Energy Economics
Applied Optimization

On Keystone XL, the Facts Speak (and So Does the State Department)

“The first rule of morality is to think clearly.”

– Blaise Pascal


On January 31st, the U.S. State Department (DoS) issued its Final Supplemental Environmental Impact Statement (SEIS) for the Keystone XL project.  This SEIS, DoS’s third for Keystone XL, refines DoS’s previous analysis in response to nearly 2 million comments submitted following release of the previous draft in March 2013.


The headline finding in the Final SEIS is that Keystone XL would have little impact on climate change.  Estimated per-barrel emissions of CO2 from the production and use of the oil sands crude that would flow through Keystone XL are about 17% higher than the average per-barrel emissions of CO2 from the crude oils currently processed in U.S. refineries, but only 2%–10% higher than the heavy, imported crudes that the Canadian crudes would displace. The Final SEIS also concludes that no single infrastructure project, built or unbuilt, will alter the course of Canadian oil sands development.


Proponents of Keystone XL, many in the business and organized labor communities, are cheered by the SEIS’s findings.  These groups continue citing the pipeline’s benefits to the U.S. in terms of economic growth, job creation, national security, and diplomatic relations with Canada.  They also state that killing Keystone XL would not stop Canada’s development of its oil sands resources.


Opponents of Keystone XL assert that the pipeline, by facilitating use of Canadian oil sands crude, would cause calamitous increases in global emissions of CO2, a greenhouse gas.  Climate change alarmist James Hansen’s rallying cry states the position concisely: “If Canada proceeds, and we do nothing, it will be game over for the climate” (NY Times Op-Ed, May 9, 2012).  The green community’s response to the Final SEIS has been, on the whole, a little calmer than this but along the same lines.


Because the two sides continue talking past each other on Keystone XL, the greens’ assertions of catastrophic effects of Canadian oil sands production and of a resultant imperative to stop such production have gone largely unchallenged, especially in the media.  That’s unfortunate, because, on this issue, the greens are dead wrong on the facts.  And the key facts can be summarized in three simple statements – all confirmed in the Final SEIS.



  • „Production and use of Canadian oil sands crude has and will continue to have minimal effect on total global emissions of CO2.


The SEIS estimates that the total “life cycle” emissions of Canadian oil sands crude is 17% higher than that of the average crude in U.S. refineries and 2%–10% higher than that of the imported heavy, sour crudes that it displaces in U.S. refineries.  These estimates reflect the findings of numerous detailed engineering studies conducted by reputable and qualified analytical groups.  These studies account for the chemical composition (including carbon content) and properties of oil sands crude and for the energy consumed in every step of the crude oil life cycle (production, transport, refining, distribution, and end-use) for all crude oils considered.


The volume of crude oil flowing through Keystone XL would be about 5% of total U.S. crude use.  Let’s assume, for purposes of this discussion, that the CO2 emissions of Canadian oil sands crude are 10% higher (the high end of the SEIS range) than those of the imported crudes that it displaces.  Under this assumption, and all else equal, the 830,000 Bbl/day of oil sands crude flowing through Keystone XL would increase total U.S. emissions of CO2 by ≈ 10 million tons/year – that is, by ≈ 0.2% of total U.S. CO2 emissions, ≈ 3% of the current annual growth in China’s CO2 emissions, and a far cry from “game over for the climate.”



  •  The U.S. cannot prevent Canada from developing its petroleum resources. 


The Final SEIS states that no single infrastructure project will alter the course of Canadian oil sands development.  Blocking Keystone XL will neither stop nor curtail Canadian production of oil sands crude.  The reason is that, given the world’s demand for oil, the Canadian oil sands resource is simply too big to leave in the ground.


Alberta’s proven reserves (i.e., oil that is economic to produce with current technology) of Canadian oil sands crude amount to 170 billion barrels, larger than any other country’s except Saudi Arabia and Venezuela.  Ultimate total production of this oil is likely to be higher than 170 billion barrels, because reserves tend to be revised upward as development proceeds.  Hence, depending on future world oil prices, production of Canadian oil sands crude is likely to generate $15–$20 trillion over the life of the resource.  Nothing short of a significant and sustained decrease in global demand for petroleum (and certainly not the wishes of some citizens of another country) will keep that much potential national income in the ground.



  • A pipeline to the U.S. is the most efficient, safest, and least CO2-emitting of all the alternatives for moving oil sands crude to market.


The SEIS states that transporting the oil sands crude by rail or by rail and tanker would generate 28%–42% more CO2 emissions than transporting it via Keystone XL.  In addition, the SEIS concludes that rail transport likely would involve more oil spills, personal injuries, and fatalities than Keystone XL.


These findings are not surprising.  Pipelines exist because they are the cheapest, safest, and most energy efficient means of transporting petroleum.  If Keystone XL remains unbuilt, the volume of oil sands crude that the pipeline would handle will simply move to market via alternative routes and transportation modes, all having higher energy consumption, higher CO2 emissions, and higher risk of spills and fatalities.


For example, oil sands crude could go to overseas markets (e.g., China) by pipeline to East or West coast Canadian ports and then onward by tanker.  The crude could come to the U.S. by similar pathways or – more likely – by rail.  Indeed, as Canadian producers and U.S. refiners await the Administration’s decision on Keystone XL, rail shipments of crude from Alberta to the U.S. have reached nearly 200 thousand Bbl/day, and rail loading and unloading capacity continues to expand.


Whatever the Administration’s decision regarding Keystone XL, the Department of State and the organizations it retained to produce the Final SEIS (as well as the previous drafts) should be congratulated for conducting a comprehensive, painstaking, and objective analysis of an important and highly controversial issue.