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.–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.
  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.

7 thoughts on “Thinking beyond pipelines: A rebuttal

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    1. …and then take a victory lap…

      “No Revskin in the Game”
      — by Horatio Algeranon

      Keystone drives me
      To extraction
      The protests are
      A big distraction

      A waste of time
      They really aren’t
      Worth a dime

      Standing in
      Obama’s way
      By doing what?
      I will not say.

  1. I have posted on this topic here:

    I doubt if you will like my overall stance on this issue. However, in the way of a peace offering I contribute some arguments here that you may think potentially useful in advancing your case:

    “I should add that what I’m proposing is to pay the Canadians to leave the oil in the ground, something I haven’t seen proposed by anyone. This could be either in the form of pre-paid royalties or compensation in the same manner as offered to those in the developing world for not cutting down trees.

    There are good reasons to consider leaving it in the ground:

    National security interests: The time will come when fossil fuels are exceedingly expensive to bring to market. If you think gasoline is expensive now, just wait. As petroleum gets more expensive, its availability will become more strategic, not only for transportation but for special products derived from petroleum. Having a large supply in ready reserve in the back yard of a good friend is not obviously stupid.

    Economic interests: Petroleum is only going to get progressively harder to find and more expensive to bring to market. The economic value of the tar sands deposits may actually increase more while its in the ground. If it’s the ‘last man standing’–the last large reserve to be developed–it will command a scarcity premium. (Obviously, there is the risk that we will continue to find equally large reserves.)

    Environmental interests: In an era when natural gas is abundant and inexpensive, why not take advantage of it and wait on the tar sands? Natural gas emits half the CO2 as does petroleum for each joule obtained in energy. In this period of uncertainty about climate change, why take the risk when we can use a safer and cheaper fuel? Make large fleets of cars run on natural gas, export it where logical and take advantage of this resource.”

    1. Re: Economic interests

      The other risk is that alternatives are developed/deployed and the demand for petroleum no longer exists.

      I find it hard to imagine a future where this doesn’t happen, the hard question is knowing when it will happen.

    2. It’s a cogent and intelligent analysis.

      The “paying Canadians not to develop” idea strikes me as deeply unrealistic, though, and presumes on an extremely close relationship between Canada and the US that never really existed (except possibly during the Pearson years) and will not sell to Americans, half-inclined to get as xenophobic about Canadians as about anybody else, today.

      But the bigger flaw is the presumption of the amount of gas there is to be found. It’s small. We are slurping up dregs. There is no complacency within the energy industry – Ray Pierrehumbert beat me to the punch on reporting on a very informative session to this effect at the last AGU meeting.

      There’s enough oil and gas to damage the climate considerably. But even “another Saudi” doesn’t count for much given the commitment of the economists and the economies to growth. And recall that not only does extraction cost and environmental damage go up, but that there is a hard EROEI limit that makes some of the geological reservoir permanently inaccessible as an energy source.

      But the main point is that growth is built in to our assumptions. This really hurts when facing a finite, consumed resource. If total consumption to date doubles every fifteen years* (* – not a real statistic, just a hypothetical for purposes of argument, please don’t quote), doubling the all-time supply just buys you fifteen years, and octupling it forty-five.

      Anyone know what the real time constant is, by the way?

  2. Compound annual growth rate for global energy usage since 1990 is 1.81%. Doubling time is 38.64 years.

    global energy consumption 1990: 355.38 quads
    global energy consumption 2012: 527 quads (est.)

  3. At the risk of boring you all, the Department of Energy forecasts that energy consumption will grow at a quicker pace in the future. Their estimate (more or less echoed by the International Energy Agency and the UN) is 2.3% CAGR. My own forecasts at 3000 Quads are higher. I believe they have underestimated growth in the developing world by a considerable margin. My outlier results and the thinking that led to them can be found here:

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