At first glance, there is little to distinguish the proposed Keystone XL oil pipeline from any other in the world. If constructed, it would run from Alberta, Canada to the Gulf Coast of America, linking one of the most isolated oil regions in the world to one of the thirstiest markets for oil. It appears to make eminent sense. So what makes this the most hotly contested project in North America?
Canada has the third largest oil reserves in the world, after Saudi Arabia and Venezuela. Unlike those countries, however, most Canadian oil is extracted from oil sands rather than conventional reservoirs. Oil sands are akin to bitumen. They are mined (rather than drilled), cooked and put through a centrifuge to separate oil from waste. In Alberta, there are hundreds of billions of barrels of such oil and Canada already produces about 2.6m barrels a day. The addition of the Keystone pipeline could increase this output by 50%, which is why it has garnered so much opposition.
Production from oil sands is among the most destructive ways of producing energy. Toxic waste is difficult to treat and is created on a colossal scale. Each barrel of oil produced from oil sands comes at a greater environmental cost than oil produced anywhere else in the world. Worse, this is among the most inefficient ways to produce energy. On some estimates, it takes the energy equivalent of three barrels of oil to produce a single barrel of oil from oil sands.
It is economic today only because oil prices remain above $100 a barrel and because North American gas prices are cheap. The production of oil sands is, in other words, a form of energy arbitrage, exploiting the difference between oil and gas prices in North America. This is no one’s ideal way of producing oil.
Production from oil sands comes with enormous environmental costs and is heartbreakingly inefficient. Critics of the Keystone pipeline are right to condemn it.