Environmental groups, with a little help from the EPA, are trying to stop construction of the Keystone XL pipeline designed to move crude oil from Alberta (Canada, for the geographically challenged) to refineries in Texas. Nobody’s seriously claiming the $7 billion, 1,700 mile addition to the pipeline network is a hazard to the people (or the prairie dogs) of the America’s Great Plains, though. The pipeline brouhaha is part of a proxy war over the extraction of fuel from Canada’s seemingly bottomless deposits of tar sands, a very messy process that is not conducive to healthy plant and animal life. Arguably more relevant, substituting a barrel of tar sands oil for a barrel of conventional oil generates 10-20 percent more greenhouse gas emissions because it takes a lot of heat to extract the liquid crude from the tar-like bitumen in the sand.
That said, do we approve of tar sands extraction? The environmental issues are troubling. But the local pollution is Canada’s problem, not ours. And the last time we looked, Canada was a functioning democracy capable of making its own decisions.
Moreover, (unlike the United States) Canada is committed under the Kyoto Accord to containing greenhouse gas emissions. So if the government chooses to allow more carbon emissions from the Alberta tar sands facilities, it will be obligated to find a way to reduce emissions from some other source. Will it meet that commitment? Hard to say. But Canada surely deserves the benefit of a doubt.
We do have a direct stake in one aspect of the controversy, though: the impact of tar sands development on U.S. energy security or, more precisely, its impact on the global oil market. Extracting an extra million barrels of oil from Canadian tar sands wouldn’t reduce the volatility of oil prices very much in a world that now consumes 90 million barrels a day. But unlike the Persian Gulf, Nigeria, Venezuela or even Mexico, Canada is plainly a very reliable supplier of fuel. So increasing Canada’s share of global output modestly would (equally modestly) increase the stability of the global market for liquid fuels.
In any event, the argument over the pipeline misses the point: Stopping its construction is not likely to have much impact on tar sands exploitation. The oil can be extracted for roughly $30 a barrel and thus is almost certain to be extracted – even if Ottawa forces the owners to internalize the costs of cleaning up the local environment and exacts a stiff tax on carbon emissions. By the same token, there is no practical way to stop the Canadians from exporting oil to the United States. If the pipeline is nixed, the oil could be transported by rail – a transport mode that is more problematic in environmental terms.
Still not convinced? Here’s the stopper: oil is fungible. In a pinch, the Canadians could always consume the oil from tar sands themselves and export the conventional crude saved thereby. Tar sands crude is plentiful and comes from a country that is committed to enforcing business contracts. Now that it’s relatively cheap, it’s likely to be extracted.
(This post was also published on Forbes.com.)