Was Keystone XL rejection such a big mistake?

The pipeline rejection can be justified, without pretending that the use of fossil fuels can be ended quickly

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CALGARY, AB Nov 8, 2015/ Troy Media/ – The American rejection of the Keystone XL pipeline proposal should inspire Alberta to start looking at the true energy future.

The rejection of the Keystone XL project has been severely criticized by Alberta oilpatch spokespersons and supporters. Many environmentalists are, of course, jubilant.

But there is a middle course. The pipeline rejection can be justified, without pretending that the use of fossil fuels can be ended quickly.

Opponents of expanded fossil fuel production, because of climate change concerns, reasonably focus on opposing expanded transportation infrastructure, although forcing companies to use far more dangerous railroads is a bad idea.

And certainly some public reaction has been more nuanced than one might expect. At least one oilpatch worker and another petroleum engineer who called CBC’s Alberta at Noon show after the announcement suggested that the pipeline might not be necessary or desirable and that oil sands production might be fairly called “dirty.”

Present production levels are reaching market without Keystone XL, so the need for a new pipeline is based solely on plans for expanded production.

But expanding oil sands production is not a good idea. The cumulative socio-environmental effects of the industry have neither been properly assessed nor dealt with. If expansion is ruled out, pressure for extensive new pipelines and the controversy would diminish. So would the inflation and recessionary effects of the “boom-bust” cycle.

Big oil sands projects have a generational timescale. But advocates of expansion forget that the fossil fuel industry will soon enter its sunset phase. According to a report in the Huffington Post, “based on IPCC estimates, the world can only burn one-fifth to one-third of its proven oil reserves” if a critical climate tipping point is to be avoided. Canadian Mark Carney, governor of the Bank of England, has warned that “if that estimate is even approximately correct it would render the vast majority of reserves ‘stranded’ – oil, gas and coal that will be literally unburnable without expensive carbon capture technology, which itself alters fossil fuel economics.”

This fact, of course, would enormously reduce the value of fossil fuel companies and consequently their ability to borrow money.

If Carney and other observers are right, executives and boards of directors who fail to heed this warning and continue to invest in new exploration and pipelines are leaving themselves open to collapsing share values.

Even supporters of low- or no-carbon energy systems are uncertain about how quickly and completely renewable energy sources can fill the gap. But governments can help the transition by adjusting financial and policy incentives or constraints. Wise governments – and companies – will take vigorous action to encourage new developments such as better storage batteries for intermittent sources. They will also engage in heavy investment in geothermal projects (Alberta doesn’t even have an approval/regulatory regime for this, which prevents entrepreneurs from obtaining the necessary financing).

It is dangerous for Alberta’s oil and gas production to go to a single market – the U.S. Continuing to do this means that billions of dollars will be left on the table. Presently, only a tiny fraction of production goes to non-American markets. Some routes to other markets for present production must be provided in the medium term, perhaps 20 years, while renewable energy is being ramped up sufficiently.

The oilpatch is not the enemy – many of its key developers are sincerely pro-environment. But the need to improve the acceptability of Canadian production puts a premium on technological developments. We must remediate tailings ponds, and reduce greenhouse gas emissions, energy and water demands of in-situ projects if foreign buyers are going to embrace our product. Further, we will need major provincial and federal programs to combat climate change in order to improve our bad international reputation.

The oil and gas industry has a medium-term future. Agile companies will be in the forefront of the move to renewable energy, realizing that they are energy companies, not oil and gas companies. Other less flexible companies may well disappear.

Governments should re-establish independent, publicly-accessible and robust project assessment and approval processes with a mandate to consider cumulative socio-environmental and economic impacts, including climate change considerations.

We must plan for transitional use of cleaned-up oil and gas production as we move into a 21st century energy system.

Phil Elder is Emeritus Professor of Environmental and Planning Law with the Faculty of Environmental Design at the University of Calgary. Phil is included in Troy Media’s Unlimited Access subscription plan.

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