Energy & Environment

Does the Keystone XL pipeline matter?

Dan Farber

Many people who have studied the issue tell me that the Keystone XL issue is mostly symbolic, because the Alberta oil sands are going to be used one way or another.  But I’m having some second thoughts because of arguments made (here) by Berkeley economist Max Aufhammer. He’s a pretty hard-headed analyst, not given to flights of environmentalist fancy.  Here’s the core of his argument:

My calculations suggest that not permitting Keystone XL will result in a binding transport constraint by 2024 at the very latest. If all planned pipeline projects are significantly delayed, not permitting Keystone XL will very likely reduce production in the short run and continue to do so unless additional pipeline capacity comes online, which is less than certain. While this note does not conduct an oil industry wide equilibrium analysis, it suggests that not permitting Keystone XL to proceed will keep at a minimum one billion barrels of heavy crude from Canadian bitumen in the ground by 2030 – in the absence of additional transport or refining projects. As carbon is a stock pollutant as far as human time frames are concerned, not permitting Keystone buys time” for alternative transportation fuels and climate policies to develop. This would allow all transportation fuels to compete on a level playing field.

The key to the analysis seems to be the time factor.  If current market and regulatory conditions continue forever, the Alberta oil would presumably all get used even if transportation capacity is limited.  But that amounts to an assumption that we’ll never do anything about climate change or that renewable energy won’t be cost-competitive even with a carbon tax.  It’s also possible that additional transportation projects beyond those currently under consideration will get launched by 2030.  On the other hand, some of the currently planned projects could get stalled or cancelled for a variety of reasons.

A single paper obviously isn’t enough basis for a conclusion about an issue of this significance.  But Aufhammer’s paper is certainly food for thought.

Cross-posted from the environmental law and policy blog Legal Planet.

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Comments to "Does the Keystone XL pipeline matter?":
    • Tuco

      How is it that Berkeley is unaware of all the coal power being generated in China to supply the Walmarts of America?

      You want real climate change? Take care of your own backyard first!

      Oil sands development could raise global temps by as much as 0.4 degrees Celsius. Coal would increase it by 15 degrees Celsius. Which do you think we should be focusing on?

      [Report abuse]

    • Ghost Reader

      Keystone has morphed into far more than just a pipeline. This is now about a generational shift in our energy paradigm and how we will survive the 21st century. For an explanation of my position:

      If current market and regulatory conditions continue forever, the Alberta oil would presumably all get used even if transportation capacity is limited. But that amounts to an assumption that we’ll never do anything about climate change or that renewable energy won’t be cost-competitive even with a carbon tax.

      [Report abuse]

    • Jeffrey Meyer

      Aufhammer makes a good point, but Keystone has morphed into far more than just a pipeline. This is now about a generational shift in our energy paradigm and how we will survive the 21st century. For an explanation of my position, please see my op-ed here.

      [Report abuse]

    • mememine69

      When will science be 100% sure THE END IS NEAR because so far it’s been 32 years of their 95% certainty in their “belief”. If science can’t “believe” nobody can until they do.

      [Report abuse]

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