Settling the future of a billion barrels of oil

When the Republican Party assumes control of both houses in the US Congress in January 2015, it is expected to press for expedited construction of the TransCanada Keystone XL (KXL) pipeline. The project, estimated to cost US$8 billion, will transport more than 800,000 barrels of oil a day 1,600 miles, through five American states and two Canadian provinces, to refineries on the Gulf Coast. If President Obama uses his veto to block the pipeline, one recent analysis suggests that this would prevent the extraction of some 1 billion barrels of crude oil by 2030.

Conveniently for President Obama, the US State Department has spent most of the last six years assessing the likely costs and benefits of the project. Its review concluded that the pipeline would probably sustain 42,000 jobs during its two-year construction period and boost the US economy by about $3.4 billion. Supporters of the project also argue that much of the oil that will be moved through the pipeline will be extracted whether or not it is built. In addition to support from labour unions, a March 2013 Pew Research poll of 1,500 Americans found that 66 per cent supported the KXL pipeline, even though 69 per cent acknowledged that climate change is a serious problem.

On the other hand, the pipeline has become a provocative symbol for the North American climate change movement during the same time. Last February 48 environmental, civil rights and community groups summoned more than 40,000 people to protest outside the White House against the project. Leading activists warned that if construction of the pipeline proceeded, it would produce up to 27. 6 metric tons of new carbon emissions, the equivalent of adding six million cars to America’s roads.

The political and environmental issues at play have been further complicated by the falling price of oil. Domestic oil production in the US has jumped nearly 50 per cent during the last five years, from 5 to 7.5 million barrels per day, and oil companies have increasingly used railroads to transport their product. The New York Times reports that 400,000 carloads of crude oil were transported by US railroads last year, a 40-fold increase on the 9,500 moved in 2008. The use of railroads has, however, highlighted the dangers of transporting large quantities of oil without appropriate safeguards. A series of accidents, the worst of which killed 47 people and devastated the town of Lac Megantic in Quebec last year, have resulted in several major spills. The Times estimates that since March of this year there have been “no fewer than 10 large crude oil spills in the United States and Canada because of rail accidents … federal records show that [the quantity of oil spilled] far outpaced the total amount spilled by railroads from 1975 to 2012.

When oil was closer to US$100 a barrel, the oil extracted from Alberta’s bitumen was still profitable, but it is much less so when the price drops to $80, or even further, as some analysts predict. This has made the approval of the KXL pipeline a matter of urgency for companies that have invested significant amounts in its success. TransCanada, for example, has reportedly spent more than US$1 billion on the pipeline in anticipation of the US government’s approval.

Pressed by both sides for decisive action, President Obama has opted to postpone his decision for as long as possible. The new ascendancy of the Republicans effectively removes the prospect of further delay. In January the president will either be forced to accept the KXL pipeline, or exercise his veto powers.

As he considers the prospect of the newly empowered Republicans extending the gridlock that has marred so much of his time in office, and maliciously dismantling the healthcare policy he had hoped would form the cornerstone of his legacy, President Obama could conclude that a stand on climate change may be one of the last few clear victories available to him.

Last week, UN Secretary General Ban Ki-moon introduced the latest report from the UN Intergovernmental Panel on Climate Change with a warning that the world now faces “severe, widespread, and irreversible impacts” if immediate and decisive action is not taken on carbon emissions. “Science has spoken,” said Ban, “There is no ambiguity in the message.” The US Republican party, replete with climate change deniers and candidates sympathetic to the interests of big petroleum producers will speak its mind in January, and there will be no ambiguity in its message either. By that stage, the only real political card that the lame-duck US president may have left is his power to silence them.