The contested Keystone XL pipeline could have a greenhouse gas impact that is four times greater than that estimated by the State Department, according to a new peer-reviewed study that is set to rejuvenate a multi-year debate about the project's climate footprint.

Indeed, the research, published yesterday in Nature Climate Change, sparked a renewal of the back-and-forth associated with the TransCanada line: Supporters said the paper was irrelevant, while opponents said it highlighted significant flaws with State Department environmental analyses. For the study authors from the Stockholm Environment Institute, the goal is not so much to nail down specific numbers but to get people thinking about the pipeline from a new angle and consider its effect on oil prices and consumption.

"This market effect appears to be significant, and it should be considered. We're not taking a position on Keystone one way or another. It's not our place to do that," said Peter Erickson, senior scientist at the Stockholm Environment Institute and author of the study.

To conclude that TransCanada's Keystone XL might have a greenhouse gas impact four times larger than State Department estimates, Erickson and his SEI colleague Michael Lazarus ran what they said was a relatively simply economic analysis of oil supply versus prices. They found that for every barrel of increased oil sands production from Keystone XL, global oil consumption would increase 0.6 barrel because of the decrease in oil prices from the extra supply.

That extra oil consumption because of Keystone XL in turn could help produce as much as 110 million tons of carbon dioxide equivalent annually, a figure higher than State's conclusion in February that the upper CO2-equivalent emissions range associated with the pipeline was 27 million metric tons annually. To put those numbers in perspective, emission decreases in 2020 from new performance standards on power plants are expected to be about 160 million to 575 million tons, the study authors said.

At the same time, the SEI researchers—like the State Department—concluded that the emissions impact of the pipeline also could be zero if Keystone XL does not ultimately increase oil sands production beyond what it would be otherwise because of rail and pipeline alternatives. The point is that the emissions range should be much broader than estimates by State, the authors said.

The paper "offers no new insights on production levels," the authors wrote. "Instead this Letter focuses on price effects and finds that, to the extent that Keystone XL may increase global oil supply, the State Department's assessment has overlooked the pipeline's potentially most significant GHG impact."

The American Petroleum Institute dismissed the conclusion, noting State's earlier finding that oil sands production would not go up because of Keystone XL in almost all scenarios (ClimateWire, Feb. 3).

"The findings in the study are irrelevant because the Market Analysis section of the [State Department final environmental impact statement] concluded that approval or denial of KXL would not impact the development of the oil sands," said API spokeswoman Sabrina Fang. She noted that the State Department was aware of the SEI model and noted it via a footnote in its environmental analysis.

Skepticism about new projections
Ben Brockwell, a co-founder of the Oil Price Information Service, said he was skeptical, considering the complexity of markets. For one thing, people are more environmentally aware then they used to be, and there is no guarantee that lower oil prices would necessarily increase consumption in the way they used to, he said. Keystone XL is largely "irrelevant," because of the bigger pressures affecting oil prices, such as fuel economy standards, he said.

Similarly, Michael Levi, a Council on Foreign Relations senior fellow, said that the ultimate impact of Keystone XL might be lower or higher than the paper estimates, as it's impossible to predict. Market analysts have always assumed that increased Canadian production would lead to greater global consumption unless other producers cut back in response, he said. The study assumes Saudi Arabia would not cut production and prop up prices, while the State Department assumes the opposite, he said.

"I have little doubt that they're both wrong," Levi said.

However, some environmentalists praised the paper for its detail and said it highlights their concerns that the State Department conclusion was flawed generally and was overly rosy in its projections of the ability of rail and alternative pipelines to act as KXL alternatives. They pointed to the fact that original projections of rail in 2013 did not match department estimates, as well as the fact that the Canadian Association of Petroleum Producers lowered its 2030 production estimates for the oil sands earlier this year amid pipeline pressures.

"This paper does show a major source in which folks have been underestimating the long-term climate impacts of the pipeline," said Anthony Swift, an attorney at the Natural Resources Defense Council. The State Department itself has moved toward a greater climate impact in its assessments, he added.

When asked about Middle Eastern producers simply cutting production to raise prices, Erickson and Lazarus said that they were looking toward the long-term price impacts of the pipeline, not what might happen from immediate short-term production cuts. "We are speaking about a general pattern that will manifest itself over the long term," Lazarus said.

He reiterated that the paper is not arguing that four times (State's numbers) is the precise numerical answer. "This is more we want to emphasize that this is a very important effect and more important than the other effects," he said.

They said the consumption-price question should be examined with fossil fuel projects generally and not just the oil sands line.

"We hope this method and ones like this can be applied more broadly in the years to come," Erickson said.

The paper follows numerous studies concluding that Keystone XL's emissions could be higher than projected because of factors ranging from petcoke to destruction of peat in Alberta. Supporters of the pipeline say that the emissions could be less than estimates because of factors such as increased oil tanker use that might occur to transport oil to Asia without Keystone.

The study also comes on the heels of editorial endorsements of the pipeline from both Nature and Science. In March, for instance, Marcia McNutt, the editor-in-chief of Science and former director of the U.S. Geological Survey, said she backed the pipeline.

A decision on the $5.4 billion TransCanada project isn't expected until after the November elections because of a court case in Nebraska. Last year, Obama indicated he could not approve Keystone XL if it "significantly exacerbates" carbon pollution.

Reprinted from Climatewire with permission from Environment & Energy Publishing, LLC., 202-628-6500