The Keystone Pipeline -- Will It Ever Be Built?

The Keystone Pipeline -- Will It Ever Be Built?

By William Tucker - October 15, 2014

Canada’s vast reservoir of tar sands in eastern Alberta has long attracted people looking for alternative sources of oil.  The Athabasca Tar Sands are the largest deposit of bitumen oil in the world and that’s only half of it.  Two other giant formations lie in the Peace River and Cold Lake formations.  Together these total 1.7 trillion barrels of oil, equal to all the other proved reserves in the world.

Since the 1970s, energy enthusiasts have been asking why this “black Golconda” (a reference to India's famous diamond mine) was not being developed.  The answer was simple.  It was too expensive.  Extracting tar sands involves installing underground heating devices and boiling the heavy oil out of the ground.  From there it is transferred to huge reservoirs that are highly toxic.  Cannons must be fired to keep birds from landing on them.  Simply thinning the material for transport is a very dirty job.

Nevertheless, by 2006 the Canadian government felt the price of oil had reached the point where tar sands had become economical.  That was the year America imported 30 percent of its energy – the highest figure in the last three decades.  There seemed to be nothing but blue sky above the enterprise. 

Critical to the whole undertaking was the Keystone XL Pipeline.  It would carry the highly viscous bitumen from the Canada’s western provinces to refineries in Texas being built especially to handle the heavy oil.    It would then be shipped up the East Coast for consumption in the metropolitan areas there or perhaps all over the world. 

From the beginning, environmentalists were apoplectic over Keystone.  First, tar sands represented a colossal defeat for the climate effort.  They represent the worst kind of fossil fuels.  Second, opponents saw this as just business as usual for the oil and gas industry, with no end in sight.  It would be an enormous symbolic defeat. Third, the project would require 2,100 miles of above-ground pipeline through the Midwest from Montana to the Gulf of Mexico.  This was bound to raise local opposition. 

Opponents lined up and demonstrations proliferated across the country.  Bill McKibben, a former writer for the New Yorker, became the national spokesman, calling Keystone the Armageddon of the climate change crisis.  Michael Brune of the Sierra Club promised civil disobedience.

But of course the pipeline had its supporters as well.  Chief among them were the Texas refineries that had spent huge amounts of money preparing to process the oil.  Moreover, the Midwest is generally supportive of resource extraction, and building another pipeline didn’t seem like anything unusual.  And then there were all those construction jobs – the pipefitters, welders, electricians, teamsters, carpenters and international laborers’ unions that saw opportunities stretching across the horizon.  The studies flew back and forth predicting every sort of economic outcome.  At one point President Obama claimed the pipeline would only create 2,100 jobs – one per mile of construction.   Others pointed out that, in the end, much of the construction would be temporary.

TransCanada, the company that is building the pipeline, ran into a buzz saw in the historic Sand Hills of Nebraska and was forced to shift the route east to North Dakota.  This turned out to be an advantage, since the Bakken Shale formation there was heating up and the pipeline could collect that oil as well.  In 2010 President Obama approved three southern segments of the pipeline, and a key section breaking up a logjam in Cushing, Okla., was completed.  But the main pipeline from Alberta to Cushing remains unbuilt.

The issue proved to be a nightmare for the president, pitting two of his biggest supporters – labor unions and environmentalists – head-to-head against each other.  It was no surprise when he pushed a decision on approval past the 2012 elections.  The State Department, which must issue the permit to cross the border, is still studying the matter and there is no chance of a decision before this year’s election either. 

In the meantime, the situation has changed radically.  Fracking techniques have set off a boom in oil and gas production that has the United State on the verge of becoming the world’s largest oil producer.  The price of oil has dipped below $90 a barrel and there is talk of a “bear market.”  More and more, the heavy bitumen from the Canadian tar sands is beginning to look irrelevant. 

But that may not be the end of it.  Texas argues there is still a huge economic benefit in refining the oil and exporting it to other parts of the world.  And there are all those construction jobs to consider as well.  There is still plenty of momentum behind the Keystone project.   

In the meantime, Canada is eyeing other markets.  In 2013, Alberta announced it was exploring a shorter pipeline to the Arctic coast, where the oil would be shipped to Asia and Europe.  Another possibility -- an eastern route to  refineries in Montreal and Quebec City.  Neither would require the approval of the United States.

In a world now awash with oil, the development of Alberta’s tar sands is beginning to look a bit premature.  Yet China has now surpassed the United States as the world’s biggest oil importer and chances are Canada will find markets across the Pacific.  One way or another, Canada’s tar sands are likely to be consumed.

William Tucker is the author of “Terrestrial Energy: How Nuclear Power Will Lead the Green Revolution” and “End America's Energy Odyssey” and news editor for RealClearEnergy.

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