09/26/2011 07:09 EDT | Updated 11/26/2011 05:12 EST

The Keystone Debate: Forget The Pipeline, This Is About The Oil Sands


When supporters of the Keystone XL pipeline tout the benefits of TransCanada's $7-billion plan to ship crude oil from Alberta to Texas, they have a long list.

The extended artery will provide energy security within North America, they say. It would be the safest pipeline ever built and will take crude that Canada doesn't have the capacity to refine to Texas refineries looking for it.

And then there are the jobs the pipeline could spawn: thousands and thousands of them. In a time of economic downturn, it would be a bright light.

Much opposition toward TransCanada’s Keystone XL project focuses on the routing of the proposed pipeline extension over the Ogallala aquifer and the Sandhills in Nebraska. The aquifer supplies water for drinking and agricultural irrigation to parts of eight U.S. states.

“We believe that [Keystone XL] is going to put the Ogallala aquifer in jeopardy,” says Maude Barlow, chairperson of the Council of Canadians. “The pipeline route will go over it for much of its journey, and it will be carrying the dirtiest oil on the planet — bitumen. [Pipelines] do spill. Even the industry admits there is no guarantee.”

Those who oppose the 2,673-kilometre extension, however, are equally adamant it should never go ahead. No matter how safe you try to make a pipeline, they still leak, and this one would cut across sensitive environmental areas in the U.S. that are key to local water supply.

What's more, the critics say, those jobs numbers are flawed and represent positions that have no long-term future.

But leave aside the fierce debate over the pipeline itself, there is another issue at stake here: the future of the northern Alberta oilsands that need an outlet for their heavy bitumen-laced oil that those refineries on the Gulf Coast can provide.

"It's debate over a pipeline, but it's really a debate about the oilsands," says Andrew Leach, an associate professor at the Alberta School of Business at the University of Alberta in Edmonton.

Here to stay

Leach readily acknowledges that it is not easy to reconcile the arguments for and against the pipeline itself.

"On both sides of the debate, the proponents and the opponents, there are a lot of levered numbers," he says.

But even TransCanada realizes that much of the root of the opposition to Keystone XL is focused on the future of those particular heavy oil deposits of northern Alberta.

Spokesman Shawn Howard says the real issue for those he calls the "professional activists" who have spoken out against Keystone XL is the oilsands.

"They have chosen to make this pipeline the target because they're of this misguided belief that if Keystone isn't built, or the second half of it isn't built, the oilsands will dry up.

"They're mistaken. This product will continue to be produced," he said. "Other markets will take it gladly."

Profits before policy

For Calgary-based TransCanada, Keystone XL is a significant part of a plan to help the company grow.

"The markets approached us to build this pipeline because they needed it," Howard says. "We don't build a pipeline like 'field of dreams' — build it and hope we'll fill it. We have 18- to 20-year contracts already in place for shipping oil on that line."

But for critics of Keystone XL, looking down the road that far is what is causing the greatest worry.

Maude Barlow, the head of the Council of Canadians, says the massive infrastructure investment for a project such as Keystone XL will boost oilsands production before an overall energy policy is established.

"We understand that you're not going to shut down the Alberta tarsands tomorrow. We understand there is an infrastructure. There are jobs. We understand that a conversion to a safe and alternative energy source will take time."

But for the council, Keystone represents a very particular part of the problem.

"The Keystone pipeline is an incredibly important symbol of the way policy is being driven and our very strong concern that this is going to lead to a potentially five-fold increase in the tarsands creation or tarsands investment, which is now Canada's fastest growing site of greenhouse gas emissions," says Barlow.

In her view, "It's just industry and greed and these big energy companies dictating policy. And it's backwards."

'Excess capacity'

For the Canadian government, Keystone XL is part of an "overarching objective of becoming a responsible energy superpower," says Natural Resources Minister Joe Oliver.

"To do that, we need to develop our resources and this is part of doing that. We have excess capacity. The U.S. has excess demand, and it makes every bit of sense to build this particular project."

Oliver sees great economic benefit in the Keystone XL project.

"The oilsands, we've been told, can generate $2.3 trillion in economic activity over the next 25 years," he says.

"If Keystone goes ahead, that would add another $600 billion and hundreds of thousands of jobs can flow from the oilsands development."

Oliver says the government is continuing to work with industry "to reduce the environmental footprint" of the oilsands, and says that the intensity of greenhouse gas emissions has been cut by 30 per cent in the past 15 years.

Overall emissions have still gone up, of course. But Oliver says that these are "not a huge factor globally," representing only one/1,000th of global GHG emissions.

The jobs debate

Environmentalists, mind you, see this differently.

"Canadians should be aware of how this project is affecting their international reputation when it comes to the environment," says Anthony Swift, a policy analyst for the Natural Resources Defence Council in Washington, D.C.

"It is certainly creating a kind of black mark on Canada's environmental record."

Swift said the Canadian government could address that situation by implementing tighter environmental regulations for the oilsands. But that approach has become bogged down in a back and forth between the federal government and Alberta, whose governing party is in the midst of a leadership race.

Meanwhile, Keystone XL is awaiting its most significant seal of approval: a U.S. presidential permit, which is required because the project crosses an international border. The U.S. State Department is reviewing the application by TransCanada and a decision is expected by the end of the year.

"The tea leaves all kind of point to it being approved," says Leach. But there could be a wild card: the Republican governor of Nebraska.

Gov. Dave Heineman has urged President Barack Obama and U.S. Secretary of State Hillary Clinton to deny the permit because of concerns over potential pipeline spills and the Ogallala aquifer. It supplies drinking water to about two million people in Nebraska and seven other states.

Oliver says he is not anticipating the permit will be turned down, although if it is, "we would just have to look at other markets," presumably meaning China.

And Leach says he doesn't really see anything at this point that would derail Keystone XL.

"I don't think right now the president or the State Department have really been given something to say here's why I'm turning down the pipeline."

What's more, he says, "even if you don't believe the jobs numbers, it's pretty hard for a president to turn that down, coming into an election year."