prices.

 

[mheslep]

A reference to *world* supply then should be compared to world demand. Even if North American demand is constant Chinese and other third world demand for oil is going to increase for some time yet.

 

[WhoWee]

A reference to *world* supply then should be compared to world demand. Even if North American demand is constant Chinese and other third world demand for oil is going to increase for some time yet.

Isn't world demand expected to decrease with green energy initiatives?