What the Keystone Rejection Really Reveals

ENERGY & EQUITY: The ruthless, evolving nature of energy politics.

By Andrew Nikiforuk 19 Jan 2012 | TheTyee.ca

Award-winning journalist Andrew Nikiforuk writes about energy for The Tyee and others. Find his previous Tyee articles here.

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Cartoon by Greg Perry.

Few debates illustrate the messy nature of North America's energy politics better than the postponement of the Keystone XL pipeline.

Now that the U.S. Department of State has officially declared that the megaproject is not in the national interest (for now), the media exploded with the usual lamentations, incriminations and sophistry.

"Tens of thousands of American jobs died today," begins one pathetic press release.

But like a giant gas flare, the very undead project shed some scary light on how unconventional resources beget unconventional politics. It even highlighted the growing political divide between one per centers and the rest of us.

In particular, the rousing debate revealed the corrosive power of the oil patch; the centrist character of the Obama presidency; Canada's wacky oil sand politics; the naivety of the environmental movement; the poverty of energy thinking and the unpredictability of life during the Great Stagnation.

A Trojan horse

Although advocates pretended that the no-brainer project was all about security and jobs, real politics suggested it just might be a Trojan horse. Renowned petroleum economist Philip Verleger even maintains that the pipeline could "allow refiners and foreign suppliers to drive a wedge between the prices of oil produced in the United States and oil produced in areas such as Africa or the Middle East." Go figure.

Now the uncontested facts are these. TransCanada wanted to build a 3,000 kilometre pipeline to move 250 million barrels of raw bitumen a year from Alberta's oil sands to U.S. Gulf Coast refineries. It wanted to sidestep an oil-processing bottleneck in the U.S. Midwest and dump their landlocked product onto coastal super tankers. But as TransCanada learned, you can never do one thing with $7-billion.

Canada's National Energy Board, a half-hearted regulator at best, rubber-stamped the pipeline several years ago. The board expressed no interest in how the pipeline might grow bitumen's ugly mining footprint and carbon liabilities. Nor did it want to know much about the impact of raw bitumen exports on Canadian refining jobs.

Then all hell broke loose in the United States. Keystone became America's favorite cliché: a political football.

Cheapest route proves costly

Let's begin with the proponent, Calgary-based TransCanada. The energy infrastructure giant, a model of Alberta arrogance, ignored all the warnings. Engineers knew that any pipeline that cut through the celebrated Nebraska Sand Hills would have to contend with "boiling sands" where groundwater can bubble to the surface.

TransCanada, which showcases the nation's astounding lack of environment sensitivity, downplayed the challenge and opted for the cheapest route through the Hills. It cost them big time.

Nor did the firm think Nebraskans might mind risking the nation's largest freshwater aquifer to leaks, spills and contamination for the benefit of a few transient Canadian vandals. They got that one wrong, too. In the end, water concerns legitimately and fairly killed the irresponsible route over the Ogallala aquifer just as water concerns have already killed the Gateway project.

TransCanada's land men also threatened ordinary hardworking ranchers with expropriation when they didn't sign on the dotted line. Although it's legal to bully Canadian landowners, its bad form in the United States. TransCanada's bad practices sent rural Nebraskans into the arms of environmentalists creating an unbeatable alliance: rural conservatives and urban liberals.

Jobs, jobs, jobs?

Next comes the jobs issue. The project was indeed about jobs but not about American ones. TransCanada and its lobbyists, including that famous oil analyst Donald Trump, falsely advertised that the pipeline would employ 20,000 construction workers and ultimately create 119,000 manufacturing positions or more.

The hubris got bolder: lobbyists at the American Petroleum Institute, and Canadian and U.S. politicians bought and paid for by Big Oil, claimed that the pipeline could reverse the stagnation of the U.S. economy.

(For the record, the oil industry is not a jobs machine. It is the world's most capital-intensive industry and earns more than 10 per cent of the world's GDP. But it only employs less than one tenth of one per cent of the world's workers. In Canada it accounts for but 1.8 per cent of the workforce.)

No matter. TransCanada's immodest economic models, for example, piped out job estimates 13 times greater (199,000) than those done by U.S. State Department (5,000 to 8,000) over a three- year period.

A 2011 Cornell University Global Labor Institute report crunched the numbers too and revealed that the project's construction would inject no more than $4-billion into the U.S. economy and only create between 2,500 and 4,650 jobs.

Unlike Canadian Tories, the Cornell study pointed out that the pipeline, by exporting raw bitumen to U.S. Gulf Coast refineries, would steal good jobs from Canada. Every time Canada exports 400,000 barrels of raw bitumen, economists calculate that the nation sends approximately 18,000 upgrading and refining jobs abroad and reduces Canada's GDP by 0.2 per cent.

Ethical or not?

Raw bitumen exports basically spell economic death by de-industrialization. That's why one of the biggest unions in Fort McMurray (the Communications, Energy and Paperworkers Union of Canada -- CEP) and Alberta statesman Peter Lougheed both opposed the pipeline. So, did lots of oil patchers. They considered it a national mistake.

But Ottawa doesn't care much about ordinary Canadians. Ethical Oil lobbyists, who all have direct ties to the office of Prime Minister Stephen Harper, claimed that the pipeline would replace "conflict oil" with ethical oil. They also said it would improve the welfare of oppressed women in Riyadh.

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