Editors Note: This article was re-featured after its publication in September following the Senate's payroll tax extension which includes a provision to force Obama to approve or deny the construction of the XL Pipeline within 60 days.
On September 12, hundreds of low-income residents in Nairobi spotted a leak in the pipeline that runs adjacent to their slum. Hoping that they might be able to cash in, many began to pack close to the pipeline to collect the spewing gasoline. A stray spark ignited the fuel and generated an inferno, killing over 75 innocent people. This tragedy illustrates the risks associated with long-distance fossil fuel transport.
Given the varied risks associated with long-distance fossil fuel transport, the U.S. should block the execution of the Keystone XL tar sands pipeline program. The new infrastructure would threaten ecosystem services that are at the core of economic stability, endangering economic development in a crucial region of the country.
Of course circumstances in Kenya, a developing country, present an extreme. Regulatory oversight and accountability are not the same in Kenya as they are in the U.S. However, the U.S. shares the same risks in terms of oil transport. For example, earlier this year, a pipeline owned by Exxon Mobil sprung a leak, sending 42,000 gallons of crude oil directly into the Yellowstone River. (Incidentally, Exxon is now reporting that it will resume operations along the Yellowstone.)
The Keystone XL project is a risky $13 billion capital investment program that will connect tar sands in Canada to the American market for energy. The pipeline poses a direct threat to the many ecosystems and communities that it will traverse en route to being refined.
TransCanada, which has recorded liabilities of about $84 million for remediation obligations and compliance costs associated with environmental regulations, estimates that its pipeline could reasonably leak 11 times within its first 50 years in existence.
Yet, in the year or so since its installation alone, the first stretch of Keystone pipeline has leaked at least 12 times. The argument is made by some, who point to this high frequency of leaks in the existing infrastructure, that a more honest estimate would be to say that the new stretch could leak more than 50 barrels of crude oil close to 91 times within 50 years.
But, as TransCanada rightly says on its website, “it is not possible for the company to estimate the amount and timing of all future expenditures related to environmental matters.” With such immeasurable environmental and economic externalities to consider, risk assessment is more of a game of posture than a display of corporate ethics.
Risk to an ecosystem is not a factor for which advance remedial funds are sufficient. Instead, given that the economy of a locality is so deeply rooted in its ecology, environmental risk should be integrated with economic risk in upfront cost-benefit analysis.
After the oil spill in the Yellowstone, ranchers in the region reported a loss in biodiversity, a decrease in productivity, significant damage to their land, and contamination of their water supplies that will undoubtedly affect output.
Indeed, the EPA expects several hundred acres of wetlands will be affected by the new stretch of pipeline, which will carry 830,000 barrels of oil each day.
Beyond the environmental risks is an underpinning of investor uncertainty. Development in the states that will be cut by the pipeline is already scarce. Montana, South Dakota, and Nebraska contain pockets of rural poverty, the conditions of which will likely be worsened with the introduction of a volatile fuel pipeline. Keystone XL will put low-income, tribal, and minority communities especially at particular risk. With the threat of a spill looming over the economies that stand in the shadow of the Keystone XL pipeline, one can be sure that any business will need a hefty incentive to build or grow in the area.
If TransCanada and the Canadian and U.S. governments viewed environmental costs as part of a larger picture, one that accounts for the relationship between ecosystem services’ reliability and private sector confidence in the surrounding region, there is no doubt the company would have had an a lot more trouble proving that Keystone XL would be in the economic interest of the U.S.
Photo Credit: David Weinberger