The Politics of Pipelines – Yet Again.

Posted by on January 30, 2017
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It is two minutes and thirty seconds to midnight.  The people in charge of the Doomsday Clock just moved the minute hand 30 seconds closer to catastrophe – the closest it has been since 1953.  The clock, which is adjusted annually, retreated to its most recent high point of 17 minutes to midnight back in 1991, with the Cold War officially over and progress being made on nuclear arms reduction.  Since then it has advanced step by step closer to midnight again, reaching three minutes to midnight in 2015.  There it remained until 26th January, 2017.

Lawrence Krauss (L), chairman of the “Bulletin of the Atomic Scientists” Board of Sponsors, and board member Thomas Pickering (R), a former U.S. Under Secretary of State as well as US Ambassador to the United Nations, Russia and other countries, unveil that the board has moved the minute hand of their “Doomsday Clock” by 30 seconds to a more ominous 2-1/2 minutes from midnight during a news conference at the National Press Club in Washington, U.S. January 26, 2017. REUTERS/Jim Bourg

The Doomsday Clock suggests the world is closer to disaster than it has been since 1953, and the US election has a lot to do with the recent adjustment.  Photo © Jim Bourg/Reuters

In the view of the committee of scientists who manage the clock, the global security landscape darkened over the course of 2016 as the international community failed to come effectively to grips with humanity’s two most pressing existential threats, nuclear weapons and climate change.  In particular, they point to how an already-threatening world situation was the backdrop for a rise in strident nationalism worldwide in 2016, including in a US presidential campaign during which the eventual victor, Donald Trump, made disturbing comments about the use and proliferation of nuclear weapons, and expressed disbelief in the overwhelming scientific consensus on climate change.  The full statement is worth a read.  In it, they report that they always take “a broad and international view of existential threats to humanity, focusing on long-term trends.  Because of that perspective, the statements of a single person—particularly one not yet in office—have not historically influenced the board’s decision on the setting of the Doomsday Clock.  But wavering public confidence in the democratic institutions required to deal with major world threats do affect the board’s decisions.  And this year, events surrounding the US presidential campaign—including cyber offensives and deception campaigns apparently directed by the Russian government and aimed at disrupting the US election—have brought American democracy and Russian intentions into question and thereby made the world more dangerous than was the case a year ago.”  The report also notes that the only reason the clock was moved less than a full minute (for the first time in the clock’s 70-year history) was that Donald J. Trump had only been in office a few days.

Words matter, and Trump has offered plenty of these (despite his curiously limited vocabulary of mostly single-syllable words), but actions matter more.  In his first week in office, Trump has signed a flurry of executive orders, many designed to begin the process of rolling back Obama’s agenda in health, foreign affairs, and environment.  I’m concerned about his words and actions re the environment.

UnPresident Trump proves once again that he can sign his name, while staff look anxiously on.  Photo © Nicholas Kamm/AFP/Getty.

In their Doomsday Clock report, the authors devote two of their seven recommendations to climate change.  In the first, they ask that all countries “sharply reduce” their emissions of greenhouse gases and fulfill the Paris Accord promise of keeping global warming below 2oC, stating that this goal is consistent with the science, eminently achievable, and economically viable.  In the second, they speak directly to the USA, asking that the “Trump administration acknowledge climate change as a science-backed reality and redouble US efforts to limit carbon dioxide emissions and support carbon-free energy sources, including, when economically reasonable and safe over the long term, nuclear energy.”  They add that “it is well past time to move beyond arguments over the reality of climate change and on to solutions, including fiscal measures—such as carbon markets and carbon taxes or fees—that encourage efficiency and put a price on carbon emissions”.

Needless to say, Trump’s words and actions so far have not been in this direction.  In fact, he is signaling very clearly that his administration will strip away environmental safeguards covering resource exploitation (he refers to ‘excessive regulations”).  In keeping with this, he has cancelled President Obama’s denial of the Keystone XL pipeline while inviting TransCanada to reapply and promising a swift (60 days) approval process, and has also removed Obama’s suspension of the Dakota Access pipeline application.  It seems Donald Trump wants to expand the USA’s extraction and use of oil, gas, and coal as quickly as possible – the exact opposite of what is really required.

Nothing like a rationally designed network for transporting liquid products.  Or is it just a whole lot of boondoggles?  Map produced by CAPP about 2010.

North of the border, Justin Trudeau’s impressive effort to get Canada finally moving on climate change is in danger of collapsing under a wave of exuberant enthusiasm for the rebirth of the Alberta tar sands, bolstered daily by news out of Washington.  Government policy was already becoming schizophrenic with significant positive moves on climate followed closely by approval of two pipelines despite the fact that ramping up production from Alberta’s tar sands will seriously impede Canada’s progress towards meeting its climate change commitments.  At a time when policies being put into place (with opposition from some Provinces and many individuals) do not come close to being sufficient to meet even the modest emissions goals so far committed to in Paris, the government only creates obstacles for itself by taking steps to encourage expansion in the tar sands.  Now, with Trump signaling that Keystone XL is virtually assured a rapid approval in the US, we have a third pipeline in play, and the oil sector in Alberta is frothing at the mouth.  Let’s take a step back and think a little.

Trump’s bluster may not result in Keystone XL getting built

I’m beginning to understand why Ringling Bros., Barnum and Bailey has closed down.  Their circus simply cannot compete with the Trump reality show in Washington.  Unpresident Trump has spent his first week in a frenetic display of activity signing ‘Executive Orders’, ‘Memoranda’ and other documents.  Some of these have immediate affect on the ground.  We saw this on Saturday with travelers being detained or rejected at airports, even when they were already residents with green cards and jobs to return to within the USA!  Others are just Trump’s usual show biz flim flam, worth little more than the paper they are written on.  Repealing and replacing the Affordable Care Act, or funding the construction of a wall along the southern border, for example, will require some action from Congress.

Don’t need a caption here – send in the clowns; meaning is clear.

The order re Keystone XL is simply a sign to Trans Canada to renew its application because, wink, wink, nudge, nudge, approval will be quick (<60 days) and easy.  There are some interesting stipulations – hire Americans and use American steel.  These stipulations appear to violate World Trade Organization rules and could lead to challenges.  Plus give the US government 25% of the revenue once the pipeline is operational.

Trans Canada has already stockpiled considerable pipe, and has planned since at least 2012 to source 24 per cent of its large-diameter pipe from Canada-based Evraz Regina; 26 per cent from offshore sources, and 50 per cent from a company in Arkansas.  On top of these problems, the world has changed in the past seven years, and Trans Canada might decide Keystone is no longer viable commercially (more on that below) even apart from Trump’s wish to take a 25% share of profits.  The executive order makes Trump look good to his base, but it does not guarantee a pipeline will be built.

As for Trump looking good… Watch his hair.  The poor man is starting to come undone.

Donald Trump’s hair farm near Tromsø, Norway.  Thanks to the boredpanda blog for a bit of hairy humor.  Photo © Daniel Kordan

Canada’s renewed love affair with pipelines

On November 29th, 2016, it was not too surprising to hear PM Trudeau announce that his government was approving the expansion of the Kinder-Morgan trans-mountain pipeline and the replacement and expansion of Enbridge’s line 3 from Alberta to the northern US.  In the same announcement, he rejected Enbridge’s bitterly contested Northern Gateway from Alberta to the northern BC coast.  He had already taken actions that will eventually establish a price for carbon across the country, and politically it was time to do something for the fossil fuel industry.

Still pending is a decision on Trans Canada’s Energy East line through to Quebec and New Brunswick.  On Friday 27th January, the National Energy Board announced that all its past decisions on energy east are now cancelled and the approval process should restart.  (The tainted membership of the NEB has been totally renewed and other changes are anticipated.)  Energy East was facing stiff opposition in Quebec and some other jurisdictions, but some see Energy East as now doomed because of Trump’s action on Keystone XL.  The added capacity could not be justified economically.  Others see Energy East as vital for diversifying the markets available to Alberta, and particularly important given Trump’s evident protectionism.  The Alberta fossil fuel sector is simply overjoyed that there now seems to be movement, and federal support, for building more pipeline capacity.

Where does reality lie?  It’s not just Keystone that may not get built.  Government approval for any of the four Canadian pipelines in play is no guarantee that they will get built either.  There remains significant opposition to Kinder-Morgan and Energy East on environmental grounds.  Indeed, the environmental sector generally opposes all pipelines these days for the arguably good reason that ‘if you build it, oil will flow’.  In what follows, I am going to try and tease out the arguments and draw some conclusions.

The arguments for new pipelines

Setting aside environmental concerns for a moment, the tar sands of northern Alberta are a major petrochemical resource, giving Canada the third largest proven oil reserves in the world behind Saudi Arabia and Venezuela.  The NEB reported total crude oil and bitumen resources in 2014 as 52.4 billion m3 or 330 billion barrels.  Proven reserves are currently 27.1 billion m3 or 171 billion barrels, and 97% of these reserves are in the tar sands.  Production is currently 682 thousand m3 per day, just under 5% of the global total.

While Canadians per capita have one of the highest rates of energy use, most of our oil/bitumen production is for export, and nearly all the anticipated growth in production is for export.  One argument specifically supporting the need for Energy East is that this pipeline would ensure safe transport capacity for western oil to eastern refineries to satisfy all of eastern Canadian requirements.  (At present, Canada imports 101 thousand m3 of oil per day into eastern ports.)  Energy East also becomes important if protectionism reduces access to US markets.

Because of the failure of the industry to build refining capacity in or near Alberta, and the failure of national and provincial governments to insist on this, expansion of tar sands extraction is limited by capacity to transport the product to markets south, west or east of Alberta.  One argument used to justify every pipeline seems to be that it is vital to the continued growth of the tar sands.  Two related arguments are that certain pipelines are needed to broaden the markets available to Alberta, shipping tar sands product to Asia from the west coast, or to Europe from the east., and that pipelines are needed to avoid the necessity of shipping by rail – a more expensive method and one deemed less safe.

Underlying all these arguments in favor of pipelines is the argument that it is in Canada’s national (read economic) interest to expand production in the tar sands as rapidly as possible.  I’ve argued against this stance in several earlier posts, but that does not mean that a majority of important people within the petrochemical sector of Canada, and many of our politicians, do not continue to use it.  For them, it is Canada’s destiny to exploit all available, economically viable natural resources.  Also seldom mentioned is the fact that corporations like TransCanada, Enbridge and Kinder-Morgan are in the business of building and operating pipelines.  And judging by photos in the media, they have a huge amount of shiny new pipe stored beside roads all over North America just waiting for an opportunity.

The arguments against

In June 2016, the Parkland Institute and the Canadian Centre for Policy Alternatives published a report titled, “Can Canada Expand Oil and Gas Production, Build Pipelines and Keep Its Climate Change Commitments?”.  Its author, J. David Hughes, is a geoscientist with 32 years of experience at the Geological Survey of Canada, and an authority on energy resources of North America.  I discussed this report soon after it appeared.

In his report, Hughes produces data challenging the argument that additional pipeline capacity is needed to permit any realistic expansion of production in Alberta.  Using NEB data, he demonstrates that there is already sufficient pipeline capacity to export all current production from Alberta, and shows that the existing capacity will be sufficient for the maximum amount of expansion that is likely to be permitted under Alberta’s new cap on GHG emissions introduced in November 2016 as part of the Notley government’s climate change action plan.  (He makes a tacit assumption that further reductions in the emissions per barrel of oil are unlikely.)

Current and projected oil transport capacity out of Alberta, and the maximum amount of production under Alberta’s emissions cap out to 2040.  With the cap in place, and assuming no breakthroughs that reduce per barrel emissions significantly, there is a healthy 16% surplus of capacity over need.  Figure © Hughes/Parkland/CCPA

Alberta’s cap on emissions is generous and would permit a 47% increase in oil production at current levels of emissions efficiency.  This is less than the rosy projections of tar sands enthusiasts a few years ago, but still a sizeable ramp-up.  Hughes’ point is that this cap removes the argument that new pipelines are needed to permit production to expand.  It is not going to expand more than 47% and there is sufficient pipeline and rail capacity to handle that, with about a 15% buffer to handle fluctuations in supply or transport.  What is particularly interesting to me is that I have been unable to find any rebuttal of his argument in the months since its release.  In fact, there have been additional reports that confirm his findings.

The argument that new pipelines are needed to avoid the use of risky rail transport was also rejected by Hughes, who claimed rail was used to a very small extent, and would only be needed to provide the surplus capacity in the future (see figure above).  Others have agreed with him, as recently as last week, although industry insiders continue to argue new pipelines are needed so they can phase out rail.

One argument that Hughes ignores is that by building new pipelines to west or east coast, Alberta is more easily able to diversify its clients.  The present pipeline map generally ships the stuff south.  A related argument, that we need pipelines to get the product from Alberta to tidewater, because of a substantial cost disadvantage when the oil is stuck in Alberta, is dealt with, and demolished in the Hughes report.  His words convince me that in a global market the differential that exists (and it fluctuates with market fluctuations) does so because of the relatively low quality of the tar sands product.  This is not the ‘light, sweet crude’ that flows out of Saudi Arabia or West Texas.  It is an almost solid, tarry stuff that has to be extensively modified and diluted with LNG simply to get it to flow through a pipeline.  Its subsequent refining is a complex and difficult process.  (All of which causes me to say, would it not have been far wiser to build refining capacity in Alberta, and sell a better product – but then, what do I know?  I am just an environmental scientist.)

Another ignored argument is the one about having to exploit the tar sands because they are there.  Hughes dismisses it on economic grounds (for the foreseeable future oil prices will be inadequate to justify expansion of production).  I think it is more about philosophy and how we view our place in the world.  I won’t repeat what I have said about it previously, except to note that when governments make this argument, it reveals they are thinking short term and only about revenues.

The biggest argument of all

The biggest argument of all against the construction of additional pipelines is the one that says Canada cannot afford the emissions cost of ramping up production of tar sands oil, because that will make it virtually impossible to meet the Paris goal of keeping warming to under 2oC.  While Canada has immense reserves in the tar sands, Canada pays a huge environmental price when they are dug up.  Setting aside the cost in despoiled environments, permanently contaminated water locked up in tailings lakes, and nasty chemicals strewn around the landscape, the GHG emissions are enormous.

Canadian production of oil is up 83% since 1999, and at an all-time high.  Tar sands production has increased 400% since 1999, and now comprises 61% of all oil produced.  The future growth projected by the industry and by NEB relies entirely on further increases in the tar sands.  The NEB states that anticipated changes between 2015 and 2040 are for a 96% increase in tar sands production and a 14% decline in other Canadian regions.  According to Hughes, if tar sands production increases as the NEB projects, the added GHG emissions will require by 2030 a 52% reduction in emissions from the non-oil and gas sectors of the Canadian economy simply in order to comply with Canada’s commitments under the Paris Accord (a 30% overall reduction by 2030).  At 2030, the oil and gas sector would be responsible for over half of Canada’s emissions (it is 26% at present).  This degree of change in the non-oil and gas sector is essentially impossible without economic collapse.

When the planned expansion of LNG production in British Columbia is factored in, the situation becomes still more dire.  Under these circumstances, reduction in emissions by the rest of the economy would have to be 59% in order to fulfill Canada’s climate commitments.

If, instead, expansion of the tar sands was limited by the Alberta emissions cap, and British Columbia develops just one of the three proposed LNG ventures, the situation is marginally better – the rest of the economy would have to reduce emissions by 47%.  Even this best-case scenario represents a near impossibility.

Hughes arguments from last June have not been rebutted to my knowledge.  Nor is he alone.  A number of climate experts, environmental scientists and others have warned of the enormous difficulty Canada faces if it wants to keep mining the tar sands while still complying with Paris.  Just this week, Andrew Nikiforuk, writing in The Tyee, makes the same argument, and cites a new report just out from Oil Change International.  And then there is the matter of the inadequacy of Canada’s Paris commitment.  If Canada is going to do its fair share in keeping the world to no more than a 2oC warming, the commitment made in Paris is going to have to be raised substantially.  Canada cannot have its cake and eat it too, and it certainly cannot have a rapidly expanding tar sands industry and hope to keep the world’s climate from spiraling out of control.

What is the best way forward?

I am an ecologist.  I am far more concerned about the capacity of the natural environment to sustain our livelihoods than I am about sustaining and growing an economy based on extraction and minimal processing of fossil fuels, until we run out of tar sands.  I do not have simple solutions for moving away from use of fossil fuels at an appropriate rate – one that does not disrupt our economy too much, but one that gets us out of that business as quickly as possible.  I do sense that there are likely to be severe dislocations in that industry as different countries around the globe recognize the need to move to a less carbon-intensive economy.

Others are thinking seriously about how Canada can move away from its over-reliance on the oil and gas sector.  Still others are looking at the winding down of the fossil fuel sector from a more global perspective.  The reading is not always pleasant, but it is available and we should all be thinking about this.

I recently came across a 15 December 2016 article by Alex Steffen, the journalist and author in 2012 of ‘Carbon Zero: Imagining cities that can save the planet’.  Titled ‘Trump, Putin, and the pipelines to nowhere’, his article is a scary read.  Central is his perspective on the ‘carbon bubble’.  The bubble exists because the damage caused by climate change is going to force us to leave large quantities of hydrocarbons in the ground.  While most people remain unaware of how serious climate change is, or of how combatting/coping with it is going to alter our lives, Steffen says the one group that surely knows is the people in the fossil fuel industry.  They know they have vast resources of high present value that are destined to become valueless when the bubble bursts.

What do clever people do when they know they are holding extremely valuable items that will at some future time become worthless?  They do not advertise this fact.  They act as if they are sure the value will always remain, and even grow.  Because the longer they can maintain the fiction, the bubble will grow, and they will make money.

Another group that recognizes the existence of the carbon bubble is the risk assessment and insurance industry, including people like Mark Carney, Governor of the Bank of England, and Chair of the Financial Stability Board, the global body designed to prevent economic meltdowns.  Last year, in a talk to Lloyds insurance group, he said he thought the carbon bubble was one of the biggest risks the global economy faces at present, and suggested governments should be looking for ways to deflate it gently.  Successful deflation of a market bubble can be a win, win for everyone.  Except for those heavily invested in the carbon.  Back to the fossil fuel sector.

According to Steffen, owners in the fossil fuel sector need to maintain the illusion that there will be continued high profits in that industry.  How would they do this?  By disputing climate science, by eroding confidence in the ability, integrity or honesty of climate scientists, by attacking the validity or worth of global climate agreements, by disputing the capacity of alternative sources of energy to replace fossil fuels, and by using every lever available to derail or delay the expansion of competing sources of energy.  They would also support putting a price on carbon, while working behind the scenes to ensure the price is kept trivial.  They might even team up with antidemocratic forces to impede efforts by communities to move towards a low-carbon economy.  Most of all, they would invest in infrastructure, to show that they are confident that investing more in this industry is worthwhile.  New exploration, new pipelines, ramping up production; after all, the larger the corporations become and the more jobs, taxes or royalties they generate, the more difficult it is for governments to shut them down.  Sounds familiar?

Steffen argues that the Trump administration, which is top-heavy with people invested in the fossil fuel sector, is tailor-made to help prolong the carbon bubble.  The Koch Brothers did not want to see Trump as the Republican nominee, and did not put any of their dark money towards his campaign.  But with hindsight, they could not have got a better President than they have in this one.  Steffen wonders if the suggested collusion between Trump and Putin might all make sense, given that Russia is a petrostate, with ownership heavily concentrated in the hands of a few oligarchs surrounding Putin.  I reserve judgement on that, but I do think that we should all be watching what the US government does in the next few years in light of the carbon bubble.

(Aside: as I write, Time magazine has reported on the Koch brothers annual meeting with their supporters at a resort in Indian Wells CA, this weekend.  They are already planning to spend $400 billion in the 2018 midterm elections and are already disagreeing publicly with some of Trump’s actions.  The privileged are seldom satisfied; they want total control, and they are out to maximize their own profits.)

In the meantime, the rest of us should be divesting our tiny bits of investment in fossil fuels, while pushing our governments to focus on the climate, and on building robust economies capable of the actions needed to cope with pending climate change, and build a better future.  In a country like Canada, with an educated workforce, there are enormous opportunities in the new low-carbon economy.  Far better that, than stringing unnecessary pipelines all over the country, and it will help move the world towards a future with a livable climate.

Postscript

As I was writing this post, the Trump Executive Order banning entry to the US for citizens of seven predominantly Muslim middle-eastern nations was generating chaos and demonstrations across the USA and around the world.  I am not going to blog about things I am poorly equipped to comment on, but Trump’s term is off to a very rocky start, and destabilization of the global order, such as it is, will disrupt the ability of nations to come together to solve difficult problems such as climate change.

The Doomsday Clock may now be set at 11.57.30 pm, but the chance for a good outcome on climate, and environmental sustainability, over the next few decades looks even dimmer then that.  At least I got to explore coral reefs when they were vibrant, exhilarating, superlative ecosystems; true jewels on this most amazing planet.

Do we humans not owe each of the many creatures in this image the opportunity to live out their lives in an environment that is not being damaged by our thoughtless actions?  Photo of reef at Palmyra Atoll in 2011 © Jim Maragos, USFWS/Wikimedia Commons.

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