Obama's Keystone Delay - Costs Lots-Gains Nothing

Obama's Keystone Pipeline Delay Boosts Energy Cost With No Benefit

Posted 09/12/2013 06:18 PM ET

Energy: While the president still hasn't made a decision on the Keystone XL pipeline, the transportation of crude continues and the pace will pick up. It will just be costlier and more of a danger to the environment.

Approval of the pipeline by the Obama administration looks like it will be delayed yet again, leaving the energy industry little choice but to pursue alternatives. Those who thought they would shut down Big Oil by stopping the pipeline were wrong. It isn't going to pack up and go home.

As Phil Skolnick, an analyst at Canaccord Genuity, told the Canadian Globe and Mail, "the oil will find a way down" from the fields of Alberta to U.S. refineries. One of the alternative modes of transportation is rail.

According to another Canadian publication, the National Post, "U.S. railroad shipments of crude oil are up 20% over last year."

The North Dakota Pipeline Authority estimates that 71% of crude leaving the Williston Basin, which includes both the Bakken and
Three Forks shale formations, is hauled in rail tankers. Only 20% is transported through pipelines.

Meanwhile, Canada's Financial Post says that analysts at Canaccord Genuity estimate that "roughly 130,000 barrels a day of Canadian heavy crude is currently moving on tracks. Planned investments in loading terminals in Alberta and anticipated deliveries of specially designed tank cars could see an incremental 425,000 barrels per day of heavy oil railed to market by the end of 2014."

At least the oil will get where it is needed. But at what cost to our wallets and to the environment?

According to TransCanada, which is involved in the Keystone pipeline project, rail transportation costs are about twice the costs of moving the oil through pipelines. In the end, shipping by rail adds about $20 to the price of every barrel of oil.

And then there are the environmental — as well as human — costs. It was only two months ago that a 73-tanker train carrying oil in Lac-Megantic, Que., derailed and went off like a bomb.

The explosion killed at least 42 people. Five are still missing and presumed dead. The city's downtown was nearly wiped out, with more than 30 buildings destroyed. The aftermath has been described as looking like a war zone.

Roughly 27,000 gallons of crude were spilled in this wreck, some of the oil possibly flowing into a river. The city's water supply had to be shut down due to possible contamination.

This wasn't the only newsworthy wreck of the year. In March, a 94-car train carrying crude derailed in Minnesota. No one was killed, but 30,000 gallons of crude were spilled. It caused an environmental hazard. And a company lost money.

Do pipelines leak? Sometimes. No form of transportation is perfectly safe.

But pipeline spills don't blow up towns, and the math says they are more likely in isolated spots than in populated areas. In addition, Keystone XL would be a new pipeline with modern safety measures built in.

Despite the dangers of shipping oil by rail, the environmentalists still won't back Keystone.

They believe oil should just stay in the ground, even though, as Reuters market analyst John Kemp has noted, "the amount of crude and other dangerous liquids spilled on both the railroads and the pipeline network is small when compared with the enormous volume of crude and other flammable, explosive and toxic liquids they carry every year."

Nothing out of the ground at no time is not a reasonable position. There is nothing yet to replace oil, and there isn't likely to be for some time.

Green energy? Only about 2% of world energy consumption would be considered from truly green sources, such as solar and wind, excluding hydropower.

Our modern economy, which has paid for countless advances for humanity, can't be run on green energy. We need fossil fuels and many more miles of pipeline to get them to refineries and on to the market.