Importing Canadian heavy oil via the Keystone XL pipeline may represent a more environmentally friendly option than crude from other sources, according to panelists at the New York Energy Week Oil and Gas Market Perspectives breakfast on Tuesday, hosted by CME Group.
Environmentalists frequently cite the environmental footprint of Canada’s “tar sands” as a primary reason to object to construction of the controversial Keystone XL Pipeline. Production from oil sands and the process of turning bitumen into crude oil causes three times the global warming pollution of conventional oil production, according to the Natural Resources Defense Council.
But the US, despite strong growth in oil production – and the potential to overtake Saudi Arabia in output, albeit temporarily – will likely continue importing oil from a wide range of countries, such as Saudi Arabia and Venezuela, for the foreseeable future. Depending on what environmental regulations exist in these countries, it is difficult to gauge whether their conventional crude production is less environmentally damaging than development of Canadian oil sands.
“Out of the countries that we receive imports from, Canada is the only one that has greenhouse gas air regulations,” said Erin Carson, Policy Analyst at Energy Solutions Forum, adding that there are cross-border initiatives to try to streamline initiatives covering both air and water quality.
Cindy Schild, a Senior Manager at trade group the American Petroleum Institute who has focused on both US refiners and Keystone XL, noted that Canada has taken steps to reduce emissions from its oil sands operations in addition to regulations governing water use and land reclamation.
Alberta – where many oil sands projects are located – was the first jurisdiction in North America to impose mandatory GHG emissions reductions targets, which took effect in 2007, targeting emitters of more than 100,000 tons per year, and requiring per-ton fees for non-compliance, according to official Canadian government information. Oil sands development accounted for roughly 6.5% of Canada’s total GHG emissions in 2009, or 0.1% of global emissions.
“The emissions from oil sands extraction have been reduced 26% since 1990. So the technology advances continually,” Schild said. “Water use is regulated, reclamation in Canada is regulated.”
“If you’re really concerned about the environmental contribution…where do you think it’s going to be managed better? In the United States, in Canada, or elsewhere? Because the resource is being developed,” Schild said.
The panelists agreed that Canada’s oil sands are being and will be developed. But they expressed various concerns about whether, and how quickly, Keystone XL will be built. “Keystone XL is somewhat of a political football,” said Carson.
Industry could see new environmental regulations by year-end that complicate the process of getting Keystone XL, and other pipelines, built. “We have a very aggressive EPA, and there are quite a few rules that are in draft form right now,” said Carson. “We’re going to see a lot of new final rules coming out before the end of this administration.”
“There are regulations that are going to dictate how easy it is to install some of these pipelines,” said Carson. “What are going to be the air and water quality standards? And is that going to hinder or facilitate industry from going forward with some of these projects?”
But the dust in Washington may have long since settled by the time Keystone XL gets approved. “You’ve still got a long few years ahead of you with this,” said Brian Busch, Director of Oil Market and Business Development for Genscape.
“The fact that we’re entering five years to talk about one pipeline project is just bordering on insanity,” Schild said.
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