EPA suggests DOS reconsider Keystone XL climate impact conclusions
The US Department of State might want to reconsider its conclusions regarding potential climate impacts from the proposed Keystone XL crude oil pipeline because crude oil prices have fallen so dramatically, a US Environmental Protection Agency official suggested.
A market analysis in the final supplemental environmental impact statement (SEIS) developed by DOS for the project examined how market dynamics might affect greenhouse gas emissions associated with Keystone XL, Cynthia Giles, EPA’s assistant administrator for enforcement and compliance assurance, said in Feb. 2 comments submitted to DOS.
Based on that analysis, the final SEIS concluded in January 2014 that if the project was not approved, oil sands crude would be likely to reach the market some other way, most likely by rail, Giles said. Given projected crude prices at that time, rail’s higher shipping costs likely would not affect profitability of oil sands development and probably would not have a significant GHG emissions impact, she said.
“Given the recent variability in oil prices, it is important to revisit these conclusions,” Giles noted. “While the overall effect of the project on oil sands production will be driven by long-term movements in the price of oil and not short-term volatility, recent large declines in oil prices (oil was trading below $50/bbl last week) highlight the variability of oil prices.”
The final SEIS concluded that at sustained $65-75/bbl prices, the higher transportation costs of shipment by rail “could have a substantial impact on oil sands production levels—possibly in excess of the capacity of the proposed project,” Giles said.
“Given recent large declines in oil prices and the uncertainty of oil price projections, the additional low price scenario included in the final SEIS should be given additional weight during decision making, due to the potential implications of lower oil prices on project impacts, especially greenhouse gas emissions,” she suggested.
In a Feb. 3 response, TransCanada Corp., Keystone XL’s sponsor, said that references to “average crude oil” in Giles’ comments ignore that more than 100 crude grades are transported in North America. “When we look at the types of oils that Keystone XL will displace (from Mexico, Venezuela and other international sources), the Canadian and American oils produce similar or often lower greenhouse gas emissions,” it said.
EPA also did not acknowledge that Keystone XL would deliver a substantial amount of light crude from the Bakken tight shale formation in North Dakota and Montana, TransCanada said. “Our existing Keystone system is already delivering oil from both Canada and the US to refineries in the Midwest and Gulf Coast regions.”
EPA is simply making new excuses for delaying Keystone XL’s approval further, an American Petroleum Institute official said. “Keystone XL was put forward when oil was less than $40/bbl so price has little impact on the project,” API Executive Vice-Pres. Louis Finkel said.
“American refiners want it; American producers want to get their oil to those Gulf Coast refineries; and we believe Americans would rather get a large portion of the 8-9 million b/d they import from Canada rather than Venezuela or the Middle East,” Finkel said.
Contact Nick Snow at [email protected].
Nick Snow
NICK SNOW covered oil and gas in Washington for more than 30 years. He worked in several capacities for The Oil Daily and was founding editor of Petroleum Finance Week before joining OGJ as its Washington correspondent in September 2005 and becoming its full-time Washington editor in October 2007. He retired from OGJ in January 2020.
