Thinking beyond pipelines: A rebuttal

My latest post on the Keystone XL pipeline was, unsurprisingly, not well received by some of the Planet3.0. I argued that I don’t think the fighting the Keystone XL pipeline is the best use of our limited resources. In the comments Andy Skuce provided a rebuttal that deserves to be promoted to its own post.

By Andy Skuce

Dan, I agree that KXL is a symbol, but I think it’s a lot more than just a symbol. Also, I believe that it’s a battle worth fighting, even though winning this battle obviously won’t win the war. Even if the battle ends up being lost, it will still have been worth fighting. Let me explain why:

1. If KXL is stopped, this will, by itself, choke back oil sands production for at least several years. The alternative transportation options are also likely to be delayed for many years, at best. Northern Gateway and the Kinder Morgan pipeline are opposed by the majority of the BC population (I am sure you know this) as well as by the probable next NDP Provincial Government. These projects are also fiercely opposed by aboriginal groups (years of court delays, at minimum) and a substantial minority who are prepared to turn this into a major civil disobedience movement. The other pipeline options eastwards or northwards(!) will face similar delays. Quebec and Ontario are not likely to want bitumen pipelines and more than BC. Upgrading in Alberta is not currently economic, even at today’s price discounts.
   http://www.journalofcommerce.com/article/id53933/–massive-oilsands-project-shelved-once-again
2. The prospect of having to live with expensive price discounts for years takes a big toll on the economics of future oil sand production economics (for once, discount rates work in the Greens’ favour). What stopping KXL is really about is delaying big capital investments in new oil sands projects. Once that capital is sunk, production economics will hinge on the marginal production costs for decades. This makes a KXL delay even more effective; all of these factors compound, and not in a good way for the producers.
3. The economics of oil sands will probably get worse over the next few years unless there is a big technological breakthrough. Natural gas prices will likely rise, making the costs of production higher and, according to the recent PWC report, shale oil may depress world crude prices over the years to come. Of course, oil price forecasts are very uncertain, but this kind of uncertainty on the downside is not the oil sands companies’ friend.
   http://www.pwc.com/gx/en/oil-gas-energy/publications/shale-oil-changes-energy-markets.jhtml
4. The KXL battle, whether it is won or lost, has greatly unsettled the governments of Canada and Alberta. Their complacent view that the world would be happy to take their bitumen has been proven to be completely wrong. They have to respond now with serious emissions mitigation strategies. Their pathetic re-branding attempts with the Ethical Oil campaign and trying to brand the anti-pipeline activists as unpatriotic have been counter-productive.
5. Even if Obama folds on KXL–and I think he will–the pressure on him and the Democratic Party to prove that they are serious about climate change will than be huge. I don’t know what tricks Obama has up his sleeve to price carbon emissions through regulations and executive orders, but, judging from his SOTU speech, it seems that he thinks he has some. I would prefer to see KXL stopped, but I would trade that for some small but real action on pricing emissions. The continuing political pressure on KXL matters.

I agree with you that reducing demand for fossil fuels is the only thing that will really make a lasting difference. Coal is the biggest enemy by far, but the remorseless logic of emissions limits and climate change means that most of the bitumen, oil and gas will also have to stay in the ground. All new capital spending on new fossil fuel spending has to be stopped to avoid infrastructure lock-in. KXL is not a distraction, it’s an important battle to fight, win or lose.