Keystone Pipeline Project free essay sample

The United States is a fossil fuel hungry nation whose economy, markets, and transportation is highly dependent on the abundance of crude oil and petroleum. Although there is roughly 85. 9 billion barrels of undiscovered technically recoverable crude oil currently in the form of oil shale located beneath our soil, we still rely on imports from foreign countries. With a crude oil and petroleum product net import of 7,270 thousand barrels per day the United States is one of the top importers of foreign oil (Petroleum Other Liquids, 2013). According to the U. S. Energy Information Administration, EIA, the United States receives its leading imports of oil from Canada at a rate of 2,815 thousand barrels per day, Saudi Arabia at 1,028 thousand barrels per day, and Mexico at 869 thousand barrels per day. Looking at the geography of the North American continent, the United States shares its longest boarder with Canada, an ideal configuration for trade and transporting goods. It is no surprise that the rate of crude oil imports from Canada is roughly 3 times the rate of imports from Saudi Arabia. This is primarily due to Keystone Pipeline and according to proposals from TransCanada Corp. The rate of oil imports from foreign countries may fluctuate with the completion of Keystone XL project. The Keystone pipeline system is a 2,148 mile pipeline, along with related facilities that carry crude oil from the tar sands of the West Canadian Sedimentary Basin, WCSB, beginning in Alberta, Canada to refining markets throughout the United States (Slade, 2013). Although first proposed by TransCanada Corporation on February 9th, 2005, actual construction didn’t occur until 2008 due to legal and environmental inspection requirements not being met (Kalen, 2013). The Keystone Pipeline consists of two developments, known as Phase I and Phase II. Phase I was the first to be completed and began full operation during the summer of 2010. It runs across Canada from Alberta to Manitoba and from there it heads south across the U. S. border and into North Dakota. Once into North Dakota, the pipeline continues through South Dakota and finally into Nebraska. At Steele City, Nebraska, the pipeline reaches a junction where it splits in two. In one direction, Phase I of the Keystone Pipeline continues east through Missouri and reaches its final destination at oil refineries in Patoka and Wood River, Illinois. Beginning at the junction in Steele City, Nebraska, is the second completion of the Keystone Pipeline, Phase II. This portion of the Keystone pipeline is also known as the Keystone Cushing Extension. It is a 298 mile long pipeline that runs south from Steele City to Cushing, Oklahoma and began operation late February, 2011(Slade, 2013). Together, Phase I and II of the Keystone pipeline pump an estimated 590,000 barrels per day. At a cost of 5. 2 billion dollars, the Keystone pipeline has had beneficial and detrimental effects on the U. S. Economy on a local and nationwide scale, however with its creation it has improved access to foreign oil and reduced foreign oil transportation cost. Although one can marvel at the transportation capacity and construction of the Keystone Pipeline, it may potentially be surpassed by the capacity and estimated benefits of TransCanada’s newly proposed Keystone XL pipeline addition. Similar to its current counterpart, the operational Keystone Pipeline, the Keystone XL pipeline, also known as the Gulf Coast Extension, is proposed to be constructed in two phases, Phase III and Phase IV. The proposed Phase III project is 485 miles long and will travel from Cushing, Oklahoma to Nederland and Houston Texas. Since it doesn’t cross any international border lines, it can proceed without the approval of the Phase IV project which does cross border lines. Phase IV of the Keystone project is 1,179 miles long and travels from Alberta, Canada, enter the states at Phillips County, Montana, pass through the Dakotas and end at Steele City, Nebraska (Slade, 2013). If constructed and made operational, the Keystone XL project will cost 7. 6 billion dollars, transport 830,000 barrels per day, and create a more direct link between oil refineries in the north and Gulf Coast (Slade, 2013). Since the proposed Keystone XL project crosses multiple states and international borders, the process it must go through to be approved is lengthy and involves many different agencies which must assess and evaluate all aspects of the Pipeline. Due to this lengthy process, TransCanada’s permit application filled in 2008 is projected to be approved or rejected by late 2014 or possibly 2015 according to Christopher E. Smith, an editor for a Journal on the operational schedule of the Keystone Project titled TransCanada delays Keystone XL in-service date to second-half 2015. Some of the questions that the Keystone XL project hopes to answer and have also arisen as a result of its proposal are whether or not lower gas prices will be expected? Will our reliance on oil imports from volatile and unstable nations be reduced? Can we expect the creation of more jobs and seek that those jobs are filled? Are we denying ourselves, as a nation, an inevitable progression towards renewable forms of energy that in addition emit less carbon? What will happen to the Ogallala Aquifer should there be an oil spill? What benefits will arise from the creation of this pipeline? For the remainder of this paper I will seek to answer the majority of these questions, depict the current exposition of the Keystone Gulf Coast Expansion Project, and convey my opinion on the issue after undergoing unbiased analysis. As a proposed project, there are three main arguments that surround the Keystone XL Pipeline project. These arguments in favor of construction and operation of the pipeline are decreased gas prices, stronger national security through reduced foreign oil import dependence, and creation of jobs. In the United States, oil supplies 36 percent of our energy sources and is all so the principal fuel for transportation around the world. Oil in particular fuels around ninety-four percent of our nation’s transportation sector (Petroleum Other Liquids, 2013). This makes oil an important commodity to many nations including our own and the market for oil very competitive between nations as they seek to compete over oil exporters and nations with convenient access to oil reap the economic benefits. Therefore, the pricing of crude oil is controlled by multiple factors; supply, demand, markets, accessibility, and physical balancing. Although the United States holds position as a major consumer of oil, our nation solely alone as minute effects on crude oil cost, even for refineries in our own country. According to an academic journal by Edwin Slade titled, The Keystone Pipeline Addition: Assessing the Potential Benefits of Reduced Gasoline Prices and Increased National Security, U. S. refineries’ crude acquisition cost change with geopolitical events, such as increasing oil demands in foreign countries such as China and those in the Middle East. Keystone supporters argue that by making oil transports more available to our country and to the global market, we impact the cost of crude oil in a more effective way that depends heavily on Keystone exports. Benefits of oil availability can be viewed on a local scale primarily in Midwest. Prior to Keystone operation, Canadian oil imports accumulated in Cushing, Oklahoma, since oil refineries and pipelines are centralized in this area, and resulted in an abundance of excess oil known as the Cushing glut. This resulted in increased domestic production of oil, increased Canadian supply, and decreased gasoline prices (Slade, 2013). The proposed development of the Keystone XL pipeline is strategically placed to access the excess oil refineries of the Cushing glut and distribute this oil to refineries in the Gulf Coast. Refineries in the Gulf Coast are not restricted to a localized market, like Cushing, Oklahoma, and therefore will export productions to the global market according to Brent North Sea and West Texas Intermediate benchmark prices which yield higher profits than mid USA appraisal (Slade, 2013). With further analysis, it is estimated that access created by the Keystone XL Pipeline to the oversupplied, discounted, Canadian heavy crude oil located in the Midwest to the U. S. Gulf Coast markets will increase the price of heavy crude to the equivalent cost of imported crude (Slade, 2013). As a result of the increased price of heavy crude oil on the world oil market, the Canadian producing industry will experience increased annual revenue. So how can we benefit from Canadian industry in terms of reduced gas prices? This claim will be analyzed in deeper context as opposing arguments to gas prices reductions resulting from the Keystone Pipeline are made. Two remaining arguments for production of the Keystone XL Pipeline are increased national security and reduced reliance on oil imports from foreign countries. Both of these arguments go hand in hand as they are a result of one another. Before assessing the benefits the Keystone XL pipeline will make towards national security, we first must review the United States current importation of foreign oil, how the pipeline tends to accomplish reduced foreign dependence, and how reduced foreign dependence may prove beneficial. According to the Energy Information Administration, Saudi Arabia is the leading exporter of oil at 8,168 thousand barrels per day and is also the leading producer of oil. In addition, the Energy Information Administration ranks China and Japan as far second and third place consumers, respectively, to number one consumer, the United States. However, according to graphs depicting trends or oil consumption rate over time, the United States oil consumption has steadily decreased since 2010, relative to the operation of the Keystone Pipeline Phase I and II, and shows increasing oil demands in Latin America, several European countries, and China. These increasingly oil dependent countries are receive the majority of their diesel imports from other countries but Gulf Coast refineries, with the aide of the Keystone XL pipeline, will be able to meet this demand (Slade, 2013). This will attract growing attention towards the supplying capabilities of the Keystone exports at the Gulf Coast on a worldwide scale and the United States plans to take advantage of this as well. In TransCanada’s presidential permit application to approve construction of the Keystone XL pipeline, the argument is made that the pipeline will allow U. S. refiners to substitute foreign crude supply with direct access to a growing crude oil output from Canadian refineries (Congressional Digest, 2013). A study commissioned by the Department of State, known as the Ensys, concluded that increased U. S. imports of Canadian oil will replace other foreign imports. As a result of overseas trade, the U. S. military surveillances potential vulnerabilities to oil supply and nation security such as abroad and domestic terrorist attacks on oil supplies, Venezuelan embargoes, and Iran closing the Straits of Hormuz. In lite that these are only a few examples of threats to foreign oil imports from a growing unpredictable list, geopolitical factors dictate that the U. S. is less vulnerable to disruptions in oil supply from Canada (Slade, 2013). Overall, a substantial increase in our nation’s share of imports from Canada will result in a decrease in share of imports from other â€Å"disruption prone† foreign suppliers and ultimately the vulnerability premium for crude oil imports will decrease. While the benefits of the Keystone Pipeline and proposed Keystone XL pipeline have been established, the counter arguments to the construction of the Keystone project are what caused its 5 year delay of proposal to operation and is currently what halts construction of the Keystone XL pipeline (Kalen, 2013). These arguments are highly prioritized when assessing the approval of the project. The duties of doing so lie under the jurisdiction of the Department of State, NEPA, Hazardous Material Safety Administration, and EPA (Petroleum Other Liquids, 2013). These agencies consider the potential environmental impacts of the entire pipeline along with economic effects before issuing any State, tribal, or Federal licenses, permits, or approvals to the project (Sassman, 2013). In addition to assessments of the pipelines environmental impact made by government agencies, there has been a concerted effort by environmentalists to resist building the pipeline in concern for Americas continued reliance on carbon emitting fossil fuels, reducing contribution factors toward climate change, hazardous methods of oil extraction, and â€Å"inevitable† damage of oil spills. In the U. S. Department of State’s August 26, 2011 Final Environmental Impact Statement, concerns were expressed towards the fragile Sandhills’ soils and the underlying Ogallala aquifer (Spatding and Aaron, 2013). The Ogallala aquifer is one of the worlds largest aquifers covering an area of approximately 174,000 miles and supplying water to 30 percent of irrigation water in the United States and 82 percent of drinking water to the surrounding area. It lies beneath the fragile and pristine Sandhills, which are sub-irrigated meadows that reach areas where water tables are as shallow as 6 meters. The construction of the pipeline through these regions in Nebraska would disturb the Sandhills’ soils and crude oil releases that may occur during the pipelines operation could potentially contaminate large volumes of the Ogallala aquifer (Spatding and Aaron, 2013). One cause of oil leakage through pipeline corrosion is contributed to an acidic component of crude oil known as dilbit. Its corrosive properties are attributed to amounts of toxic chemicals benzene, toluene, ethylbenzene, and xylene, (BTEX), whose aqueous solubility’s in water exceed maximum contamination levels (Spatding and Aaron, 2013). A prime example of the harmful effects can be seen at the Kalamazoo River tributary in Michigan which experienced a 790,000 gallon dilbit release into flowing surface water (Sassman, 2013). Should the Keystone XL project undergo construction and operation it is clear that we risk the environmental preservation of vital resources. This outweighs any benefits proposed by TransCanada and supporters for the pipelines construction. Referring to the arguments in favor of benefits that construction of the Keystone XL pipeline will bring, particularly the promise of lower gas prices, counter arguments show that the pipeline will yield little effect on gas prices. In June 2012, the average price of unleaded regular gasoline rose by 39 percent from 2010 prices of $2. 79 per gallon to $3. 55 per gallon (Sassman, 2013). According to an article titled, The Keystone Pipeline Addition: Assessing the Potential Benefits of Reduced Gasoline Prices and Increased National Security, over the last eleven years, petroleum imports from Canada have rose fifty percent yet gas prices in the United States during the adjacent time period have continued to rise according to fluctuations in the global market. It is a possibility that these imports have acted to stabilize gas prices more so than if the U. S. wasn’t receiving oil imports from Canada at all. Although there are counter arguments against the benefits of the Keystone XL, along with environmental controversy, these counter arguments are in the process of being met in order to meet consumer demands, projected schedule, and licensed approval. In the future proposal for the Keystone XL pipeline, a risk-managed route is suggested that avoids the environmental geographic restrictions that prevented the grant of a presidential permit. The newly proposed route avoids the Ogallala aquifer beneath the Sandhills, avoids surface water crossings in the canyons of northern Holt County located near the Sandhills, and the southeasterly portion of the risk-managed route runs through low cropped irrigated land rather than undeveloped prairies (Spatding and Aaron, 2013). With conflicts and benefits constantly arising and being tested regarding the future of the Keystone XL pipeline, there’s no telling which side is winning or if a suggested solution will ever be agreed on. Such solutions, like the risk-managed route, may lead to a presidential permit to presume construction by 2015. However, until all aspects are taken accounted for, the future of the Keystone XL pipeline still remains undecided.