Goldman Sachs: Killing the Keystone XL Pipeline Kills Canadian Oil Sands
By Mat McDermott
Motherboard
Contrary to what the U.S. State Department says, stopping the Keystone XL tar sands pipeline would have a large impact on the financial viability of future expansion of tar sands projects, as shipping all that bitumen--oil's heavy, vicous tar form--out via rail would be just too expensive and logistically challenging. For the Canadian tar-sand oil boom to continue, they're going to need to open that vein.
Though that sounds like something environmental groups opposed to the proposed Alberta-to-Texas pipeline have been saying for some time, it actually comes from a far more conservative source: A new Goldman Sachs report, being highlighted by NRDC.
Goldman Sachs found that even though rail transport of bitumen may indeed expand if the Keystone XL isn't built, trains can't replace the capacity of the pipeline. Failing to construct the pipeline will slow expansion of tar sands extraction because the oil being trapped in Alberta depresses prices for Canadian oil locally, and would result in future projects being "deferred or cancelled."
As for logistical hurdles for moving tar sands by rail and not pipeline, Goldman Sachs highlights three main challenges:
The first hurdle is that bitumen/heavy crude oil rail cars have to be specially constructed so that their viscous cargo can be heated by steam in order to flow the crude out of the car.
Secondly, heating a rail car so that heavy crude oil can be unloaded takes more time than simply tapping a rail car filled with light oil, which means fewer heavy barrels per day can be transported than light.
Third, bitumen and [Western Canadian Select oil] are denser than light crude, and since rail cars have maximum weight restrictions, fewer barrels of heavy crude can be carried in ear car compared to light. Therefore, of the 150,000 b/d of crude transported by rail in 2013, we estimate that no more than 40 percent is likely to be heavy (and this number could prove closer to 20 percent).
These very same issues have been singled out by environmental organizations for some time, along with rising myriad "regulatory, environmental and local community opposition," as noted by the report. Meaning the U.S. State Department Draft Supplemental EIS--which claimed Canadian tar sands would be shipped out of the country regardless of whether the pipeline gets built--is at best wildly optimistic.
The Goldman Sachs report is released against a backdrop of global carbon emissions rising 1.4% last year–to a new record high of 31.6 billion tons–and just as the International Energy Agency warns that unless we get our collective energy act together within the next five years to radically reduce carbon emissions, we will have little to no chance of keeping temperature rise below the internationally agreed upon target of 2 degrees Celcius—a target which, as Kelly Rigg of the GCCA points out, is likely still too high to avoid damaging climate change effects.
If the Obama administration is serious about doing something about climate change—today's announcement that the US and China will be working together to phase out short-lived super greenhouse gases is encouraging—then it needs to show it and accept that the State Department's analysis is in error, and reject construction of Keystone XL, leaving carbon locked in the tar sands, rather than the atmosphere.
http://motherboard.vice.com/blog/goldman-sachs-killing-the-keystone-xl-p...
