The Keystone Comedy

It seems inevitable, at least in recent decades, that when we discuss important issues in America we start off by focusing our attention, anger and mutual distrust on side issues.

So it is with the Keystone Pipeline, a projected line intended to take oil from Canada down to Houston. Because the oil is thicker than normal, the refineries down Houston way are the natural destination for it.

Environmentalists are not happy. They insist that the pipeline not be built. They are making this a litmus test for President Obama and anyone else who ever wants the affection of environmentalists through the end of time–or the next time a Republican gets elected president, whichever comes first.

Anybody sane enough to understand what’s good or bad for the environment, but not sufficiently up-to-date to grasp the hidden politics of all this would take about five minutes to come up with a common sense answer.

tar-sands

“Well, of course you should build a pipeline,” they would say. “It’s cheaper. Sending it by rail, or worse–by truck–would not be economical. And don’t you care about the environment? A pipeline has one-third the number of spills and accidents as rail transport, and don’t even get started on trucking. And sending it by pipe would emit less CO2–those trains are powered by fossil fuels and the cars weigh as much as the oil that goes in them. Get real!”

But of course the Keystone Pipeline is not the real issue and never was.

The real issue is whether the oil buried in the tar sands of Alberta should be used at all.

And the debate that nobody really wants to have is on the pros and cons of this issue. Both sides are afraid that losing that debate would be disastrous. I also think that both sides understand too well that winning the debate would be almost Pyrrhic in nature. (The winning side would face the same peril, but about different subjects. If the environmentalists win, if the economy breaks, they own it. If those in favor of using the oil win, if the environment breaks, they own it. Far better to discuss the merits and demerits of a pipeline.)

Those who are most concerned about climate change have a real interest in limiting our consumption of fossil fuel. Discoveries of large deposits of fossil fuels over the past two decades have exploded the myth of Peak Oil, removing one of the lines of attack they have used in arguing for a sheaf of environmentally sound policies regarding fuel use.

Oil Scarcity Myth

Oil consumption per year

The tar sand deposits in Alberta are one-third two-thirds (oops) the size of Saudi oil reserves, and putting them on the market would effectively remove all constraints (except price) from unlimited fuel consumption. When added to underwater oil deposits found off the coast of Brazil, unconventional oil and gas deposits almost everywhere and huge coal mines being dug in Mongolia, we are entering a new era of increased availability of fossil fuels.

Largest_Oil_Reserves_2011

Many are exuberant about the possibility, focusing on the economic development and increased employment this will lead to. Others are concerned that this will greatly increase human contributions of greenhouse gases, leading to a worse outcome for global temperature averages.

As economic times are tough all over these days, the people focused on the economic advantages of exploiting these resources are getting all the easy wins in the debate over the pipeline. But because the pipeline is not the real issue, these wins are tactical, not strategic, and leave their environmentalist opponents angrier and hungrier.

Let’s have a brief look at the real issue. Environmentalists argue (or would argue, if they had the courage to match their convictions) that the oil in Alberta should be left undeveloped.

I think there is a case to be made for that argument, although I’m not sure that case would convince. Sadly, I don’t think they’ve even tried to make that case–those few who have mentioned it merely make the assertion and then use the assertion as if it were proof.

Update: I should add that what I’m proposing is to pay the Canadians to leave the oil in the ground, something I haven’t seen proposed by anyone. This could be either in the form of pre-paid royalties or compensation in the same manner as offered to those in the developing world for not cutting down trees.

There are good reasons to consider leaving it in the ground:

  1. National security interests: The time will come when fossil fuels are exceedingly expensive to bring to market. If you think gasoline is expensive now, just wait. As petroleum gets more expensive, its availability will become more strategic, not only for transportation but for special products derived from petroleum. Having a large supply in ready reserve in the back yard of a good friend is not obviously stupid.
  2. Economic interests: Petroleum is only going to get progressively harder to find and more expensive to bring to market. The economic value of the tar sands deposits may actually increase more  while its in the ground. If it’s the ‘last man standing’–the last large reserve to be developed–it will command a scarcity premium. (Obviously, there is the risk that we will continue to find equally large reserves.)
  3. Environmental interests: In an era when natural gas is abundant and inexpensive, why not take advantage of it and wait on the tar sands? Natural gas emits half the CO2 as does petroleum for each joule obtained in energy. In this period of uncertainty about climate change, why take the risk when we can use a safer and cheaper fuel? Make large fleets of cars run on natural gas, export it where logical and take advantage of this resource.

Unfortunately, environmentalists seem to rely on purity of heart and the fervor left over from the 60s and 70s. I don’t know why they cannot admit that this is the real issue and use common-sense arguments. I only know that they don’t.

Fighting over a secondary issue because you don’t have the courage to take on the real issue has a long history in the United States. Not a glorious history, just a long one.

I cannot remember an occasion when such a strategy ever emerged victorious.

 

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33 responses to “The Keystone Comedy

  1. Hi Tom,

    Thanks again for another interesting post.

    But let’s look at this issue a different way: we don’t have a planned economy. So we don’t choose or not choose to develop this resource or that resource. We let the market decide these things. We auction the exploration rights or open the ground to staking. The only way we can control the rate of development of a major resource is through either a) the price we charge at auction for the right to explore; or b) a tax on some aspect of the production or consumption of a resource. And once the permits are auctioned, there’s a pretty strong argument that, if the resource is withdrawn, the permit holders have a right to compensation for their incurred costs.

    With that in mind, I’d love to hear the environmentalists make the cases that you’ve made above, because they undermine the idea of markets on which our economy is based. (note I’m avoiding the term “free markets” because they’re not totally free, and because I’m a market advocate, not a free market purist).

    So that’s probably why enviros – as much as they may want to make the arguments you’ve described – probably won’t. Because it would expose their hostility to the economic system that provides their meals.

  2. Tom, I know of no environmentalist groundswell opposing the pipeline. There was a protest in DC last weekend against it sponsored by 350.org. It fizzled. Starting last November the left wing enviro blogs started exposes’ of 350.org and its founder Bill McKibben. Seems they are well funded by the “1%”. And they were joined by the Sierra Club which got caught taking most of their money from frackers. Then just a few days ago there was this great expose on WUWT, that Bill McKibben was paid very well by people he pretends to denounced. The article was taken word for word from an article by James Tracey on Global Research , a hard left blog, posted last November. So what’s happening? Are right wing nut jobs reading hard left blogs looking for dirt on the faux left?
    McKibben is useful because he is the very stereotype of an environmentalist that the right loves to hate. He acts like a rebel while lobbying for policies that make frackers rich. There are people who see through this, we just aren’t well funded.

    • Hiya Marty

      Do you have a link to Anthony’s post on McKibben?

      • http://opinion.financialpost.com/2013/02/14/rockefellers-behind-scruffy-little-outfit/

        This is the article WUWT linked to . Notice the title. Do readers of the Financial Post think that linking to the Rockefellers is disparaging?

      • Wow. $2 million a year on payroll? That ain’t bad, given the size of that outfit. Wonder if they need any workers…

      • This is from a real left wing environmental blog:

        “A leading mouthpiece of the CO2 global warming hysteria is science author and journalist Bill McKibben, who oversees the popular 350.org publicity outlet. Through this effort McKibben has succeeded in convincing young and old alike to draw attention to the “scientific” assertion that atmospheric carbon dioxide levels are advancing from the low 300s to 400 parts per million of overall atmospheric gases—an ominous .01 percent—by sending in money, buying 350.org paraphernalia, partaking in civil disobedience and even hiking across the United States. This is an impressive public relations accomplishment. More importantly, however, such antics cleverly lend themselves toward authenticating the notion that most every extreme weather event is attributable to dangerous CO2 levels. This conjecture has become as central part a part of the powerful liberal and progressive opinion generating apparatus as the declarations of eugenicists seeking to build a master Nordic race a century ago—an assemblage of scientists and publicists who were, uncoincidentally, funded by some of the same interests.

        McKibben’s 350.org project is the public face of his 501(c)(3) 1Sky Education Fund, which between its founding in 2007 and 2009 took in close to $5,000,000 in foundation money and “public contributions.” In 2010 the Rockefeller Brothers Fund gave 1Sky $200,000. The key “scientific” paper McKibben points to as support for his dire warnings on climate change, “Target Atmospheric CO2: Where Should Humanity Aim,” coauthored by NASA scientist James Hansen, was partially funded through Rockefeller Foundation money.[15]

        The piece is not so much a scientific report as it is a set of mandates calling for drastic social and political action to avert continued CO2 “buildup.” “Preservation of a climate resembling that which humanity is accustomed,” the authors assert, “requires that most remaining fossil fuel carbon is never emitted to the atmosphere.” Independent researchers and journalists assert that such proposed policies based on tying carbon emissions to atmospheric decay, many of which are already underway in some US states at the local level, will inevitably curtail further industrial development (and consequently economic growth) of almost every type and circumvent existing property rights while ushering in a new age of near-feudal hardship.[16]

        McKibben and 350.org are an especially proficient example of the many foundation-supported promotional outlets that, in the tradition of Edward Bernays, have since the late 1990s fundamentally altered public perception and discourse on weather and the climate. This is particularly the case among members of the intelligentsia who disturbingly accept the pronouncements of calculating figures such as McKibben and Vice President Al Gore—individuals that routinely demonstrate their contempt for science and the public interest by trumpeting the assumed inevitability of an uncertain theory. As a result the CO2 explanatory phantom dominates center stage and wholly removes from consideration far more probable causes of unusual and extreme weather.”

      • The last quote was from Tracy’s article at Global Research.

  3. Conrad Dunkerson

    This article is almost entirely fictional.

    Maybe we should define some of the terms in that ‘oil pyramid';
    ‘Proved reserves’ – Oil that we have actually found and have the technology to extract at costs not much higher than current.
    ‘Technically recoverable’ – Possible to recover with current technology IF we ignore the fact that it is currently not economically viable to do so AND do not factor in the energy which would be used in extraction.
    ‘Oil shale’ – Sedimentary rock infused with kerogen which can be separated out to a liquid by heating the rock. Current technology can only slowly recover small amounts at very high prices and with the resulting fuel providing less energy than was used to obtain it.
    ‘Undiscovered resources’ – Oil products which are estimated to exist in unexplored areas (at this point that basically means deep water and the Arctic) based on their geological history with no consideration of whether they are recoverable or not.

    Can we assume that future technology will make ‘technically recoverable’ and/or ‘oil shale’ resources cost effective? Sure… but if we’re talking about future technology we need to remember that OTHER energy technologies are not just going to stand still either. The fact that there is the possibility of future technology allowing us to tap a couple hundred years worth of oil is no different than economically viable breeder nuclear reactors, nanoscale rectifying antennas for direct conversion of sunlight into electricity, high altitude wind power ‘kites’, and any number of other things which DON’T ACTUALLY EXIST YET. Which of these possible scientific breakthroughs will actually happen is, along with the ones we haven’t even thought of yet, impossible to predict. However, the fact that oil companies have been spending billions on trying to crack these technological problems for decades makes me think there is greater likelihood of success in some of the newer avenues of research… with solar power looking like a near inevitability at this point.

    • CBD,
      It is much less non-existent then the climate catastrophe that enables your idiocratic posting.

    • Conrad, you’re welcome to point out errors in fact at any time. I know the definitions of recoverability you cite and I’ll bet so do most readers here. In fact I suggest you consult Tim Worstall’s blog for a bit of refinement of your own definitions.

      I know that petroleum will get harder to find and more expensive. That’s why I wrote in my post that it will get harder to find and more expensive.

      It seems as though you really have to work very hard to find a reason to disagree with what I write. And yet you say it is almost entirely fictional.

      You’re writing from reflex, not from any real thought on the subject. I thought better of you.

      • So you see nothing dishonest or misleading in posting that graphic to support your contention of ‘increasing availability’ of oil and ‘exploding the myth of Peak Oil’ WITHOUT disclosing that the tiny red bit at the top really is the only portion which is CURRENTLY recoverable?

      • No. Not at all. If you choose to ignore the appropriate definitions it is your decision.

        Sent from my iPhone

  4. Tom,Sorry but on this one you are hung out in extremist fantasy delusion land.
    There is nothing wrong with Canadian oil, and a pipeline is the one environmentally sound way to move it from where it is to where people can use it.
    You might want to revisit the antics of enviro extremists regarding the Alaskan pipeline int he 1970’s: They were using some of the same style arguments, and they were, to be charitable, wrong.
    But they did shake down a lot of money from gullible people of good will.
    Every single claim they made about destruction of the environment was false.
    They claimed the caribou would go extinct, that the tundra would fail, that it was not helpful, that it was not needed, that it could not be built or operated responsibly.
    But the fat cat NGO’s got fatter, and their lawyers got rich on fees litigating it.
    You are being deceived by the same sort of schills regarding Canadian oil and the pipeline..
    Just like so many have been regarding windmills:

    http://www.telegraph.co.uk/earth/energy/windpower/9889882/Wind-farms-will-create-more-carbon-dioxide-say-scientists.html

    • I’m not sure I have offered a firm opinion on whether or not we should use Albertan oil, Hunter. I’m analyzing the facts on the ground and here offer my opinions on the debate and some arguments environmentalists might use if they develop some common sense and try and win the argument as opposed to just dancing around.

      • Tom,
        We should produce the Canadian oil sands and move them to refineries via pipeline as soon as possible. Anyone who cares about the environment should support Keystone and fight ethanol. Paying Canadians to not produce is madness. Read the tripe and idiocratic ignorance of the CBD’s of the world. Do you want to be associated with kooks like that in any way?

      • Hunter, tone down your description of people like CBD, please. He’s your opponent in a political struggle. That does not make him stupid, ignorant or evil. He’s just on the other side.

      • I disagree with CBD about half the time, but Hunter’s language is over the top.

      • OK. More sweetness and light, fewer over the top rhetorical flourishes.
        I do wonder if CBD and the other climate obsessed will stop calling people liars for daring to disagree with them?

      • Thanks, hunter–don’t try and measure yourself by the actions of those you oppose. Set and live up to your own standards. I speak from experience, as you well know.

  5. Some minor quibbles:

    “Let’s have a brief look at the real issue. Environmentalists argue (or would argue, if they had the courage to match their convictions) that the oil in Alberta should be left undeveloped.”

    Here in Canada, that is an argument occuring (albeit in a muted fashion) at the national level. Two of the three main parties would be more than happy to pander to the enviromentalists and shut down the tar sands – they’d get to be smug about saving the earth *and* punish Alberta for voting Conservative since the dawn of time…

    “Fighting over a secondary issue because you don’t have the courage to take on the real issue…”

    That the primary debate isn’t happening in the US is no big surprise – there’d be no real point. Canada is still a sovereign nation able to make it’s own decisions for it’s own reasons. Good luck convincing us to leave that big an economic driver alone. As well, I can’t imagine that any US enviromentalist would be capable of proposing paying us to leave the oil in the tar sands – any payments would go to either big corporations or wealthy foreign governments.

    (Nice thought on bribing us to leave the oil alone, though. I can see an entirely new approach to foreign policy here: “Nice climate you’ve got there. Be a shame if anything were to happen to it…”)

    “There are good reasons to consider leaving it in the ground”

    1 – Developing the infrastructure to utilize the tar sands takes some time. From a national security viewpoint, it might actually make more sense to build that now, not later. That way, when the oil is needed it’s easily available. It’s not like we’re going to run out anytime soon.

    2 – Whose economic interest? From a Canadian point of view selling the stuff now, while there is a demand for it, makes much more sense than waiting and hoping that technolocigal innovation will not provide alternatives.

    3 – I agree with you here, but the green movement doesn’t seem to (an evil hydrocarbon is an evil hydrocarbon, right?). The scaremongering on fracking is the biggest impediment to this.

    In general, though, I’d have to agree with the main point of your post: the fight against the Keystone pipeline is fundamentally stupid. Tar sands oil is going to be produced and is going to be sold, and there really isn’t anything the US can – or will – do about that. Blocking a single pipeline won’t change that basic fact. This is all about optics and symbolism, not sense and reality. But then, doesn’t that describe the entire history of the enviromental left?

    • Ah, playing the ol’ national sovereignty card, are we…? :)

      At least I mentioned that we ought to compensate Canada. That’s gotta be worth something. If we (or the UN) ever did, you ought to think about it up there–you could start a Norwegian style wealth fund and all have happy retirements.

  6. Hi Tom,
    1. I know you are following the climate sensitivity discussions. Almost everyone agrees the IPCC estimate are exaggerated. There is no issue with CO2. Remember CO2 lags temperature by 100’s of years – it does not drive global temperatures.
    2. So on this basis alone we should extract all the carbon we can. Carbon energy is the single most important driver of lifting people out of poverty.
    3. Paying Canada to keep the oil in the ground. Paying farmers not to grow crops really worked out well, he he!. Who do you pay, the oil companies who own the rights? Shall we have a referendum and ask just the greens to pay. Dumb idea.
    4. last time I looked Canada was a sovereign nation. They can do what they please with the oil.
    5. You know in your hearts of hearts that oil is coming out of the ground.

  7. Fred from Canuckistan . . .

    “The tar sand deposits in Alberta are one-third two-thirds (oops) the size of Saudi oil reserves,”

    The Oil Sands of Alberta do not magically stop at the Saskatchewan border. By some accounts, the Saskatchewan Oil Sands are at least equal to the Alberta deposits.

    As the fear and panic over the Great Glowball Warming Thingy starts to fade – and make no mistake, when Hanson, Trenberth and Annan start walking back their doom & gloom because their theory and computer models are proving to be false, the great big hairy scary environmentalist project is over and their apparent life is just the rotting corpse twitching as it decomposes.

    OBamBam will throw his enviro sycophants under his political bus and approve the Keystone . . . he may be clueless about science and economics but he has a very well tuned political ear and the need for jobs and revenues will trump the enviro fear mongering.

    • Hiya Fred

      Well, I’m a committed ‘OBamBam’ fan, although I wouldn’t go so far as to claim sycophancy status. You are correct about him being a pragmatic centrist. I’ve said that for four plus years now, to the jeers and sneers from both sides. I don’t want to get all political on you, but how is it you understand his pragmatic centrism on environmental issues and not on all subjects?

  8. putting them on the market would effectively remove all constraints (except price) from unlimited fuel consumption

    The only constraint now is price.
    Conventional oil reserves are nonsense. They are based on how much oil is economically extractable at the current price.

    Same goes for fossil reserves…since we can convert coal/natural gas to oil.

    This document prepared for the State of Wyoming by Idaho National Labs has some interesting price points..also has some interesting emissions numbers…

    https://inlportal.inl.gov/portal/server.pt/document/116035/energy_development_opportunities_for_wyoming_pdf

    …..basically at $145/barrel transportation fuel in the US becomes unlimited anyway.

    IMHO The ‘stopping Keystone’ people are just ‘useful tools’ in a war between various ‘transportation fuel’ interests and various interests making money transporting transportation fuels.

    The proposed 2025 US CAFE standards are going to revolutionize trans-portion anyway…there will have to be some CO2 free vehicles in the mix in order to make the standard. They’ll get subsidized just like the Chevy Sprint was subsidized when US CAFE standards were first introduced.

  9. Actually we canadians are counting on your government to block Ketstone again.
    Politically that will be far more beneficial to our long term interest.
    Once the oil flows east or west, invoking national interest, we are less likely to be taken down as your economy tanks.
    So please keep fighting to block keystone.

    • John,
      You hit a good point: The national miasma that has permitted climate hucksters to hijack the public square is deeper than climate. Look at the hand wringing over cutting something under 1% of federal government expenditures. This is an odd war we are waging on ourselves, but like with any war the first casualty is truth. The climate hucksters have led the way, but they are being followed by many, many more parasites and opportunists.

  10. ” If it’s the ‘last man standing’–the last large reserve to be developed–it will command a scarcity premium. ”
    If the owners of the tar sands thought they could make more money if they waited until tomorrow to sell, they would wait until tomorrow. There would be no reason to have to pay an incentive for them to make more money. This means the folks who look at the future of oil disagree with your prognostications. Or they agree with the peak oilers and think now is the time Canada et al need the oil.
    Whose money would you pay Canada with? You expect to get it back when they develop the oil eventually, right? With interest, right? If there is some future where the oil sands are desperately needed and will be developed, why would the climate care whether it happens now or later?
    Harry, isn’t the history of CAFE replete with automakers – and their representatives in Congress – showing great ability to ignore the standards when people don’t want small cars? That’s my recollection. CAFE killed the Kingswood stationwagon and replaced it with Suburbans, Broncos and Hummers.
    CAFE and Keystone are alike in one respect- they require a belief that the government can completely control the auto and oil markets. Gas prices drive both auto fleet mileage and drilling.

  11. The other thing about Keystone is the implied connection between Keystone and electrical dgenerating plants- when keystone/Canadian oil is about *transportation fuel*, not power generation.
    I wonder how many of the glitterati getting arrested in front of the WH understood the distinction?

  12. Hi Thomas,
    Althouth an interesting idea, there are three things making this a nonstarter.
    – How many years did we pay for a strategic helium reserve after lighter than air travel was obsolete?
    – We are going to pay an owner not to produce and then hope they will sell it to us and not the highest bidder 50 years from now? Good luck with that. We would be better off buying the stuff and storing it in our strategic oil reserves.
    – Unless you have more sinister methods of persuasion, you have to offer people more money than their potential profits. So if extracting oil from Canadian oil sands is profitable at $60 and current prices are $97 that’s $37 a barrel. So if we offer 20% ($7.40 a barrel) of the profits and the Canadians think they can extract half their reserves in the next 50 years, that’s 85.1 billion barrels x 7.4 over 50 years. I’m pretty sure we are not willing to pay Canada a cool $12 billion a year to keep gas and oil prices higher.

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