By Oil Change International
Keystone XL Belongs in the ‘Trash Can of History’
By Lorne Stockman August 8, 2017
Hearings began Monday at the Nebraska Public Service Commission (PSC) in Lincoln for the Keystone XL pipeline. The PSC is charged with deciding whether the pipeline’s route is in the interests of the state of Nebraska. If the pipeline is judged to pose unacceptable risks to land, water, wildlife, cultural resources and property values, the PSC could deny a permit to build the 36-inch pipeline carrying toxic tar sands oil oil through the state. No doubt TransCanada will be attempting to make its case that these risks are minimal and/or mitigable, despite plenty of evidence to the contrary.
But key factors the PSC should be assessing—like whether market demand still exists for the project—have been disqualified from the process. As a result, the PSC is in danger of issuing a permit for a pipeline that may be underutilized and possibly not built at all. While on the surface, it may sound like an underutilized pipeline would come with fewer risks, this is far from the truth. Grave risks associated with these outcomes—like increased potential for spills and the indefinite seizure of private land—must be considered in order to protect Nebraskans.
When President Trump signed the federal permit for Keystone XL in the Oval Office in March, there were some uneasy murmurs in the room from TransCanada executives as he jovially quipped that TransCanada could now go ahead and start construction. Transcanada CEO Russ Girling knew that not only did the project still need approval in Nebraska, where it had faced the stiffest opposition in the past, but that as things stood, he did not actually have any customers for the pipeline. That situation has not changed.
A multi-billion dollar pipeline does not get built unless customers that will ship product in the pipeline contractually commit to using the pipeline. This usually takes the form of signing 20-year take-or-pay contracts for the majority of the pipeline’s capacity. So a shipper, which could for example be an oil producer, a refiner or a trader, will sign a contract committing to pay for shipping a specified amount of oil on the pipeline every day for 20 years. It is essentially a long-term reservation of space on the pipeline. TransCanada has stated that it hopes to sign up 90 percent of the project’s 830,000 barrels per day (bpd) capacity. So it needs to sign up nearly 750,000 bpd. This is a tall order in today’s oil market and the future does not look any better.
It was primarily this issue of market need about which I submitted some 13,000 words plus 33 attachments of testimony to the Nebraska PSC back in June. I was expecting to present that testimony in person at the PSC this week. However, in a last minute decision the PSC dismissed my testimony, and that of 39 others, limiting the scope of issues it will consider and thereby ignoring some of the key risks it should be considering.
The key points that the PSC should be considering are this:
- After the projects that are currently under construction come online, ultimately by 2020, there is currently no financial commitment from Canadian tar sands oil producers for further production growth.
- There is already enough pipeline and refining capacity to cope with the production growth that is committed to.
- The future of oil demand, and consequently oil prices, is more uncertain than ever, with new technologies and environmental policies threatening to end oil’s stranglehold on transportation forever.
- As one of the most expensive to produce sources of oil in the world, the tar sands oil that would potentially fill Keystone XL has no future in a world moving toward cleaner cities and greater climate and energy security.
That the pipeline may not attract enough customers is a major issue for TransCanada. The company has stated several times that it is struggling to sign up committed shippers and will not know if it has enough commitment until November at the earliest.
So why should the PSC consider this? If the pipeline doesn’t get built then how are Nebraskans at risk? If it does get built but then fails to meet expectations, isn’t that only of concern to the company?
Unfortunately, the vagaries of the land easements that would be enforced if the PSC issues the permit, and the greater risk of spills in an underutilized pipeline, mean that the risks of the project failing financially are potentially as bad or worse than if it is a success.
The land easements that TransCanada has signed with willing landowners, as well as those it would force upon unwilling landowners through eminent domain, give the company rights to the pipeline corridor in perpetuity. This means that if the pipeline is not built TransCanada can sell the easements to the highest bidder. Therefore, landowners will have no control over what happens on their land in the future.
That unwilling landowners will be forced through eminent domain to hand over land for an unspecified use is an outrageous abuse of the principle of eminent domain. No public good has been proven for Keystone XL or any project that may end up in the corridor.
If shippers decide to take the gamble and sign up enough capacity for the project to go ahead—a gamble they may take based on overly optimistic expectations of the oil market—it is highly likely that some of the contracts may not be fulfilled and the pipeline may be underutilized.
The Natural Resources Defense Council reported Monday on the increasing evidence that underutilized pipelines are more prone to spills and those spills are much harder to detect and locate in pipelines operating under low pressure, known as “slack line” conditions.
These spill risks have not been evaluated in the environmental impact assessment of the project, which has assumed the pipeline would operate at or near full capacity.
The Keystone XL project has always been a risky and misguided venture designed to enrich corporate shareholders at the expense of the climate and landowners along the route. Since its original permit was denied, the case for building it, weak as it was, has evaporated.
What remains is a project serving only the political goals of a vain and corrupt administration bent on reversing its predecessor’s achievements no matter who bears the cost. Granting a permit in the state of Nebraska risks ceding control of Nebraskan land to a corporation that has in no way demonstrated a public interest for its project.
The permit should be denied and the Keystone XL pipeline finally confined to the trash can of history where it belongs.