The Horrible Failure of the State Department’s Keystone XL Analysis

I recently read a Climate Progress assessment of the State Department’s “supplemental” review of the Keystone XL pipeline, and was filled with horror at the depth of misunderstanding that the assessment suggested.  I then read relevant sections of the review itself, and found that its conclusions were more thoughtful and nuanced than the Climate Progress review suggested. And yet, I was even more appalled.  How can this be?

The two most important criticisms (imho) of the review in the Climate Progress assessment were: 

1.        The only scenarios that the review considered assumed that a Keystone-sized amount of tar sands oil would get burned no matter what.  Well, not quite.  Actually, the review estimated the “total lifecycle” amount of carbon emitted per year associated with the project and came up with 167-188 megatons of carbon emitted.  Of course, the review then said that this was unlikely to be the total sum added to carbon emissions each year, as somewhat less “dirty” heavy crude would simply be substituted for the tar sands oil.

2.       “KXL tar sands oil is really dirty”, asserts Climate Progress, and the review does not recognize that “fact”.  Actually, not quite again.  The review does come up with an estimate (167-188 megatons) in the same range as last time, and does concede that this is dirtier than heavy crude.  Of course, it then argues that the difference between the two is not big enough to matter.

All in all, something on which reasonable people may differ.  Right?

No.

Starting From the Science

Here, I derive from a recent Hansen et al paper that I did my best to summarize back in November on this blog.  Here’s the money phrase:

‘If we burn 17% of the (available reserves of) coal, 50% of the natural gas, and all of the tar sands/oil shale/oil, then “worst consequences” happen.’

Now go to the description of “worst consequences” in that blog post.  I would hope that anyone sane would want to avoid “worst consequences.”

Now, please bear in mind that it may be easy to keep 50% of coal reserves from being consumed in the next 90 years, but given existing coal plants and commitments, 17% is doable but not easy.  Likewise, natural gas is the natural alternative for oil and coal companies (much of the same infrastructure used), so, again, if we are holding coal to 17% usage, 50% natural gas usage over the next 90 years is doable but not easy.  Oil, as all seem to concede, has usage of all reserves as a real prospect over the next 90 years.

And then there’s tar sands and oil shale – harder to get, harder to process into something usable by existing infrastructure, and requiring significant new infrastructure, such as new containers, new shipment methods from new locations, and new precautions against new effects from spills due to new chemical treatments of tar sands.  It’s still easier for oil/gas companies to produce than solar or wind; but of the carbon-emitting choices, it’s the one that requires major governmental intervention to create some of that infrastructure.  And the Athabasca tar sands are the major source of tar sands/oil shale oil at present.  And so, if Keystone XL goes through, infrastructure will almost inevitably be created for tar sands/oil shale oil, and with the added competitive advantage from the infrastructure, we can pretty much guarantee that tar sands oil will be price-competitive with solar and wind for the next 20 years and probably beyond.

To put it another way, even if we accept the report’s low-ball estimate of 167 megatons of carbon emissions used per year for Athabasca via Keystone, 90 years of production will take us to perhaps 20 gigatons of carbon emissions, or 1.5% of the way to “worst consequences” – and the infrastructure-related cost reductions should lead to usage of much of the rest of the tar sands/oil shale over that time period.

Is it possible that oil and gas companies will try other methods of using tar sands and oil shale over the next 90 years?  Probably – but that only makes Keystone XL more important, as the first such attempt.  It will be far easier to say “no” when the lack of infrastructure means additional costs and efforts to create such infrastructure.

In other words, the science says, don’t do tar sands and oil shale – or, to be more exact, tar sands and oil shale are the low-hanging fruit, the easiest to tackle in ensuring that we don’t create “worst consequences”.  And if Keystone XL goes through, our job in avoiding “worst consequences” becomes much harder – especially considering what a terrible job we have been doing in avoiding “worst consequences” that got us in this mess in the first place.

The Appalling Flaws of the State Department Review

The first flaw in the review that had me horrified was that, fundamentally, despite feedback from climate-change action advocates, they failed to think in the terms I have outlined above:  how do we plan to avoid “worst consequences”, and what effect will enabling the creation of tar-sands production/distribution infrastructure have on those plans?  The subtext of this is that the onus is on the reviewer, not the environmental commenters, to come up with a reasonable argument that tar sands usage should not be opposed in any way possible. 

Instead, the report makes no assessment of the difference between zero tar sands usage and Keystone leading to full tar sands/oil shale usage – a viewpoint that makes the phrase “business as usual” to describe it almost obscene.   Instead, it urges a never-mind-the-camel’s-nose-in-the-tent, project-by-project assessment.  In fact, I could look at it and replicate its arguments a thousand times for the follow-on projects, with the same outcome each time; oh, there’s an insignificant impact for this project. And that’s what has me really appalled:  instead of dealing with the imperatives of climate change, it sets up a template for driving us further down the road to “worst consequences.”

The second dreadful flaw in the review was that it not only failed to get the point that Hansen et al have laid out so cogently – we must not only slow down carbon emissions drastically but also set aside a major portion of fossil-fuel reserves to never be used – it actively assumes that we can keep on going the way we have.  This is not explicit – which makes it all the harder to point at flagrant examples.  And yet, it pervades the analysis, from the assumption that just because people will substitute heavy crude for tar sands that there’s no net emissions benefit for the US (how did we get off the consideration of global carbon emissions?) to stating that Canada could simply ship tar sands oil by rail instead as if there were nothing we could or should do about that.

The appalling thing about this assumption is that it spreads the implicit lie that this is the only such decision we are facing, and if we make the wrong decision it’s still “business as usual”.  On the contrary, I fully expect other challenges to the “no tar sands/oil shale” stance to continue to happen, and I also expect the urgency of fighting these challenges as well as cutting way back on coal and natural gas to keep rising – and so does every other climate change action advocate, afaik.  But here’s the point:  no consequences to just one more increment of enabled carbon emissions is speculative; “worst consequences” is not.  Admitting in the review that there is such a thing as human-caused climate change is eye candy.  Only walling off actual fossil fuels from use is real.

Minor Flaws But Worth Noting

At one point, the review notes that Canada has assured the US that it will take appropriate steps to safeguard the environment and avoid excessive carbon emissions.  My jaw dropped when I read that.  Every environmentally conscious Canadian I know has assured me that the Canadian government is busy suppressing its governmental scientists, and especially those who are rightly concerned with climate change.  And this review believes that this same Canadian government will actually do something environmentally effective about climate change in general and Keystone and the Athabascan oil sands in particular? As the English say, pull the other one.

I also suspect – although I can’t prove it – that much of the review’s assertion that there will probably be minimal carbon-emissions effects because if market doesn’t buy tar-sands oil, they’ll simply buy alternative Venezuelan crude (and so, the net effect of not doing Keystone will be the difference between the two’s carbon emissions) is a misunderstanding of the economic concept known as the price elasticity of demand. 

As I understand it, the basic idea is that if there are no immediate substitutes for the oil that you’re selling, and I have to have it, the oil demand is price-inelastic:  I will pay any price to get that oil.  However, in the long run, with new technologies and so on, every good’s demand is price-elastic, so that if you raise your price above other sellers, you will sell exactly nothing.

Now let’s examine the idea that “it’s likely that people will buy Keystone or Venezuelan heavy crude, but not both” in the light of that concept.  Suppose that we offer both Keystone and Venezuelan.  Supply has gone up, so what happens?  Price inelasticity of demand is about a fixed amount of supply – there’s one buyer, and he has to have it at any price.  However you assess it, economics says that when supply increases, more demand can be satisfied, so you sell more (at a cheaper price).  Nothing suggests that either Keystone or heavy crude would suddenly become unprofitable with a marginal increase in overall supply this year. 

So, however you slice it, price inelasticity of demand does not mean that oil demand is fixed.  More specifically, it doesn’t mean that if you add more to the market, the market won’t buy it.  On the contrary, economics says that people will buy it, and you’ll make more profit, if you lower the price a little. 

So that’s the real choice we’re facing:  between Venezuelan crude and V c plus Keystone.  In other words, the review appears to be flat wrong by economic theory:  the net effect of Keystone is not Keystone emissions minus Venezuelan crude emissions, it’s just plain Keystone emissions. 

I have left out other questionable stuff – they appeal to a “model” to justify the estimate of net Keystone emissions, when there’s certainly a question about the industry data supplied to fuel that model, and (as the Climate Progress assessment noted) it is not clear just how they derived their assessment that Canada would definitely go ahead and ship the tar sands oil by rail to its ports failing all else.  However, I don’t feel these “minor” flaws are relevant, in the sense that unless the review can adequately deal with the science and avoid the major flaws noted above, it doesn’t matter whether those minor flaws get fixed or not.  Or, as the old doggerel has it, “Here beneath six feet of clay, lies the body of Mr. Wong.  He died defending his right of way; but he’s just as dead as if he’d been wrong.”

Sorry, You Can’t Have the Devil

All of this has given me a new perspective on the old story, “The Devil and Daniel Webster.”  Briefly, the story goes that a hard-luck New Hampshire farmer made a deal with the Devil that for seven years his luck would change, and at the end of it, he’d give his soul to the Devil in return.  When the time came to pay up, he desperately turned to Daniel Webster, the famous Senator and orator, to argue his case.  The Devil loaded the jury; but when Daniel appealed to the patriotism of the jurors, even the most hardened of them was moved, and the farmer got off.

Well, that’s the deal that the review would have us take, over and over, a little piece of added emissions at a time in exchange for the possibility of a few extra jobs.  But when the reviewer’s great-great-grandchildren are faced with the consequences of those choices, they will not face a Devil that can be swayed by tricks or oratory or feelings at all.  They will be faced with a world that is totally unmoved by their pleas and efforts, a world of “Hell and High Water”, not to mention decimation – and the rich will suffer with the rest, because any smart military man will simply grab your money instead of taking a pittance to give you security in Hell.

So here’s my review of the latest State Department review.  I think it should be titled “From Hell It Came.”  And my review is, simply, “Back send it.”