Five year anniversaries can be joyful or sad. It all depends upon what one is celebrating. Undoubtedly, “extreme greens” must be dancing as five years have gone by due to their efforts to prevent the creation of the XL pipeline extension. A sober consideration of this dubious achievement reflects well on the Administration’s effort to reward environmental lawyers for their resolute pursuit and personal economic benefit of ‘keeping the world cleaner.” The facts don’t support such a claim, but if you have already made up your mind on what the true goal of the effort might be, ‘don’t confuse the issue with the facts.”
Consider for a moment the following. When tar sands oil is available to ship, it will be shipped and converted into a variety of refined petroleum products. The XL pipeline extension may have deterred additional investment in producing more oil from the tar sands, (we are not really sure of this), but this is an unlikely conjecture. Whatever oil is available to be used was shipped, one way or another. Common sense tells one that because once produced, a barrel of tar sands oil only has value to a refiner, not to the owner of unshipped and unsold oil. The issue is really about future volumes of oil from the tar sands.
If the XL pipeline is not extended and if the economics of transport don’t erode all of the value of the oil, additional supplies of tar sands oil will get shipped, to the US or to other refiners in other parts of the world. What this means is the netback on producing the oil could be reduced if additional transportation costs are incurred, and the profits from additional production might be lowered, but from an environmental point of view, the world only gets less “dirty” if the oil doesn’t get produced. Of course, that is the real object of the environmental advocates. Don’t produce more “dirty” oil, at least not in Canada. Tar sands oil will get produced in other areas if the economics allow for an adequate return to capital. It is possible that the world is marginally cleaner for all that effort, but the more likely outcome is to affect who benefits from additional production.
Think of it this way. Suppose the only way to transport tar sands oil was in an old fashioned metal barrel in a horse cart? Pretty expensive transportation or put another way, a much lower net back to tar sands production. Now imagine that a rail line with tank cars is constructed? Transportation costs drop significantly and netbacks rise. Result? More tar sands oil is produced. Now change the transportation to a pipeline. Higher netbacks mean higher production. Since shipping by pipeline to the US results in an enlargement of the effective market, this means even higher netbacks and therefore more production from Canada. Does the world go hungry for more petroleum products if the pipeline is not built? No, only the sources of oil production change. If the “extra” oil comes out of Venezuela rewarding a belligerent, non-democratic regime, so be it. But, what about the environmental effects?
These are not so easily calculated because the model for petroleum production is demand driven. If crude oil, derived however, is needed, it will get produced. So the net savings environmentally involves where refining takes place and what additional deleterious environmental effects there are from production from tar sands as opposed to any other oil bearing rock. Conclusion? It is not at the refinery that the argument pinches. In fact, producing products in US refineries is probably better environmentally than producing in non-US refineries because our control at the refinery level are so much more stringent than elsewhere. This means that the true test of the environmental effects of reducing tar sands production by one barrel and instead producing crude oil from some other, non-tar sands barrel, is really the difference in offensive gases that are produced from oil produced from tar sands as opposed to the next more expensive source of production. That differential is likely to be quite marginal. The economic costs of moving production away from Canadian Tar Sands to the next cheapest source are likely to be far more significant.
What does it all mean? Let the lawyers who derive handsome sums from representing Environmental Interests come up with the cost benefit analysis. The biggest beneficiaries are the lawyers themselves…Since we hear there are unemployed lawyers, the Greenies can take pride in increasing employment in the legal profession…but again, this is a pretty marginal gain. The economic costs, on the other hand, are in principle knowable. Less employment in the US for pipeline workers; less employment for refinery workers here; less taxes collected by the various State and Federal entities that tax the oil. Possibly more revenue for railroads who will haul the oil in tank cars.
In short, the real beneficiaries are the very lobbyists who represent the attack on the XL pipeline. Lawyers, you say? The President is a lawyer too! A good campaign strategy no doubt…reward your own constituents. What about the rest of the country? Who cares?