EPA: Tanking Oil Price Means Keystone XL Could Impact Climate Change

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Since it first reared its head in 2011, the Keystone XL oil pipeline has become the glaring symbol of a much larger debate about how we balance the recent North American energy boom with growing concerns that the unchecked burning of fossil fuels could ultimately cook our planet to death.

In the ensuing four years, during which time the Obama administration has effectively avoided the question, industry groups have trotted out fuzzy jobs figures while crowing that the 1,179-mile pipeline, which would ship some 830,000 barrels a day of crude from the Alberta tar sands down to Port Arthur, would help ween us off big, bad, scary Middle-East oil. Meanwhile environmentalists, to crib a line from NASA scientist James Hansen, have warned that "if the tar sands are thrown into the mix, it is essentially game over" for the climate.

But over time, a new argument became popular in industry and moderate circles alike: the Keystone XL doesn't really matter anymore.

While politicians continue to argue ad nauseam over Keystone (since it crosses an international boundary, it needs express approval from the U.S. government) a number of other pipelines, many slated to transport Canadian tar sands crude, have gone through various stages of the permitting process. And in its long-awaited environmental impact assessment last year, the U.S. State Department essentially said that any argument against Keystone that invoked climate change was a nonstarter --that tar sands crude will be burned anyway, regardless of whether it's shipped via Keystone XL (and if that's the case, why not just approve it, right?).

In a letter to the State Department this week, an Environmental Protection Agency official cited tanking oil prices to challenge that premise.

In her letter, posted to the agency's website yesterday, assistant EPA administrator Cynthia Giles says the State Department's own review shows that demand for tar sands oil starts to drop once oil prices fall below $65 a barrel. Not only is it among the dirtiest stuff to extract and refine, but it's also among the most expensive.

Below that $65-per-barrel mark, shipping this stuff by rail, the more expensive route, is no longer as attractive as it once was, Giles says. Below that price, exploiting the Canadian tar sands is no longer an inevitability. (Keep in mind the precipitous decline in oil has us hovering around the $50-per-barrel mark right now.)

In her letter, Giles wrote:

"Based on that market analysis, the Final SEIS (State Department environmental impact assessment) concluded, in January of 2014, that if the Project were not approved, oil sands crude would be likely to reach the market some other way, most likely by rail. The Final SEIS acknowledged that the alternative of shipment by rail is more expensive than shipment by pipeline, and would therefore increase the costs of getting oil sands crude to market. However, the Final SEIS concluded that given global oil prices projected at that time this difference in shipment costs would not affect development of oil sands, which would remain profitable even with the higher transportation costs of shipment by rail. Therefore, the Final SEIS concluded that although development of oil sands would lead to significant additional releases of greenhouse gasses, a decision not to grant the requested permit would likely not change that outcome, i.e., those significant greenhouse gas emissions would likely happen regardless of the decision on the proposed Project. This conclusion was based in large part on projections of the global price of oil."

As Giles alludes to in her letter, the State Department's review ultimately conceded that the 830,00 barrels of oil the pipeline would transport each day could add an extra 1.3 to 27.4 million metric tons of carbon dioxide to the atmosphere each year, similar to putting anywhere between 250,000 to 5.5 million extra cars on the road.

After clearing the Senate last week, a bill that would force Obama to make a decision on Keystone is expected to sail through the House next week -- Obama has vowed to veto the measure, although that doesn't necessarily mean he's rejected the pipeline outright.

In a statement to the New York Times, TransCanada Corporation, the company that wants to build Keystone XL, chided the EPA for "focusing on the emissions related to an energy resource that is developed outside of the United States."

"Respectfully, this goes far beyond the mandate of the E.P.A., and legislators and others would not appreciate other countries interfering in issues of American federal or state sovereignty," TransCanada's statement read. As if fossil fuels extracted in Canada only matter in Canada.

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