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The Environmental Case for Keystone XL presentation by Scott Farris of TransCanada

April 4, 2013
Scott Farris (2)

Scott Farris

For those of you who were unable to attend The Environmental Case for Keystone XL presentation by Scott Farris, Director of Government Relations at TransCanada, here is a copy of his speech below! GEM teamed up with TransCanada Corp. and the Denver Petroleum Club for this speaker series event. More than 250 people attended the discussion at the Denver Athletic Club last month.

“Last month, what was billed as the largest rally yet in the U.S. on the dangers of climate changed occurred on the National Mall in Washington.  Estimates vary widely, as they always do, as to exactly how many people attended, but clearly there were thousands, and the rally included planned civil disobedience by protesters in order to be arrested.

Now, the focus of the rally might have been to demand that Congress and the President impose a tax on carbon, or establish a cap-and-trade program that would set a price on carbon to incent people to limit their use of carbon fuels.  The protestors might have called for a national renewable portfolio standard to promote the use of green energy, or called on the EPA to establish the same carbon emission standards for existing power plants that they have already imposed on new power plants.  They could have called for even tougher auto fuel efficiency standards, more money for green energy research, or their focus might have been on developing a national campaign to rally all Americans to commit to using less energy in order to reduce greenhouse gas emissions.  Any and all of these actions, if implemented, would represent significant steps toward reducing greenhouse gas emissions and possibly reversing the trend of global climate change.

But instead, the rally focused on the demand that President Obama deny TransCanada the Presidential Permit necessary to complete construction of the Keystone Xl pipeline—a denial which, as the U.S. State Department concluded once again in a supplemental environmental impact statement issued March 1st, will do virtually nothing – nothing – to reduce or even restrain greenhouse gas emissions or roll back the dangers of climate change.

Given all the heated rhetoric from its opponents, you may find it hard to believe that Keystone XL is as benign as the State Department says it is.  After all, Dr. James Hansen, the former administrator of NASA, has said construction of Keystone XL would mean it is “game over” in terms of rolling back climate change.  The primary spokesperson for opposition to Keystone XL, Middlebury College professor Bill McKibben, has said stopping Keystone XL is to the environmental movement what the March on Selma meant to the civil rights movement, or what the Stonewall riots meant to the gay rights movement.  Activist Van Jones, who previously worked in the Obama White House, recently took a shot at his former boss, saying if President Obama approves Keystone XL it will forever be known as the “Obama Pipeline,” and that Keystone alone will be the legacy of President Obama, overshadowing all else he has done or will do as President.. Robert F. Kennedy Jr. has gone further, telling the Huffington Post a few weeks ago that approval of KXL would mean—quote—“the end of civilization.”

Wow.

So, today, I want to make the case that KXL does not represent the end of civilization, nor does it doom the planet.  I want to explain why the State Department concluded what it did, that approval of Keystone XL is actually preferable—even from an environmental standpoint—to the most likely alternatives should Keystone XL be blocked.

First, I realize that Keystone XL has not been the focus of the professional lives of everyone in this room as, alas, it has been for mine these past several years, so let me first begin by telling you a bit about TransCanada and also the rationale behind why TransCanada wants to build Keystone XL.

During this debate, TransCanada has often been charged with being part of “big oil.”  We are not.  Oil pipelines represent just 13 percent of our assets. Nor is TransCanada an oil or gas producer.  We are an energy infrastructure company.  About half of our business involves transporting energy.

As the map behind me shows, we have about 40,000 miles of natural gas pipelines, which makes TransCanada North America’s largest transporter of natural gas by volume.  Natural gas is the cleanest of carbon fuels and is a fuel that, under current technology, is essential to the development of renewable energy.  Because the wind doesn’t always blow and the sun doesn’t always shine, when their customers need power that can’t be met with renewables at that moment in time, utilities most often turn to natural gas for power generation because it is quick and easy to turn off and on.  This is called “firming up” renewables.

Natural gas might not be needed to firm up renewables if we had better energy storage technology.  We lack that right now.  According to the Gates Foundation, if you took all the power stored in every battery in the world you would have enough electricity to run the world’s economy—for four minutes.  We have a ways to go before green power alone can meet our energy needs.

Like President Obama, when it comes to energy, TransCanada has an “all of the above” strategy.  About half our business is power generation.  We have 21 different facilities generating nearly 12,000 MW of electricity.  In addition to conventional gas-fired power plants, TransCanada owns and operates the largest wind farm in Canada, the Cartier field in Quebec, and the largest wind farm in New England, Kibby in Maine. We also provide most of New England’s hydro-electric power, and have the largest carbon-emission-free nuclear facility in North America, the 6,000 MW Bruce plant in Ontario. We recently acquired a half-billion-dollars worth of solar facilities, and expect to move more aggressively into solar in the coming years. We tried – and still hope – to develop a total of 9,000 MW of green electric transmission – that would move wind power generated in Wyoming, Montana, and Alberta to the West Coast and Southwest, but those projects have been stymied by a host of factors and have been shelved.

What I hope this inventory of assets demonstrates is that TransCanada aspires to be a profitable and sustainable energy infrastructure company not just for the 21st century, but also into the 22nd century. So why, you may ask, would a company with those aspirations and a diversified energy portfolio decide to move about seven years ago into the presumably dying business of oil.  Well, that is because petroleum’s death, if it occurs at all, is not going to be quick.

There are a quarter-billion gasoline-using vehicles just on America’s highways today.  Even if we were to ban the internal combustion engine tomorrow – and I have not heard a serious proposal to do that – it is clear that we will still be using oil products for decades to come – until we have affordable alternative technologies to replace it. The question, then, is if we are going to use petroleum for a certain number of additional decades, does it matter from whom we obtain that oil and how should it be delivered?  TransCanada and many others think it does.

It has been the policy of the United States for four decades to end or at least reduce our reliance on imports from OPEC nations.  It is worth remembering that the one entity with the largest carbon footprint on earth is the U.S military—and a key reason America has a large military presence in the Middle East is to ensure the flow of oil from that region is never severed.  Colorado Governor John Hickenlooper will never have to worry about deploying the Colorado National Guard to Canada.

Keystone XL will allow us to purchase more oil from our closest ally and trading partner, Canada—a democratic nation, committed to human rights, with environmental regulations at least as stringent as those in the United States—and much less from OPEC nations – 40 percent less.  Without Keystone XL, we will continue to purchase oil in substantive quantities from petro-dictatorships that are not particularly environmentally conscious, where our dollars will be used to enrich the few, oppress the many (especially women), and to sometimes fund anti-American activities.

Economically, our purchases from OPEC represent only an outflow of American capital with virtually no benefits to U.S. workers or communities.  With Keystone XL, several thousand Americans will be employed during construction, earning high wages for two or more years, working in areas of the country that could use an economic boost. More importantly, at a time of tight budgets, Keystone XL will generate tax revenues for communities that to use for schools, health care, transportation, public safety, and much more.  Keystone XL will generate $100 million per year in property taxes alone.

These facts have led 70 percent of Americans surveyed in a recent Washington Post/ABC News poll, to support construction of Keystone XL.

But jobs and tax revenues are a poor trade if the cost is the death – or at least a radical altering – of the planet.  So, let me now begin to make the case that Keystone XL will not exact such a cost on nature and humanity, but rather offers a number of environmental benefits.

The oil that will be delivered through Keystone to refineries on the Gulf Coast is designed to replace oil those refineries already receive today from Venezuela, Nigeria, and the Middle East.  By our estimate, Keystone XL will negate the need for more than 200 tankers each year that now travel across the high seas and enter American waters to deliver that foreign oil.

Further, if Keystone XL is not built, one potential—even likely—result is that Canada will find the means to ship more of this oil overseas, adding, rather than subtracting, 200 more tankers traveling the oceans. This “crude oil shuffle” will, in our estimation, actually increase global greenhouse gas emissions by between seven and nineteen million metric tons per year.

But there is another environmentally important reason to prefer pipelines to tankers.

Pipelines are the safest method of transporting oil while tankers pose a significant risk. In addition to routine leakage and the fuel needed to power these behemoths across the ocean, of the three-dozen largest oil spills in history, virtually all were tanker spills.  I pick three dozen because the 36th largest spill by volume was the notorious Exxon-Valdez, which gives you a sense of how large a disaster it is when a tanker accident occurs.  None of the world’s largest oil spills was the result of a ruptured pipeline.

Why doesn’t this argument sway our opponents?  Because they say we’re lying about Canadian oil replacing Venezuelan or other oil.   They insist this Canadian oil is destined for export to Asia even though the refiners on the Gulf Coast have insisted this is not true.  Just as with the oil that is being refined there now—the oil that will be replaced by oil flowing through Keystone XL–, the refiners insist that 90 percent (or more) of the refined product made from the crude transported by Keystone will remain here in the United States to benefit U.S. consumers.

Google all you like; you’ll not find a shred of evidence to the contrary. Nothing has surfaced – no smoking gun, no secret memo or e-mail – to contradict this claim.

So what do opponents of Keystone XL offer as proof to the contrary?  They just say its common sense that this oil is designed for export.  No, with all due respect, it’s not.

There are, absolutely, alternative plans to ship Canadian oil to Asian and other markets overseas—in part because of the uncertainty surrounding Keystone XL.  But economic considerations would not put any of these on the Gulf Coast.  There are also legal restrictions on exporting domestically produced crude oil. Export licenses can be obtained for foreign-origin crude—provided it has not been co-mingled with crude oil of U.S. origin—and Keystone XL will also be transporting U.S. crude from the Bakken region in Montana and North Dakota.   In fact, as much as 250,000 barrels per day of the oil transported through Keystone will be American-produced oil—100,000 barrels per day from the Bakken and perhaps as much as 150,000 barrels per day for other producing regions, such as Oklahoma

Another argument for blocking Keystone XL is that stopping the pipeline would constrain development of the region known as the Oil Sands – or, Tar Sand, if you insist – in northern Alberta.   We know this will not happen because it already has not happened.  With Keystone XL now already delayed two years, producers have found other ways to get oil to market.

The Oil Sands, with roughly 180 billion barrels of recoverable oil, represents the world’s third-largest oil reserve.  Opponents charge the Oil Sands is the “dirtiest oil on Earth.”  They were therefore disheartened when the scientific journal, Nature, in a January issue, endorsed Keystone XL in an editorial headlined “Change for the Good.” Among the several points made by Nature was this quote—“”Nor is oil produced from the Canadian tarsands as dirty from a climate perspective as many believe (some of the oil produced in California, without attention from environmentalists, is worse),” Unquote.

What does dirty oil actually mean?  As Jerry Seinfeld might say, has anyone ever actually seen clean oil?  What opponents mean is that one concern is that tarsands oil is strip mined and there are claims that a boreal forest the size of the state of Florida has already been destroyed.  There is strip mining but that is no longer the preferred method of extraction., Now, more than 80 percent of the oil is produced in situ – where steam is injected into the ground and the oil then pumped up by more conventional means.  The area that will be disturbed is not as big as the state of Florida, but more close to the size of a county in Rhode Island.

There are also charges that tar sands oil, because it is a heavy crude called bitumen, is more corrosive than conventional oil, increasing the chance of a pipe failure.  Yet another study was issued just two weeks ago, this time by the British firm Penspen Integrity, which concluded, as a half-dozen previous other studies have, that bitumen is not more corrosive than conventional crude.  In other words, chemically, oil is oil.

Another critique is that it takes more energy to produce Oil Sands oil than conventional oil.  Here is an important statistic.  The Cambridge Institute’s Daniel Yergin, Pulitzer Prize-winning author and one of the world’s leading energy experts, says the amount of greenhouse gases generated by Oil Sands oil versus conventional production is six percent over the life cycle of a barrel of oil – that is, from the time it is pumped from the earth to the time it is burned in your engine – and that differential continues to go down as production technology continues to improve.

This six percent figure is important to know because it reminds us of this truth, which I was trying to get at in my introductory remarks: it is not the production of oil that generates CO2, it is the consumption of oil—the consumption of oil. That is why the most productive means of addressing climate change is not reducing supply; it is reducing demand.  I want to say that again: until we have the green technologies developed that can truly make oil obsolete, without requiring that we go back to being hunters and gatherers living in caves, the key is reduction in consumption and demand.  We may need to help people reduce that demand by putting a price on carbon, but conservation and efficiency are the keys to tackling climate change—not stopping Key-stone.

In fact, did you know that Oil Sands production currently accounts for one-tenth of one percent of the world’s greenhouse gas emissions?  That may seem consequential—one-one-thousandth of all the globe’s greenhouse gasses–until you consider this: that is still less than half the greenhouse gas emissions produced the coal-fired electric generation plants operating just in the state of Illinois.  And yet it is the Oil Sands are the focus of all this attention.

Opponents of Keystone XL have the fantastical belief that stopping Keystone XL will stop development of the Oil Sands—and that this will reduce the worldwide supply of oil, forcing a crisis that will finally convince the world to move beyond petroleum. They believe that Canada will willingly abandon the development of a resource that could contribute an estimated 13 trillion dollars toward the Canadian gross domestic product over time.

This hope received another hit this week when the leader of the main opposition party in Canada, Thomas Mulcair of the NDP (New Democrat Party), who was in Washington this week meeting with President Obama,  said he will remain neutral on Keystone XL, but he reiterated that he and NDP  support for development of the Oil Sands, adding that he hoped to develop a major new oil pipeline across Canada running from west to east to facilities that would export that oil overseas to Asia and elsewhere.  Meanwhile, the current government in Canada reiterated that finding new export markets for the Oil Sands, in the wake of the Keystone delay, remains a top national priority.

So, production in the Oil Sands continues to grow, despite the sagging economy and, absent Keystone XL, the main means of transport producers are turning to is rail.

Now, I love the railroads and I know that they, like TransCanada, a fellow transportation company, do our best to have exemplary safety records.  But let’s consider a few facts. First, emissions. The University of Alberta has concluded that transporting crude oil by rail generates three times as much greenhouse gases as transporting a similar amount of oil by pipeline.  Next, safety. A study by the Manhattan Institute, a conservative think tank, concluded that rail accidents occur 34 times more frequently than accidents involving pipelines for every ton of crude shipped comparable distances.  Now, the railroads dispute that exact number, but do acknowledge the likelihood of a rail accident is at least double or triple the chance of a pipeline problem. The railroads would also argue that a spill involving a train would involve a lower volume of oil than a spill from a pipeline.  That’s the good news.   The bad news is that trains pass through cities, over waterways and through wetlands that pipelines can be built to avoid.

As part of our agreement with the federal government, TransCanada has agreed to 57 special conditions in construction and operation that we believe will make KXL the safest oil pipeline yet constructed.  These conditions include directional drilling under major rivers and streams so the pipe will be 25 feet below the riverbed, thicker steel than necessary at key points, and a lower operating pressure than that engineered into the system. Despite these assurances, Keystone XL is now well into its fifth year of permitting.  Oil-loading rail terminals can be built in a matter of months.

Well, you might say, the difference is in scale; railroads can’t begin to carry as much oil as Keystone XL will.  Not true.  Keystone XL is designed to transport just over 800,000 barrels of oil per day.  Just the Burlington Northern Sante Fe Railroad alone has reported that its oil shipments increase by 7,000 percent – yes, seven thousand percent – in just the past four years.   And BNSF’s short-term goal is to transport one million barrels of oil per day – nearly 25 percent more than Keystone XL would carry. This Keystone-scale delivery method will occur without the requirement of new environmental impact statements, public hearings and oversight or, dare I say, a single planned protest—which I am not advocating, by the way. I am just noting the irony.

Well, then, you might say, the issue must be that Keystone XL is ploughing new ground.  No, Keystone XL is not blazing new trails.  If constructed, Keystone XL would be at best the third major new oil pipeline to deliver Oil Sands oil into the United States—and there are of course already many existing pipelines that have been delivering Oil Sands oil into the United States for many years.  Remember that we already annually import more than one billion barrels of oil from Canada now.

The first of these new pipelines was the original Keystone approved by the Bush administration, and which has been in operation since July 2010. The second, constructed by TransCanada competitor, Enrbidge, received a Presidential Permit from the Obama administration in 2009.  The Keystone-scale 1,000-mile, 36-inch diameter pipeline, known as the Clipper, running from Alberta to Wisconsin, has also been in operation since 2010.  Both of these pipelines completed their permitting within two years.  Neither generated any protests or political opposition.

So, what has changed?  Our opponents have explained it rather candidly.

Recall that back in 2008, it appeared our nation was ready to tackle the climate change issue. A variety of states (and Canadian provinces) had banded together in the West, in the Northeast, and in the Midwest to implement their own climate change policies that were to have included regional cap-and-trade systems designed to put a price on carbon and establish emission reduction targets.  Both presidential nominees, Democrat Barack Obama and Republican John McCain, had pledged to tackle climate change and endorsed cap-and-trade.  Most of the energy industry was either resigned to climate legislation or actively supporting it as preferable to a patchwork of state and provincial laws.  And then 2009 rolled around … and nothing happened.

The economic collapse, not surprisingly, took precedence over environmental concerns.  There was a growing chorus of people who began to more aggressively insist that climate change was either not real, not man-made, or that the cure would be worse than the disease. President Obama expended most of his political capital on the Affordable Care Act and indefinitely postponed offering any legislative action on climate change, though EPA did institute some new rules to reduce greenhouse gases. Those who believe climate change represents an existential threat were understandably frustrated and angry – and I hope you have noted that nowhere in my presentation today have I used climate change denial as an argument in favor of Keystone XL, because I am not a denier of either the fact of climate change or the role human activity is playing in climate change.

To rouse the public and policymakers, particularly the president who has disappointed them, from this perceived apathy, environmentalists decided upon a new strategy.  If people were having trouble rallying around such a nebulous concept as climate change, perhaps they could be roused to action against particular individual projects.  It had certainly been an effective strategy in other environmental battles.

From TransCanada’s perspective, the timing of this change in tactics was just bad luck.  Had we been six months further along in our project, it would be in the ground, operating today, and no one would have ever heard of Keystone XL.  Instead, it has generated the most passionate debate of any environmental issue in a generation. To quote the movie, “The Shawshank Redemption,” there is nothing especially egregious about Keystone XL; we were just in the path of the tornado.

Our opponents have confirmed this. Bill McKibben told the New York Times last year—quote—“Keystone, by itself, won’t make or break the environment.”  Rather, Mr. McKibben said he and others of like mind had concluded—quote—“The most sensible way to go about dealing with global warming is one pipeline at a time.”  Unquote.

President Obama, in an interview with Rolling Stone magazine last year, echoed McKibben’s comments.  The President said—quote—“The reason that Keystone got so much attention is not because that particular pipeline is a make-or-break issue for climate change, but because those who have looked at the science of climate change are scared and concerned about a general lack of sufficient movement to deal with the problem.”

And so the strategy to hold back climate change is not to have a comprehensive debate over the facts and theory behind climate change, but to engage in a global game of “whack-a-mole,” attacking infrastructure projects one at a time in the hope that the sum will someday equal a whole.  I would not be optimistic such a strategy will work.

But then, I think like a policy wonk looking for answers – and I am told there is another type of logic on this question. Last month, angrily responding to Nature’s endorsement of Keystone XL, popular eenvironmental blogger David Roberts, writing for grist.org, expressed impatience with those who argue that the facts do not justify blocking construction of Keystone XL.  Said Mr. Roberts—quote—“As I’ve said many times, wonk logic and activist logic are different. A wonk ranks fossil fuel projects by tons of carbon per unit of energy. An activist looks for opportunities to break through the news cycle, to force confrontation, to create a symbol, to build a movement … Like it or not, Keystone has become a symbol.”

[I cannot help but note the irony that environmentalists upset that so many reject the science of climate change now so willingly dismiss the science that says approval of Keystone XL will not worsen climate change.]

So Keystone is a symbol—though it is more a symbol of our political dysfunction than a symbol on the order of Selma or Stonewall.  Like the sequester and about two dozen other issues we could all name this morning, Keystone is another example of how we as a nation seem incapable of directly addressing any issue in a forthright and civil manner.  It is not enough to argue over the facts – if we can even agree on a common set of facts – we must also challenge the integrity and the motives of those on the other side.

So Keystone XL remains a proxy for a bigger debate we ought to have.  It is a Potemkin village built by environmental activism, erected in place of a much larger and more substantive discussion we should and must have regarding the future of energy, our economy, and our environment.

Why we can’t have that discussion is not altogether clear to me. But absent that discussion, should Keystone be denied approval, I do wonder how disillusioning it will be to those who have signed petitions and marched and protested with the sincere desire to see something concrete done about climate change?  What will they think if Keystone is denied and nothing changes?

And what will that do to the credibility of those leading the opposition to Keystone on an issue, climate change, where the credibility of the science and the data is everything?  Where every tornado is said to validate a theory and every snowflake is supposed to rebut that theory?  In this debate, credibility is everything.

For over time, whether it is approved or disapproved, it will be clear that Keystone is not the Selma of climate change, that it will do nothing to reduce our demand for or our dependence on oil. It will do nothing to stop development of the Oil Sands or the flow of that oil to willing markets; it will not be the catalyst for a sudden great advance in green technology. It will not result in a decrease in greenhouse gases, but because the alternatives are more tankers and more rail cars, the defeat of Keystone will perversely mean higher carbon emissions than if Keystone is approved.

And so those whose sincere desire is to save the planet will, if successful in killing Keystone, only preserve the status quo—and the status quo is something I think all of us can agree, regardless of ideology, whether our concerns are sustainability or affordability, is something we want to break away from.

If the focus of the great environmental debate of the 21st century is on symbols, not substance, do we lose the opportunity, in the wake of Hurricane Sandy and other extreme weather events, to win public support for real and prompt action on climate change?

We at TransCanada remain optimistic that a focus on substance – on facts and on science – will prevail and that we will ultimately obtain our Presidential Permit.  And contrary to his former advisor, Mr. Jones, President Obama can grant our permit with a clear conscience and even some pride.  Not only because Keystone XL will generate jobs and tax revenue, and not only because it will enhance both our and Canada’s national security and reduce the influence of the globe’s petro-dictators, but because there are also sound environmental reasons to do so.  At least, I hope that is the case I have successfully made this morning in this very long speech.

Thank you and I’d be pleased to address any questions or comments that you might have.”

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