State Dept Keystone Review Assumes 'Global Failure to Address Climate Change'

Environmental groups tell State Dept that assumptions made in its Keystone review could 'undermine the nation’s credibility' during UN climate talks.

Students protest against the KeystoneXL pipeline during a March 2 march and sit-in at the White House. Credit: Kristina Banks

As the deadline for public comment on the Keystone XL pipeline arrived on Mar. 7, environmental groups told the Obama administration that the State Department's analysis of the project was based on flawed assumptions that clash with the nation's commitment to mobilizing global action against climate change.

In its final environmental impact statement (EIS) issued on Jan. 31, the State Department asserted that no single project would have much effect on the growth of Canada's tar sands industry. It based its conclusions partly on business-as-usual projections that oil demand and prices would rise amid continued worldwide inaction on global warming.

The Natural Resources Defense Council said in wide-ranging comments that the EIS "makes a fundamental error by relying on energy consumption scenarios which assume a global failure to address climate change."

If the State Department stuck with its predictions that energy consumption and prices were destined to remain high, it would "undermine the nation's credibility" during United Nations talks aimed at heading off the worst effects of global warming, the advocacy group said.

Climate experts from around the world have agreed to aim for a binding treaty to be signed in Paris in 2015 that would keep emissions at a level consistent with global warming of no more than 2 degrees Celsius. According to the scientific consensus, this means not letting carbon dioxide emissions grow above 450 parts per million in the atmosphere. To stay within this limit, widely accepted computer models project that as much as 80 percent of available fossil fuels must be left in the ground.

But in analyzing the Keystone XL's effects, the State Department never considered the decline in oil use that would occur under an effective global climate treaty. Achieving a climate deal is a high priority for Secretary of State John Kerry and President Obama, who are the ultimate decision-makers on a permit for the Keystone XL .

The authoritative International Energy Agency has projected that under carbon cuts aimed at hitting the international safe-climate goal, United States demand for petroleum would drop from 17 million barrels a day in 2011 to just 10 million barrels a day in 2035.

Instead, the State Department's Keystone analysis adopted business-as-usual assumptions in which U.S. consumption either grows to 19 million barrels a day, or in the best case declines only slightly.

The agency's assumptions about the energy markets "must be interpreted as analysis centered on a world where curbing climate change is not a priority," said a separate report released Monday by the Carbon Tracker Interactive, a nonprofit that links capital markets to climate issues.

Oil Prices: High or Low?

The NRDC's comments to the State Department were written for a coalition of several environmental groups that have made common cause against the pipeline through the five-year review of the project. The public was given 30 days to comment on the Jan. 14 environmental review. The pipeline will carry fuel from Canada's oil sands region to the Texas Gulf Coast.

In their comments, the groups pointed out that if the world acts now to rein in the use of oil and other fossil fuels as part of a global climate deal, demand for those fuels would fall—and so would prices.

With prices lower it would be harder for tar sands oil producers to turn a profit. To remain profitable, producers would need to keep down the costs of transporting oil all the way to the Gulf Coast, a crucial artery for the flow of tar sands abroad. Because pipelines are cheaper than rail, projects like Keystone XL would hold the key to tar sands profits.

Therefore, the groups reasoned, building the Keystone XL and other pipelines would be essential if the Canadian oil industry is to double or triple tar sands output in the decades ahead. Rail would be unaffordable if oil prices fall, they said. Only the Keystone XL, and others like it, could enable the higher tar sands output—and the higher emissions that would exacerbate global warming.

The State Department, on the other hand, believing that oil prices would stay high, argued that even without pipelines, the Canadians could afford to expand the tar sands and deliver the oil by rail. Its review said it was unlikely that oil prices would decline in the years ahead. And so, the Keystone XL line would not affect the rate of tar sands growth, and its approval would make no difference to global warming, the agency concluded.

NRDC and the Carbon Tracker Initiative both said that the State Department had relied on projections for oil demand and prices that were much higher than those suggested by the International Energy Agency, under a scenario that assumed nations would devise a way to restrain emissions to relatively safe levels.

The scenarios built into the market analysis that is at the heart of the State Department's environmental review did not include any "supply/demand outlook or other elements that would be consistent with a global energy sector that is evolving to contain the risks of climate change," the Carbon Tracker report said.

The State Department and its contractor assumed "growing global oil demand and a trajectory for future oil prices strongly at odds with the trends likely to persist in a world that is aggressively reducing carbon emissions," it said.

Both the United States and Canada have already pledged to reduce carbon dioxide pollution by the year 2020 to a level 17 percent below the 2005 mark, with steeper reductions to follow. The United States is on course to meet this goal if new controls on emissions from coal fired power plants are imposed, as the Obama administration is proposing. But Canada has conceded that it is unlikely to meet the target, largely because of emissions associated with growing production of tar sands oil.

By drawing the connection between the State Department's analysis of the Keystone project and its task in the ongoing international negotiations—which resume this month in Bonn—the environmental groups were reminding Secretary of State John Kerry that the current examination of whether the pipeline is in the national interest must take global interests into account as well.

European nations, in particular, are adamant that the new treaty should respect the 2 degree safe climate goal and that nations should explicitly declare what steps they are taking to stay within the desired limit.

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