Keystone XL Pipeline: the Latest

On Friday, January 9 the Nebraska State Supreme Court ruled 4-3 in favor of landowners opposing the Keystone XL pipeline, but under Nebraska law, five judges are needed to declare a statute passed by the legislature and signed by the governor unconstitutional and therefore, the court said, the measure passed in 2012 “must stand by default.” The law under question was Nebraska law LB 1161 that Governor Heineman used to sign the January 2013 recommendation to the U.S. Department of State for a Presidential Permit for the Keystone XL pipeline to cross the international The Nebraska Department of Environmental Quality (DEQ) had recommended approval of the revised route for the pipeline that had been selected with their guidance

Under LB 1161 a pipeline carrier submits a route for evaluation by the Nebraska DEQ and receives the Governor's approval instead of obtaining approval from, the Public Service Commission, PSC, under the requirements of an older law called the Major Pipeline Siting Act (MOSPA) that was actually went into effect after the Keystone XL Pipeline application was submitted to the United States Department of State. The newer law LB 1161 was an amendment to MOPSA to exempt any major oil pipeline that had submitted an application to the United States Department of State under Executive Order 13337 prior to MOPSA's effective date. The only oil pipeline to fit within this exemption was the Keystone XL Pipeline.

The MOSPA process includes review by the Nebraska DEQ, Department of Natural Resources, Department of Revenue, and Department of Roads, the Game and Parks Commission, Nebraska Oil and Gas Conservation Commission, Nebraska State Historical Society, State Fire Marshal, and Board of Educational Lands and Funds and also requires the PSC to schedule a public hearing within 60 days of receiving an application. LB 1161 allowed the Keystone XL project to shorten this process for their revised route.

A Judge in a lower court had found that under the Nebraska’s State Constitution, exclusive regulatory control over pipelines like the Keystone XL must be exercised by the Nebraska Public Service Commission (PSC), and cannot be given to the Governor, and that LB 1161 must be declared unconstitutional and void. Though the Judge stated in her opinion that “such a declaration should not be misconstrued as an indictment of the work done by NDEQ in conducting the comprehensive evaluation required by LB 1161, or the conclusions reached by the Governor after reviewing NDEQ's Final Evaluation Report and approving the Keystone XL Pipeline route.”

The three Plaintiffs in the case are residents and taxpayers of the State of Nebraska. Each Plaintiff owns land or is the beneficiary of a trust holding land that was, or still is, in the path of one or more proposed pipeline routes for the Keystone XL Pipeline. The Defendants were the Governor, the Director of the Nebraska DEQ and the Nebraska State Treasurer. The Defendants argued that the Plaintiffs did not have standing to challenge LB 1161 and the district court lacks subject matter jurisdiction, and should have dismissed the case. The Nebraska Supreme Court had three of the panel judges conclude the landowners did not have legal standing to bring the lawsuit. As a result, they declined to address the larger constitutional question. Though four of the judges concluded the routing law “violates fundamental constitutional limits on government power in Nebraska,” a supermajority of five judges is required to declare a law unconstitutional and the law stands.

On April 18, 2012, TransCanada submitted a new "Initial Report Identifying Alternative and Preferred Corridors for Nebraska Reroute" to the Nebraska Department of Environmental Quality, NDEQ, for evaluation (paid for by TransCanada) of new route for the Keystone XL Pipeline project under the requirements of LB 1161. This application for a NDEQ review of a new route was followed in May 4th 2012 by a new application to the United States Department of State for a Presidential Permit to construct and operate the Keystone XL Pipeline.

On January 31, 2014, the U.S. Department of State released the Final Supplemental Environmental Impact Statement for the Keystone XL Pipeline. The executive summary states that Keystone XL is “unlikely to significantly impact the rate of extraction in the oil sands or the continued demand for heavy crude oil at refineries in the United States based on expected oil prices, oil-sands supply costs, transport costs and supply-demand scenarios.” In other words, no matter what action the Administration chooses to take on this portion of the pipeline-approve, reject, or stall- the oil sands are not staying in the ground in Canada.

The Department of State opened a 30 day comment period on February 5, 2014 then in April the administration announced that they would be delaying the decision until after the Nebraska Supreme Court decided the case. There has never been a timeline for making a decision, but the time has come to fish or cut bait. Secretary Kerry is empowered to make the final decision, though the White House has always controlled the process and now will be forced to make a decision because congress is taking action. Now a bill that authorizes the Keystone XL pipeline to cross the international boarder has passed the U.S. House of representatives 266-153 and is headed to the U.S. Senate where it is expected to pass, but does not have the majority necessary to override a Presidential veto. The bill should arrive on the President’s desk next week.

Though the President will veto the bill, it is just  a pipeline, the crude oil is not staying in the ground it will come by pipeline, boat, truck or rail road. As Marcia McNutt, the editor in chief of the AAAS journal Science stated in a recent editorial moving the Canadian crude by pipeline is the least environmentally damaging and safest method of transporting oil. There is currently a pipeline Keystone I that runs east from Hardesty Saskatchewan to Manitoba and then south through the Dakotas to Steel City, Nebraska. It is a less direct route and is a lower volume pipeline. Keystone II runs from Steel City to Cushing, Oklahoma at the Oklahoma storage facilities. Keystone III running from the Cushing Oklahoma to the Nederland, Texas began delivering crude oil from Cushing, OK, to the oil refineries in Texas on Wednesday, January 22, 2014. The Gulf Coast Project, Keystone III, did not require a Presidential Permit because it does not cross an international border.

Keystone XL Pipeline Delayed Indefinitely

On Friday, April 18th 2014 the U.S. Department of State announced that it will delay with no definitely period of time cited a decision on the Keystone XL Pipeline citing uncertainty from a February court decision that struck down a Nebraska state law (LB1161) allowing the Governor to approve the route in Nebraska as reason to keep the federal agency comment period open. If you recall on January 31, 2014, the U.S. Department of State released the eleven volume Final Supplemental Environmental Impact Statement for the Keystone XL Pipeline that found that whether or not the Keystone XL Pipeline was built would have limited if any impact on the development of the Canadian Oil Sands resource.

Nebraska state Law LB 1161 is a streamline approval process. Under LB 1161 a pipeline carrier submits a route for evaluation (and recommendation) by the Nebraska Department of Environmental Quality, NDEQ, and receives the Governor's approval instead of obtaining approval from, the Public Service Commission, PSC, under the requirements of the MOSPA. The MOSPA process includes review by the Nebraska Departments of Environmental Quality, Natural Resources, Revenue, and Roads, the Game and Parks Commission, Nebraska Oil and Gas Conservation Commission, Nebraska State Historical Society, State Fire Marshal, and Board of Educational Lands and Funds and also requires the PSC to schedule a public hearing within 60 days of receiving an application.

The Nebraska decision is being appealed to the Nebraska Supreme court, and there is always the option of subjecting the Keystone XL Pipeline route to the review process by the PSC under MOPA. Now the Presidential Permit review process is delayed, again for at least this construction year. On January 31, 2014, when the U.S. Department of State released the Final Supplemental Environmental Impact Statement for the Keystone XL Pipeline it looked as if a final decision on the pipeline might be made by the administration this spring, but that’s not happening this year.

The executive summary of that report states that Keystone XL is “unlikely to significantly impact the rate of extraction in the oil sands or the continued demand for heavy crude oil at refineries in the United States based on expected oil prices, oil-sands supply costs, transport costs and supply-demand scenarios.” In other words, no matter what action the Administration chooses to take on this portion of the pipeline-approve, reject, or stall- the oil sands are not staying in the ground in Canada. There is world demand for heavy crude oil and it will be met. The Texas refineries are optimized for heavy crude either from South America or Canada. The crude oil will come by pipeline, boat, and truck or rail road.

The U.S. Department of State has now extended the comment period for the Keystone XL Pipeline indefinitely. Though under the executive order currently in place, Secretary Kerry is empowered to make the final decision, the next step in the process if we ever get there requires consideration of: energy security; environmental, cultural, and economic impacts; foreign policy; and compliance with relevant federal regulations and issues. During this time, the Department of State will consult with, at least, the eight agencies identified in the executive order: the Departments of Defense, Justice, Interior, Commerce, Transportation, Energy, Homeland Security, and the Environmental Protection Agency and each agency are to be given the opportunity to thoroughly review all comments. No decision will be made this year.

There is strong opposition to the Keystone XL pipeline and in one route or another it has been under consideration since 2008. However, as the Supplemental Environmental Impact Statement argues the pipeline will not determine if the oil sands resources in Canada will be mined and is the safest way to transport oil. The risks of transporting oil by rail car were seen in the Lac-Mégantic train disaster that killed 47 and obliterated sections of the town last year and the incident last February when 19 cars derailed in New Brunswick. To account for uncertainties about oil production, consumption, and transportation, the Environmental Impact Statement modeled 16 different scenarios that combine various supply-demand assumptions and pipeline constraints. Under most scenarios examined in the report whether or not the pipeline is built had limited impact on development of the oil sands. Oil sands production and development will slow or accelerate depending on oil price trends, regulations, and technological developments. The Canadian oil sands have been known for decades, but until oil prices rose and technology improved these oil deposits were too expensive to exploit beyond the limited scope of surface mining. Advances in technology in both oil sand extraction and refining techniques and rising oil prices altered the economics and have made the extraction of oil sand possible. While the advances in extraction techniques have quadrupled recoverable oil reserves and moved Canada into second place in proved world oil reserves, it requires more energy to produce the oil and increases the carbon footprint of the crude as compared to fracked light sweet crude from Montana.

Keystone XL Pipeline Roundup

The Keystone XL pipeline remains in the news. Last week Nebraska judge Stephanie F. Stacy struck down a state law (LB1161) on Wednesday that allowed Governor Dave Heineman to approve the Keystone pipeline's path through the state back in January 2013.

from TransCanada

First a little background:
In November 2011, the State Department announced it was delaying its decision on the original 2008 TransCanada Keystone XL pipeline application for a Presidential Permit to cross the Canadian/United States border. That route passed through some environmentally sensitive areas of the Ogallala Aquifer, one of the largest bodies of water in the United States. Then on January 18, 2012, President Obama denied TransCanada's Presidential Permit application.

On April 18,2012, TransCanada submitted a new "Initial Report Identifying Alternative and Preferred Corridors for Nebraska Reroute" to the Nebraska Department of Environmental Quality, NDEQ, for evaluation of rerouted Keystone XL Pipeline project under the requirements of Nebraska law LB 1161 which allows pipeline carriers to seek and obtain approval of a proposed pipeline route from Nebraska's Governor, following a self-funded environmental review by NDEQ. This application for a NDEQ review of a new route was followed in May 4th 2012 by a new application to the United States Department of State for a Presidential Permit to construct and operate the Keystone XL Pipeline. The President has not yet acted on TransCanada's new application.

LB 1161 (the law that Judge Stacy struck down) was an amendment to the Major Pipeline Siting Act, MOPSA. At the time of its enactment in November 2011, MOPSA did not apply to any major oil pipeline that had submitted an application to the United States Department of State under Executive Order 13337 prior to MOPSA's effective date. The only oil pipeline to fit within this exemption was the Keystone XL Pipeline.

Under LB 1161 a pipeline carrier submits a route for evaluation by NDEQ and receives the Governor's approval instead of obtaining approval from, the Public Service Commission, PSC, under the requirements of the MOSPA. The MOSPA process includes review by the Nebraska Departments of Environmental Quality, Natural Resources, Revenue, and Roads, the Game and Parks Commission, Nebraska Oil and Gas Conservation Commission, Nebraska State Historical Society, State Fire Marshal, and Board of Educational Lands and Funds and also requires the PSC to schedule a public hearing within 60 days of receiving an application.

On January 22, 2013 Governor Heineman of Nebraska signed the recommendation to the U.S. Department of State for a Presidential Permit for the Keystone XL pipeline to cross the international border after the Nebraska DEQ recommended approval of the revised route selected (with their guidance) for the Keystone XL Pipeline. It was LB 1161 that enabled the Governor to do this.

The three Plaintiffs in this case are residents and taxpayers of the State of Nebraska. Each Plaintiff owns land or is the beneficiary of a trust holding land that was, or still is, in the path of one or more proposed pipeline routes for the Keystone XL Pipeline. The Defendants are the Governor, the Director of the Nebraska DEQ and the Nebraska State Treasurer. The Defendants argued that the Plaintiffs did not have standing to challenge LB 1161 and the district court lacks subject matter jurisdiction, and should have dismissed the case.

Siding with three plaintiffs, Judge Stacy found that under Nebraska’s State Constitution, exclusive regulatory control over pipelines like the Keystone XL must be exercised by the Nebraska Public Service Commission (PSC), and cannot be given to the Governor. Judge Stacy found LB 1161 must be declared unconstitutional and void. Though the Judge stated in her opinion that “such a declaration should not be misconstrued as an indictment of the work done by NDEQ in conducting the comprehensive evaluation required by LB 1161, or the conclusions reached by the Governor after reviewing NDEQ's Final Evaluation Report and approving the Keystone XL Pipeline route.”

Judge Stacy’s decision will probably be appealed to the Nebraska Supreme court, or the Keystone XL Pipeline route could be subjected to the review process by the PSC under MOPA. Either way this decision serves as yet one more delay to take federal action on the Keystone XL pipeline. Which is once more awaiting federal action. Presidential Permit review process is now focused on whether the Keystone XL Pipeline serves our national interest, though maybe it is focused on how long you can drag out a difficult decision.

On January 31, 2014, the U.S. Department of State released the Final Supplemental Environmental Impact Statement for the Keystone XL Pipeline. The executive summary states that Keystone XL is “unlikely to significantly impact the rate of extraction in the oil sands or the continued demand for heavy crude oil at refineries in the United States based on expected oil prices, oil-sands supply costs, transport costs and supply-demand scenarios.” In other words, no matter what action the Administration chooses to take on this portion of the pipeline-approve, reject, or stall- the oil sands are not staying in the ground in Canada. There is world demand for heavy crude oil and it will be met. The Texas refineries are optimized for heavy crude either from South America or Canada. The crude oil will come by pipeline, boat, truck or rail road. As Marcia McNutt, the editor in chief of the AAAS journal Science stated in a recent editorial moving the Canadian crude by pipeline is the least environmentally damaging and safest method of transporting oil.

The Department of State opened a 30 day comment period on February 5, 2014 where members of the public and other interested parties can submit comments on the Keystone XL Pipeline. Though Secretary Kerry is empowered to make the final decision, the next step will have input from the White House. 

Keystone III Begins Operations

from TransCanada

On Wednesday, January 22, 2014 TransCanada began operation of the Gulf Coast Project. The pipeline also known as Keystone III has begun delivering crude oil from Cushing, Okla., to the oil refineries in Texas. This pipeline cost $2.3-billion and provides a direct connection between the Cushing, Oklahoma oil hub and the refineries on the Gulf Coast. This project also added of 2.25 million barrels of crude oil storage capacity at Cushing and will ultimately carry 1.3 million barrels of oil a day between Oklahoma and Texas. In 2012, TransCanada announced their intension to build the Cushing Oklahoma to the Nederland, Texas portion of the Keystone XL pipeline, and to extend that pipeline 435 miles to Port Arthur and Houston. The Keystone Phase III Project (Oklahoma to Texas) began construction during the summer of 2012 and began opeations at 700,000 barrels a day yesterday.

One year ago, January 22nd 2013, Governor Dave Heineman of Nebraska signed the recommendation to the U.S. Department of State for a Presidential Permit for the Keystone XL pipeline to cross the international border. The recommendation is in support of the TransCanada’s second application for a Presidential Permit to build the northern most section of the Keystone XL pipeline (Phase IV) from the Canadian Border from where Saskatchewan meets Nebraska along this new route through Nebraska that would join up with the Keystone Phase II which runs from Steel City, Nebraska to Cushing, Oklahoma. The route avoids many of the fragile soils in northern Nebraska and the shallowest areas of the Ogallala Aquifer, but still overlies portions of the aquifer, which covers most of the state. The State Department has taken no action on the Keystone request in the past year.

There is currently an existing Keystone pipeline that runs east from Hardesty Saskatchewan to Manitoba and then south through the Dakotas to Steel City, Nebraska. It is a less direct route and is a lower volume pipeline. The existing Keystone Pipeline is known as Phase I and run from Hardesty, Canada to Steel City, Nebraska near the Kansas and Nebraska border. Keystone Phase II runs from Steel City to Cushing, Oklahoma where the Canadian crude oil and U.S. domestic production of light sweet crude from North Dakota can now be transported to the refineries on the Gulf Coast.  Keystone is not the only pipeline from Cushing, OK to Texas. Enbridge Inc. and Enterprise Products Partners owners of the Seaway pipeline that runs from the gulf coast area to Cushing, Oklahoma, reversed the flow in their gas pipeline to move crude from Cushing to the gulf coast refineries in mid-2012 with the addition of pump stations and other.  The capacity of the reversed Seaway Pipeline is up to 150,000 barrels of oil per day, a fraction of the new Keystone III Pipeline.

The Keystone XL Pipeline has been very controversial. Most of the environmental controversy has focused on the porous soils of the Sandhills and fears of a possible oil leak into one of the nation's most important agricultural aquifers. Moving the pipeline away from the aquifer should mitigate that concern. However, many who oppose the Keystone XL pipeline want to prevent the development of the oil sands resources in Canada to prevent the acceleration of global warming. The Canadian oil sands have been known for decades, but until oil prices rose and technology improved these oil deposits were too expensive to exploit beyond the limited scope of surface mining. Advances in technology in both oil sand extraction and refining techniques and rising oil prices altered the economics and have made the extraction of oil sand possible. While the advances in extraction techniques have quadrupled recoverable oil reserves and moved Canada into second place in proved world oil reserves, it requires more energy to produce the oil and increases the carbon footprint of the crude as compared to oil from the Middle East or Brazil.

The current method of mining the Canadian oil sands increases the CO2 released in every gallon of gas adding to man’s carbon footprint. In addition, older methods of mining the oil sands left open pits that still need to be reclaimed, thought today groups of wells are typically drilled off a central pad and like fracking wells and can extend for miles in all directions. This reduces surface disturbances of the land and the footprint of the area to be reclaimed.

Keystone Pipeline New Nebraska Route Approved by Governor

On Tuesday, January 22^nd  2013 Governor Dave Heineman of Nebraska signed the recommendation to the U.S. Department of State for a Presidential Permit for the Keystone XL pipeline to cross the international boarder. This was expected after the Nebraska state regulators recommended approval of the new route for the Keystone XL Pipeline on January 4^th 2013. The recommendation is in support of the TransCanada second application for a Presidential Permit to build the northern most section of the Keystone XL pipeline (Phase IV) from the Canadian Border from where Saskatchewan meets Nebraska along this new route through Nebraska that would join up with the Keystone Phase II which runs from Steel City, Nebraska to Cushing, Oklahoma. The new route avoids many of the fragile soils in northern Nebraska and the shallowest areas of the Ogallala Aquifer, but still overlies portions of the aquifer, which covers most of the state.  

There is currently a pipeline that runs east from Hardesty Saskatchewan to Manitoba and then south through the Dakotas to Steel City, Nebraska. It is a less direct route and is a lower volume pipeline. The existing Keystone Pipeline, is known as Phase I and run from Hardesty, Canada to Steel City, Nebraska near the Kansas and Nebraska border. Keystone Phase II runs from Steel City to Cushing, Oklahoma where it still terminates, leaving the Canadian crude oil in Oklahoma along with U.S. domestic production from North Dakota that has been using the pipeline to reach the Oklahoma storage facilities. Increased U.S. oil production combined with the Canadian production has produced a glut of oil waiting to be refined in Cushing, OK.

In February 2012 TransCanada announced their intention to build the Cushing Oklahoma to the Nederland, Texas portion of the Keystone XL pipeline, the Keystone Phase III, a 435 mile extension of the existing Keystone pipeline to Port Arthur and Houston areas. The Keystone Phase III Project (Oklahoma to Texas) began construction last summer and planned to begin operations in mid to late 2013. In response to the glut of oil in Cushing, Enbridge Inc. and Enterprise Products Partners owners of the Seaway pipeline that runs from the gulf coast area to Cushing, Oklahoma, reversed the flow in their gas pipeline to move crude from Cushing to the gulf coast refineries. The reversal  and change to crude required pump station additions and modifications, and was up and running in mid 2012, the capacity of the reversed Seaway Pipeline is up to 150,000 barrels of oil per day. 

According to the TransCanada the Keystone XL will also transport U.S. crude oil from the very large Bakken oil basin in Montana and North Dakota, along with Canadian oil, to U.S. refineries. TransCanada expects the cross border permit to be processed expeditiously and a decision made now that a new route in Nebraska has been approved by state regulators and endorsed by the Governor. This is alternative route for Keystone XL Phase IV will now be submitted as part of the Presidential Permit application. Though, it seems doubtful that the application will be approved any time soon.

The Keystone XL Pipeline has been very controversial. Most of the environmental controversy has seemed to focus on the vulnerability of the porous soils of the Sandhills and fears of a possible oil leak into one of the nation's most important agricultural aquifers. Moving the pipeline away from the Sandhills should mitigate that concern. However, many who oppose the Keystone XL pipeline want to prevent the development of the oil sands resources in Canada to prevent the acceleration of global warming. The Canadian oil sands have been known for decades, but until oil prices rose and technology improved these oil deposits were too expensive to exploit beyond the limited scope of surface mining which could reach only about 8% of the oil sands. Advances in technology in both oil sand extraction and refining techniques and rising oil prices altered the economics and have made the in-situ extraction of oil sand possible. Using Steam Assisted Gravity Drainage (SAGD) combined with horizontal drilling has allowed for in-situ extraction of the oil. These advances in extraction techniques have quadrupled recoverable oil reserves and moved Canada into second place in proved world oil reserves, it requires more energy to produce the oil and increases the carbon footprint of the crude as compared to oil from the Middle East or Brazil.

The current method of mining the Canadian oil sands increases the CO2 released in every gallon of gas adding to man’s carbon footprint. In addition, older methods of mining the oil sands left open pits that still need to be reclaimed, thought today groups of wells are typically drilled off a central pad and like fracking wells and can extend for miles in all directions. This reduces surface disturbances of the land and the footprint of the area to be reclaimed. Canada’s Imperial Oil just started operations at another new oil sands site, Kearl,  producing  another 110,000 barrels per day of bitumen. This bitumen doesn’t need to be refined. It goes straight to the pipeline, but in general, refining capacity and pipeline capacity are not keeping up with the production of Canadian crude and the price has fallen to the lowest in the world.

The Keystone XL is planned to initially transport of 830,000 barrels a day which will be ultimately expanded to 1.3 million barrels a day of oil, to be processed in the oil refineries along the Gulf Coast and in Oklahoma. The Keystone XL Phase IV pipeline could be completed by the end of 2014 if they received the Presidential permit this spring. In 2011 for the first time since 1949 the U.S. exported more petroleum products than it imported.  The United States remained a net importer of crude oil, some of which was refined into petroleum products that were then exported. The increase in exported distillate fuel (mostly diesel) is what allowed the U.S. to become a net exporter of petroleum products.

American refiners still imported large, although declining, amounts of crude oil from Canada, which in 2011 topped 2 million bbl/d for the first time, and from North Dakota's Bakken formation to process into petroleum products.  According to the U.S. Energy Information Agency, the U.S. consumed 18.8million barrels per day of petroleum products during 2011, making us the world's largest petroleum consumer. Current imports are 8.4 million barrels a day and Canada supplied the largest share of these petroleum imports. The next biggest sources of U.S. petroleum imports in 2011 were Mexico, Saudi Arabia, Venezuela, and Nigeria, in that order. Overall, about 40% of U.S. petroleum imports came from countries in the Organization of the Petroleum Exporting Countries (OPEC), while 60% came from non-OPEC countries such as Canada, Mexico, Russia, and Brazil. Most ofthese petroleum imports were crude oil. 

In June 2010 TransCanada commenced commercial operation of the first phase of the Keystone Pipeline System. Keystone's Phase I was the conversion of natural gas pipeline to crude oil pipeline and construction of a bullet line that brings the crude oil non-stop from Canada to Steel City at 435,000 barrels a day. Phase II of Keystone was an extension of the pipeline from Steele City, Nebraska to Cushing, Oklahoma and began operations in February 2011. Keystone Phase II increased the volume per day of Keystone Phase I with the addition of pumping stations; the system now runs at 591,000 barrels a day. The Seaway pipeline began operations in June completing the ability to pipe crude from Canada to the Gulf Coast carrying 150,000 barrels a day. The Keystone Phase III when completed in 2013 will increase volume in the Oklahoma to Texas portion of the pipeline. The Keystone Phase IV when and if approved will increase volume of the upper portion of the pipeline from the current 591,000 barrels a day to 1.3 million barrels a day.

The Canadian pipeline, known as the Northern Gateway, is a 730 mile route from Alberta where the oil is produced to the Pacific port of Kitmat, for export to Asia. In order to  reach the port the pipeline must travel through British Columbia (the California of Canada) and is facing strong public opposition and the political leaders in British Columbia offer no support. Economic Benefit to British Columbia would be minimal. The Northern Gateway would open a potentially large new market for Canadian crude by taking oil over the Rockies to Kitimat, British Columbia, where it could be loaded onto tankers bound for China and other Asian markets. Due to the current excess in supply in the United States, the price of West Texas Intermediate crude has fallen and the price of the Canadian crude has fallen even more to near $50 per barrel due to a lack of capacity to refine the heavier crude.  The Northern Gateway could reduce that price differential somewhat and is being proposed to carry 525,000 barrels of crude a day. If it wins approval, Enbridge expects it to be up and running in 2017. 

Using Up the Ogallala- The Groundwater Footprint of the U.S.

The High Plains aquifer commonly known as the Ogallala aquifer (because the Ogallala formation makes up about three quarters of the aquifer) became news and burst into public awareness due to the protests associated with the Keystone XL Pipeline. The Keystone XL Pipeline has been very controversial. Most of the environmental controversy has focused on the porous soils of the Sandhills and fears of a possible oil leak into the Ogallala aquifer which is one of the nation's most important agricultural aquifers. Moving the pipeline away from the aquifer or piping the Canadian oil through British Columbia should mitigate concern for contamination to the Ogallala, but oil leaks are a minor problem. Really, the oil does not move quickly or spread easily through the sedimentary deposits of the High Plains aquifer. There is a much bigger threat to the Ogallala; the aquifer is being depleted because the groundwater within it is predominately non-renewable. This groundwater aquifer that spans and estimated 174,000 square miles is the primary source of water for the High Plains. This was open range land until the groundwater from the aquifer was used to turn the range land into irrigated crops. However, according to John Opie in “Ogallala: Water for a Dry Land” this is essentially fossil water that was generated 10,000-25,000 years ago by the melting of the glaciers of the Rockies.

Water level declines in the High Plains Aquifer since 1958 

The High Plains aquifer is the most intensively used aquifer in the United States and 97% of the water is used for irrigation. Groundwater withdrawals from the High Plains aquifer represent about 20% of all groundwater withdrawals within the United States and have turned the dry range land in the center of the country into the breadbasket of the world. There are only about 2.5 million people living within the High Plains aquifer. With the grains we grow and export we are exporting our water reserves and possibly the future of the region. The High Plains aquifer is being depleted (and contaminated) by irrigation. In the central and southern High Plains water levels have fallen from 50 to more than 150 feet primarily in parts of Kansas, Oklahoma, New Mexico and Texas.  

In  the past year Drs. Tom Gleeson, Yoshihide Wada, Marc F.P. Bierkens and Lodovicus P.H. van Beek each a distinguished voice in groundwater research have pulled together to try to popularize the concept of Groundwater Footprint in order to focus attention on the sustainability of groundwater use. While I think the “global groundwater footprint” is not particularly useful beyond seeing how important groundwater use is globally, their groundwater footprint concept may end up being a very powerful tool. Water is regional and while the authors of “Water Balance of Global Aquifers Revealed by Groundwater Footprint” point out that some groundwater consumption can be transferred to an adjacent aquifer (they use the Upper and Lower Ganges aquifers in India as their example) more often water use and recharge are a dictated by local conditions. An excess of water along the Amazon basin is not particularly useful to Saudi Arabia. However, the authors measurement of “groundwater footprint” is really a measure of groundwater sustainability. A groundwater footprint is a simplified tool to see the water balance between recharge and use of an aquifer and could be used to include groundwater sustainability in developing water, economic and agriculture policies using the virtual water and water footprint analysis. If the water use is not sustainable, then ultimately we are not sustainable.

Groundwater footprint, as the authors point out, could be used with the satellite-based Gravity Recovery and Climate Experiment (GRACE) and Global Land Data Assimilation System (GLDAS) to quantify groundwater depletion. Researchers at the University of California, Irvine, the University of Texas, and the Hydrological Sciences Branch at NASA GSFC have worked in partnership to apply GRACE and GLDAS to real world groundwater monitoring. As these tools develop, the groundwater footprint could end up being an intuitive management tool. The authors found that 80% of the world’s aquifers are not being depleted, but that of the 20% that are being depleted are being depleted at such a vast rate that the global average footprint is of unsustainable groundwater use. In the United States the High Plains and the Central Valley aquifers are being depleted. We as a nation need to examine our agricultural policies and incentives, even our energy policies (corn for ethanol is squandering 40% of the corn crop and the non-renewable water in it to dilute gasoline) and the way we value and price water to ensure that we will have food in the future. 

Keystone Pipeline the Saga Continues

On May 4th 2012 TransCanada Corporation announced their application for a Presidential Permit to build the northern most section of the Keystone XL pipeline (Phase IV) from the Canadian Border from where Saskatchewan meets Nebraska using an as yet undetermined route through Nebraska to join up with the Keystone Phase II which runs from Steel City, Nebraska to Cushing, Oklahoma. This is the newest step after announcing on February 27th 2012 their intension to build the Cushing Oklahoma to the Nederland, Texas portion of the Keystone XL pipeline, the Keystone Phase III, a 435 mile extension of the existing Keystone pipeline to Port Arthur and Houston areas. The Keystone Phase III Project (Oklahoma to Texas) is expected to begin construction this summer and begin operations in mid to late 2013. TransCanada hopes to have the northern section completed in 2015.

If you recall the   existing Keystone Pipeline Phase I runs from Hardesty, Canada to Steel City, Nebraska near the Kansas and Nebraska border. Keystone Phase II runs from Steel City to Cushing, Oklahoma where it terminates, leaving the Canadian crude oil stranded in Oklahoma along with U.S. domestic production from North Dakota that has been using the pipeline to reach the Oklahoma storage facilities. Increased U.S. oil production combined with the Canadian production has produced a glut of oil waiting to be refined in Cushing, OK.

Russ Girling, TransCanada's president and chief executiveofficer was quoted in the TransCanada press release as saying: "KeystoneXL will transport U.S. crude oil from the very large Bakken oil basin inMontana and North Dakota, along with Canadian oil, to U.S. refineries.” Mr. Girling added that he expected the cross border permit to be processed expeditiously and a decision made once a new route in Nebraska is determined. TransCanada is working directly with Nebraska's Department of environmental Quality (DEQ), to determine an alternative route for Keystone XL Phase IV that avoids the environmentally sensitive Sandhills watershed. Several alternate routes and a preferred route were submitted to the DEQ April 18. The DEQ will now determine a specific route and oversee the public comment and review process. Once a route is finalized, it will be submitted as part of the Presidential Permit application.

The Keystone XL Pipeline has been very controversial. Most of the environmental controversy has focused on the porous soils of the Sandhills and fears of a possible oil leak into one of the nation's most important agricultural aquifers. Moving the pipeline away from the aquifer should mitigate that concern. However, many who oppose the Keystone XL pipeline want to prevent the development of the oil sands resources in Canada to prevent the acceleration of global warming. The Canadian oil sands have been known for decades, but until oil prices rose and technology improved these oil deposits were too expensive to exploit beyond the limited scope of surface mining. Advances in technology in both oil sand extraction and refining techniques and rising oil prices altered the economics and have made the extraction of oil sand possible. While the advances in extraction techniques have quadrupled recoverable oil reserves and moved Canada into second place in proved world oil reserves, it requires more energy to produce the oil and increases the carbon footprint of the crude as compared to oil from the Middle East or Brazil.

The current method of mining the Canadian oil sands increases the CO2 released in every gallon of gas adding to man’s carbon footprint. In addition, older methods of mining the oil sands left open pits that still need to be reclaimed, thought today groups of wells are typically drilled off a central pad and like fracking wells and can extend for miles in all directions. This reduces surface disturbances of the land and the footprint of the area to be reclaimed.

The Keystone XL is planned to initially transport of 830,000 barrels a day with a planned expansion of 1.3 million barrels a day of oil, to be processed in the oil refineries along the Gulf Coast and in Oklahoma and used within the U.S.  According tothe U.S. Energy Information Agency, the U.S. consumes 14 to 15 million barrels of oil each day. Current imports amount to almost 9 million barrels a day, approximately 60% of the United States' requirements. The Keystone XL pipeline could ultimately represent 10%-14% of oil imports.  

In June 2010 TransCanada commenced commercial operation of the first phase of the Keystone Pipeline System. Keystone's Phase I was the conversion of natural gas pipeline to crude oil pipeline and construction of a bullet line that brings the crude oil non-stop from Canada to Steel City at 435,000 barrels a day. Phase II of Keystone was an extension of the pipeline from Steele City, Nebraska to Cushing, Oklahoma and began operations in February 2011. Keystone Phase II increased the volume per day of Keystone Phase I with the addition of pumping stations; the system now runs at 591,000 barrels a day. The Seaway pipeline, a joint venture between Enterprise Products Partners L.P. and Enbridge Inc., will begin operations in June completing the ability to pipe crude from Canada to the Gulf Coast carrying 150,000 barrels a day. The Keystone Phase III when it is completed will increase volume in the Oklahoma to Texas portion of the pipeline. The Keystone Phase IV when and if approved will increase volume of the upper portion of the pipeline from the current 591,000 barrels a day initially to 830,000 barrels a day then to 1.3 million barrels a day.

Keystone Pipeline the Never Ending Story

On February 27th 2012 TransCanada Corporation announced their intension to build the Cushing Oklahoma to the Gulf Coast portion of the Keystone XL pipeline, the Keystone Phase III, a 435 mile extension of the existing Keystone pipeline to Port Arthur and Houston. The existing Keystone Pipeline Phase I runs from Hardesty, Canada to Steel City, Nebraska near the Kansas and Nebraska border. Keystone Phase II runs from Steel City to Cushing, Oklahoma where it terminates, leaving the Canadian crude oil stranded in Oklahoma along with U.S. domestic production from North Dakota that has been using the pipeline to reach the Oklahoma storage facilities. As oil prices have climbed recently the 55 million barrels of oil that can be stored in Cushing have produced a glut of oil waiting to be refined and the lowest gas prices in the nation for the mid-west.

In response to the glut of oil in Cushing, Enbridge Inc. and Enterprise Products Partners (who purchased a 50% interest in November) owners of the Seaway pipeline that runs from the gulf coast area to Cushing, Oklahoma, announced their intention to reverse the flow in their gas pipeline to move crude from Cushing to the gulf coast refineries. The reversal requires pump station additions and modifications, scheduled to be completed by June 2012, the capacity of the reversed Seaway Pipeline will be up to 150,000 barrels per day and further expansions could increase that volume. Now, TransCanada Corp. has announced that it will build a portion of the Keystone XL pipeline from the Cushing oil hub south to the Gulf Coast to compete with the Seaway pipeline while attempting to obtain approval of a revised route for the Keystone Phase IV leg to increase flow from Canada to Steel City, Nebraska.

The Keystone XL Pipeline has been very controversial. Most of the environmental controversy has focused on the porous soils of the Sandhills and fears of a possible oil leak into one of the nation's most important agricultural aquifers, TransCanada is reapplying for State Department and Presidential approval of a revised rout for the northern portion that bypasses the Sandhills. However, many who oppose the Keystone XL pipeline want to prevent the development of the oil sands resources in Canada to prevent the acceleration of global warming. The Canadian oil sands have been known for decades. Until the recent protests against the Keystone XL pipeline that labeled these oil reserves “Canadian Oil Sands,” they had been variously known as unconventional oil or crude bitumen. These oil sands have been surfaced mined in Canada with drag lines and power shovels since the late 1960’s, but until oil prices rose and technology improved these oil deposits were too expensive to exploit beyond the limited scope of surface mining. Advances in technology in both oil sand extraction and refining techniques and rising oil prices altered the economics and have made the extraction of oil sand possible.

Steam Assisted Gravity Drainage (SAGD) is the current method of extraction. In SAGD, two horizontal wells are drilled in the oil sands, one at the bottom of the formation and another about 15-20 feet above it. In each well pair, steam is injected into the upper well melting the bitumen, which flows into the lower well and is pumped to the surface. SAGD was the breakthrough that has quadrupled recoverable oil reserves and moved Canada into second place in proved world oil reserves. SAGD is cheaper than previous methods, allows very high oil production rates, and recovers up to 60% of the oil in place. It is the SAGD method that has created the need for a pipeline to deliver the oil to the American markets and the controversy. SAGD requires more energy to produce the oil and increases the carbon footprint of the crude. Those who believe completely in the positive feedback global warming model where increased CO2 raises global temperature, increases evaporation of water vapor to the atmosphere, and in turn increases the functional impact of CO2 on global warming see any increase in carbon as quickening the destruction of the earth. The Canadian oil sands increase the CO2 released in every gallon of gas adding to man’s carbon footprint. In addition, older methods of mining the oil sands left open pits that still need to be reclaimed, thought today groups of wells are typically drilled off a central pad and like fracking wells and can extend for miles in all directions. This reduces surface disturbances of the land and the footprint of the area to be reclaimed..

In June 2010 TransCanada commenced commercial operation of the first phase of the Keystone Pipeline System. Keystone's Phase I was the conversion of natural gas pipeline to crude oil pipeline and construction of a bullet line that brings the crude oil non-stop from Canada to Steel City at 435,000 barrels a day. Phase II of Keystone was an extension of the pipeline from Steele City, Nebraska to Cushing, Oklahoma and began operations in February 2011. Keystone Phase II increased the volume per day of Keystone Phase I with the addition of pumping stations, the system now runs at 591,000 barrels a day. The Seaway pipeline will begin operations in June completing the ability to pipe crude from Canada to the Gulf Coast carrying 150,000 barrels a day. The Keystone Phase III when it is completed will simply increase volume. The Keystone Phase IV when and if approved will increase volume of the upper portion of the pipeline from the current 591,000 barrels a day to 1.3 million barrels a day.

Energy Consumption in the US 2010

According to the US Energy Information Administration, the statistics branch of the Department of Energy, the US used 98 quadrillion BTU last year. Energy sources are measured in different physical units depending on the type of energy source: barrels of oil, cubic feet of natural gas, tons of coal, kilowatt hours of electricity. In the United States, British thermal units (Btu), a measure of heat energy, is a commonly used unit for comparing different types of energy. In 2010, U.S. primary energy use equaled 98 quadrillion (=E15, or one thousand trillion) Btu. If it helps to visualize this any better, that is equivalent to about 2,471 Mtoe (million tons of oil equivalent) the energy measurement standard used by the International Energy Agency, IEA, the keeper of world statistics. In a world with seven billion people the United States is estimated to have 310 million people, about 4% of the world’s population, 7% of the land mass and use about 14% of the energy (depending on how fast China and India are growing since the world energy data is about two years old).

In the United States the US Energy Information Administration collects and reports the energy statistics in quadrillion BTUs and has recently reported the summary data for 2010. These statistics paint a picture of who we are today. The major energy sources in the United States are petroleum-gas and oil (37%), natural gas (25%), coal (21%), nuclear (9%), and renewable energy primarily biomass and hydro power generation (8%). The United States only produces about 75% of the energy we consume, the shortfall is imported petroleum. The major users are heating of residential and commercial buildings (11%), industry (20%), transportation including cars, trucks, trains, planes and ships (27.4%), and electric power generation (40%).

The slightly complicated chart above shows the types of fuel and the sector that consumes it. Looking at petroleum, you can see that it supplies 37% of our energy needs. Transportation, cars, trucks, trains, planes and ships, uses 71% of petroleum and that petroleum provides 94% of the total energy used in transportation. Industry uses 22% of the total petroleum consumed by the United States to supply 40% of the energy used by industry. Studying all the details of the chart tells you a lot about the United States in 2010. It will also allow you to understand the impact that policies, regulation and scientific advances might have on the country.

For example, 92% of coal mined in the United States is used to generate electricity, regulations like the EPA’s Mercury and Air Toxics Standards and the Cross-State Air Pollution Rule affecting electricity generation are likely to impact coal use, cost of electricity, mining and mining regions. In 2010, of the 1,085.3 million short tons of coal produced in the United States, about 7.5% was exported, so if the number of coal fired electrical plants is decreased, the demand for coal to produce electricity is reduced, the amount of coal mined in the United States will decrease, the number of coal miners and employees of coal companies will decrease, the trains transporting coal and their employees will not be necessary, and the cost of electricity will increase as the electrical power industry builds new generation plants burning other fuels.
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Some primary energy sources, such as nuclear and coal, are entirely used in one sector, electrical generation. Others, like natural gas and renewables, are more evenly distributed across sectors. Similarly, while transportation is almost entirely dependent on petroleum, electric power uses a variety of fuels. Because the United States is the world’s largest oil importer, it may seem surprising that it also exports about 2 million barrels a day of refined petroleum products. It seems were are also an excellent oil refiner on the easily accessed Gulf Coast. Petroleum is used primarily for gasoline for cars (55%), diesel for trucks and heating oil (23%), propane and liquefied petroleum gases used in homes and farms for cooking, heating, and jet fuel (9%). The five biggest sources of net crude oil imported to the United States in 2010 were: Canada (25%), Saudi Arabia (12%), Nigeria (11%), Venezuela (10%), Mexico (9%). Policy decisions about a future Keystone pipeline may change that in the future. U.S. crude oil imports grew rapidly from mid-20th century until the late 1970s, but fell sharply from 1979 to 1985 because of restructuring the economy (manufacturing as a component of the economy was reduced), conservation, and improved efficiency. After 1985, the upward trend resumed, peaking at 10.1 million barrels per day in 2005, and falling to 9.2 million barrels per day in 2010.

Natural gas is the source of 25% of the energy consumed in the United States and in 2010 was used almost equally for industry, electrical generations and residential and commercial heating. Most, but not all, of the natural gas consumed in the United States is produced in the United States. Some natural gas is imported to the United States in the older Keystone pipelines. Natural gas is also being shipped to the United States as liquefied natural gas (LNG). U.S. natural gas production and consumption were nearly in balance through 1986 though U.S. production of natural gas peaked in 1973. From 1986 to 2006 consumption of natural gas outpaced production, and imports rose. Then in 2006 U.S. production of natural gas began to increase as a result of the development of more efficient and cost effective hydraulic fracturing techniques. In 2010 natural gas production in the United States reached the highest recorded annual total since 1973. Regulation and control of hydraulic fracturing will impact the cost of natural gas production in the United States, the availability of gas and the environmental impact to our natural resources.

In truth I am an old time engineer who learned to look at the world with a slide rule (calculators were just coming in and thought to be cheating). Through numbers I understand the world, policies and see relationships.