Keystone Pipeline Has Better Odds Now But Energy Managers Won’t See An Immediate Benefit

keystone-xl-pipeline-2The Dakota pipeline is now getting all the headlines. But sometime after President-elect Trump is sworn in, the Keystone XL Pipeline will be back in the news. What is Trump likely to do and how will this impact both environmental and energy managers?

There’s little doubt that Trump will approve the 1,200 mile pipeline that would stretch from Canada to the Gulf States, although during the campaign, he did say that he would extract some concessions from TransCanada Corp., which is the company that will complete the line that is already operational in parts of the United States.

The reality is that the tar sands are already making their way into this country. And while it may be more efficient to send the oil through pipelines, they are still getting here via rail cars — methods that have shown themselves to be less dependable and more expensive than pipelines; rail car explosions have occurred in this country. There have also been pipeline leaks and accidents, which is a key reason opponents do not want to see this line completed. (Reducing carbon emissions is typically cited as the main purpose of the opposition and the sole reason for the so-called ‘line in the sand’ for environmentalists.)

Oil uses pipelines 70 percent of the time, river barges 23 percent, trucks 4 percent and railway 3 percent. Of note, analysts say that it can cost as much as five times more to transport oil by rail than it does pipe, for moderate to long distances.

On the practical side, the price of oil is still relatively cheap at roughly $50 a barrel, which means that TransCanada could afford to wait until the price of the commodity would rise and therefore make the Keystone line more economical. That said, it has political reasons it wants to get immediate approval, or to strike when the iron is hot.

State Department report that essentially blessed its construction says that if the network is not developed, the tar sands would then likely make their way into this country via the rail system. Needless-to-say, energy managers won’t see any immediate benefits out of the line given that oil prices are low today.

“TransCanada remains fully committed to building Keystone XL,” spokesman Mark Cooper said in the statement. “We are evaluating ways to engage the new administration on the benefits, the jobs and the tax revenues this project brings to the table.”

As everyone already knows, President Obama turned down the line more than a year ago, saying that it would add to the level of greenhouse gas emissions. That does not mean the pipeline is permanently dead — a project that would carry as much as 900,000 barrels of crude oil per day.

None of this is necessarily bad news for the oil industry, which says that construction of the $12 billion Keystone XL Pipeline would also create about 20,000 — temporary — jobs:

“Approval or denial of any one crude oil transport project, including the proposed project, remains unlikely to significantly impact the rate of extraction in the oil sands, or the continued demand for heavy crude oil at refineries in the United States,” says the State Department.

The conventional thought is that that the exploration and the transport of Canadian oil sands is about 20 percent dirtier than other petroleum forms. EPA’s assertion is that the tar sands are thicker than other non-refined products and that it takes more energy to create gasoline, diesel and solvents. The potential for corrosion and subsequent spills is also greater, it says, adding that they would be more difficult to clean up.

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