Keystone XL and the war on drugs

No, the proposed Keystone XL pipeline will NOT carry black tar heroin. But whether you think that diluted bitumen from the Canadian oil sands is better or worse than heroin, there may be a lesson from the “war on drugs.” No, I haven’t been smoking anything, although this morning my hybrid did inhale gasoline and exhale CO2, some of whose carbon probably came from Alberta.

As President Bush declared in his 2006 State of the Union address, “America is addicted to oil.” Since then U.S. oil consumption has decreased by about 10 percent; the portion of U.S. demand met by imports has been nearly halved from its high of 60 percent; and the Obama administration has made climate protection a priority alongside the quest for energy independence that has shaped policy since the Nixon administration. President Obama has declared that he would approve Keystone XL “only if this project does not significantly exacerbate the problem of carbon pollution.”

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According to the U.S. State Department’s Final Supplemental Environmental Impact Statement, replacing other crudes with oil sands crudes transported by Keystone XL would increase greenhouse gas emissions by the equivalent of 1.7 to 27.4 million metric tons of CO2 per year. While these numbers seem large, the upper value amounts to less than 1 percent of total U.S. CO2 emissions from oil use. Significance is in the eye of the beholder.

The fight over Keystone XL has been waged with symbolic arguments about its existential threat to climate. There is an urgent need to reduce carbon emissions, and even the actions taken by this administration, including increased vehicle efficiency and proposed rules on carbon emissions from power plants, have been criticized as too little. Given the scale of our consumption and the high value of liquid transportation fuels, petroleum will be necessary for decades to come.  We cannot quit cold-turkey, and the weaning may be long and at times painful even with the best policies and technologies.

Will Keystone XL prolong our addiction to oil?   Can we really inhibit the production of a commodity in another nation, a commodity for which there is considerable global demand, by attempting to throttle its importation? If you think we “won” the war on drugs, perhaps the strategies that “worked” to curb the flow of Colombian cocaine will work for Canadian bitumen. If you take a more sanguine view, perhaps not.

While there are significant environmental costs to developing the oil sands, there are large economic incentives for Canada to exploit this resource. Our abilities to constrict the global market are limited. The fight over Keystone XL is not over whether we will import Canadian crude – we are not proposing to ban it like an illicit drug – but how we will do so and what infrastructure investments we should make.

If the US remains a significant consumer of oil for the next 30 years even as we transition to an ideal renewable energy future, we need to make infrastructure investments for that transition period.  Some argue that in the absence of Keystone XL higher transportation costs will make development of the oil sands less attractive.  Evidence so far suggests otherwise.  We have seen an explosion of oil shipment by rail (up by a staggering 3500 percent since 2009) owing to inadequate pipeline capacity from Canada and from the Bakken region of North Dakota (which also would be served by a connection to Keystone XL.)

Rail is inferior to pipelines for oil transportation in almost every respect.  Increasing oil shipments have increased the load on our rail system, and have increased competition for movement of commodities best transported by rail, from coal to grain. We have also increased the burden on an aging pipeline infrastructure.  The Pegasus pipeline that ruptured at Mayflower, Arkansas, in 2013 was more than 60 years old!  Pipeline technologies, from materials, to fabrication and construction techniques, to corrosion protection, to monitoring and control, have advanced substantially in the past 60 years.  Leakage risks will be greatly reduced by building new pipelines to modern standards, rather than relying on aging infrastructure. 

What alternative economic levers might be used to limit CO2 emissions? Perhaps there is a lesson here as well from drug policies.  Colorado has chosen to regulate and tax the distribution of marijuana, rather than proscribing it.  Whatever one thinks about this as social policy, as fiscal policy it appears to be a success.  The obvious analog is to price carbon. If properly structured, this could make crudes with larger carbon pollution footprints less competitive.  The economics and politics are subjects for another day; suffice it to say that former Treasury Secretary Henry Paulson recently expressed support for a carbon tax.

Another concern is that refining oil sands crude generates larger quantities of petroleum coke – carbon solids with high levels of sulfur and metals. Mountains of petcoke are unsightly, potentially flammable, and environmentally hazardous. Ultimately petcoke is used to fuel industrial furnaces or shipped as a cheap fuel to countries with fewer environmental controls.

Imagine instead that we limited above-ground storage and combustion of petcoke and banned its export.  The solid carbon is 10,000 times more concentrated than the CO2 from the smokestack if it is burned – why not remove it from the carbon cycle in concentrated form?   This would remove economic value from petcoke and reduce the value of oil sands and other heavy crudes, further reducing carbon emissions.

The CO2 emissions impact of Keystone XL is symbolic rather than substantive.  Blocking it will exacerbate energy security and infrastructure reliability issues, and divert resources from the urgent task of building a cleaner energy future.  If the war on drugs has any lessons to teach us, constricting imports is likely to fail as a policy mechanism – modulating (and pricing) demand is a more promising alternative.

Barteau, Ph.D., is the director of the University of Michigan Energy Institute. He is a member of the National Academy of Engineering and chaired the National Academies' study of pipeline transportation of diluted bitumen.  Opinions expressed are solely those of the author.