How the construction of the Keystone XL Pipeline would affect the United States - Term Paper Example

How the construction of the Keystone XL Pipeline would affect the United s Introduction This policy paper is addressed to the US congress which is the authority that can approve the construction of the Keystone XL pipeline. The congress should be aware of the adverse consequences that the pipeline might cause to livelihoods of many US citizens. The pipeline will cut through many rivers that supply clean drinking and farming water to thousands of Americans. In the event of oil spillage, the damage to the ecosystem will be irreparable. The pipeline will increase the toxic levels in the refineries thus instances of cancer among the local communities will be high. The current US energy policy allows Canada to ship oil to main refineries in the US; the congress should reject any attempts to authorize the construction of the Keystone XL pipeline (Alperrovitz and Speth 164). Geothermal power, coal and hydroelectric energy are friendlier to the ecosystem. Coal has some negative impacts like air pollution but it can be exploited cheaply. Hydroelectric energy is more reliable and sustainable to produce since the US has many rivers and dams. The US energy policy should aim at enhancing biodiesels energy since it does not damage the environment and encourages recycling of waste. The government should invest heavily in geothermal power exploitation in order to meet the current energy needs and ensure sustainability of the energy supply (Fickling and Schott 67). Statement of the purpose Keystone XL pipeline will cover about 1661 miles from Alberta through Oklahoma and finally terminate in Texas. The pipeline is intended to ship Canada oil sands to US refineries in the Gulf coast. TransCanada, which is the company behind the pipeline proposal, has made plans of constructing the pipeline using thinner steel in order to avoid instances of oil spillage. If plans of the pipeline proceed, the pipeline will increase the level of toxic tar to the US ecosystem and jeopardize national goals of achieving renewable and clean energy sources. The pipeline will transport approximately 1 million barrels of crude oil daily to the US refineries. Keystone XL pipeline construction has both positive and negative consequences to the US economy (Rapier 237). The debate of the pipeline project has become a major political weapon especially in the current election year, where several politicians have taken opposing views on whether the US congress should permit Keystone XL pipeline construction. The pipeline will boast the staggering economy through additional jobs in construction sites and refineries. The pipeline will adversely affect the climate policy since heavy and poisonous gas emissions are expected from the refineries (Alperrovitz and Speth 173). The pipeline will destroy water resources since it will cut through several rivers that supply safe drinking and agricultural water to the communities living near the pipeline (Fickling and Schott 69). There have been numerous public concerns and heated debate on dirty oil emissions and oil spillage that may damage the US ecosystem. Introduction On November 4th 2011, TransCanada announced its support for the Keystone XL pipeline. The State of Nebraska supports the development of the pipeline. If the proposed pipeline is approved, the pipeline will avoid sand hills since Nebraskans will give their decisions on the pipeline root (Rapier 270). The proposed pipeline will expand the current TransCanada Keystone pipeline network. It will have the capacity to deliver the Canadian oil sands up to 100,000 barrels per day from the production in North Dakota and Bakken formation (Rapier 237). The production of oil from North Dakota has shot up in the past few years from the initial 100,000 barrels per day to the current 450,000 barrels per day (Rapier 277). According to the US law, cross border pipeline projects should receive Presidential permit and the authority is delegated to the State Department. Under the current North American Free Trade Agreement (NAFTA), transport of Canadian oil to US markets and refineries and markets through rail, ocean or increase in volume through the existing pipeline is prohibited thus US has to look for alternative energy sources. However, the open trade between US and Canada has led to more cross-border investments between the two countries. Proponents of the pipeline assert that diverting the Canadian oil sands to Middle East markets would harm the US refineries as the Gulf of Mexico refinery industry has invested heavily in new refinery technology (Rapier 293). Below is a map of the proposed Keystone XL pipeline and the existing pipeline. (Fickling and Schott 2011) Cost benefit analysis of Keystone XL pipeline Economic impact The construction of Keystone XL pipeline will act as an economic stimulus to the US economy. The construction will create jobs along the pipeline route and construction site. The stable supply of oil to the US will also lower the energy prices. The current refineries will have to expand and employ more workers. The issue of “energy independence” has attracted a long debate. The US economy consumes 25 percent of the global energy consumption but can only produce about 5 percent of her energy needs (Rapier 285). The stable supply of oil to the US economy from a predictable source like Canada will aid in economic development. The Pipeline expansion will link Canadian oil producers with a major market supplier in the US. The pipeline will improve the capacity of refineries and marketers to refine and export the oil products to other overseas economies. The local population along the pipeline will also benefit from the increase in revenues and economic activity generated by the construction works. Local property taxes will have to be paid on a continuous basis (Rapier 294). The pipeline will improve the capacity of the US to plan for its energy requirements. With stable supply from a reliable source like Canada, there will be few business interruptions in the US due to increased supply and stock of energy. The prices of the crude oil products like diesel and petrol will decline due to the abundant supply thus lowering the overall costs of production in other sectors that depend on energy for their operations (Rapier 342). High global oil prices are one of the factors that contributed to the decline of the recent global recession in the US. A decline in the energy costs will increase the production output of many industries thus prices of commodities will definitely decline (Washington Post 4). US exporters will also benefit from reduced and stable energy costs. US exports will become more competitive in the global markets because of low prices after the reduction in the manufacturing costs (Rapier 323). The US economy will depend on imported energy for the foreseeable future. Alternative energy sources such as biodiesels, hydroelectricity and geothermal energy are not sufficient to meet the high energy demand in the economy. Keystone XL pipeline will stabilize the energy demand by reducing the oil demand deficit that has been created by unreliable supply from the Middle East economies (Washington Post 5). The current oil transportation pipeline is already overstretched thus future energy demands will not exceed the oil pipeline capacity (Hiscock 220). Investment in Keystone XL pipeline is worth since the current crude oil pipelines and pipelines transporting the crude oil products are currently operating at full capacity (Bureau of National Affairs 95). The US will experience permanent benefits due to savings of achieving a reliable oil supply that can meet the future oil demands. According to Perryman Group estimates, the business activity from stable oil supply includes $ 100.144 billion in total spending and $ 29.048 in the form of business output (Perryman Group 26). A total of 250, 348 permanent jobs will be created by permanent oil supply in the US economy. According to Perryman Group, the benefits associated with reduced oil prices include $ 221.305 billion in total spending, $ 65 billion in total output and half million jobs (Perryman Group 30). TransCanada has set up plans to contract more than 13,000 Americans to work on the construction site as welders, mechanics and electricians. Additional 7,000 jobs will be created in the manufacturing sector along the pipeline (Perryman Group 45). The additional jobs will lead to increase in the demand for goods among the communities living near the pipeline thus increasing the gross output in the economy. The decline in crude oil prices will not definitely reduce the gasoline prices paid by consumers in the Midwest. There are no WTI discounts for gasoline. Midwest prices for gasoline is usually high since the crude oil must be imported from other markets outside the region. The US market will have to purchase gasoline at the prices prevailing in the global markets otherwise the distributors will sell to the Asian markets. The US gasoline market will continue to depend on Asian suppliers and other suppliers outside the region since the US market prices will still be shaped by the global market forces. For instance, the Midwest refineries paid a higher price for the crude oil compared with gulf coast prices for crude oil but the relative gasoline prices which are determined by the global market forces were not changed (Hiscock 221). However, proponents of the Keystone XL pipeline assert that crude oil prices are the determining factor in the global gasoline markets. The increase in the supply of crude oil at the market demand will lower the prices of crude oil leading to a decline in gasoline prices. However, the prices of crude oil will not definitely decline with the increase in supply since they are influenced by many global factors. Other factors that shape the prices of crude oil include the rate of economic growth, the political stability in the supply countries and the stability of the US dollar (Morton 187). Environmental concerns Climate scientists have expressed environmental concerns on the construction of Keystone XL pipeline. According to environmentalist, Keystone XL pipeline will increase global warming due to increase in carbon oxide emissions (Friends of Earth 4). Portions of Keystone XL pipeline will cut across active seismic zone that has the potential of 4.3 magnitude earthquake. The dirty tar sand oils contain more poisonous emissions than the conventional oils. It is estimated that they emit three times more carbon dioxide than the normal oils. Keystone XL pipeline will impair US climate policy objectives of achieving sustainable and clean energy sources. Greenhouse gas emissions from the crude oil refineries in the Gulf coast will increase global warming and air pollution in the US (Bureau of National Affairs 75). Keystone XL construction will damage the limited water resources. A lot of water is used in the refineries to clean the extracted products, clay, bitumen and sand. It would require three times amount of water to extract a single unit of oil in the refinery. The tar operations will consumer nearly 400 million gallons of water to extract the needed oil daily. The used water is acid and poisonous to aquatic life (Friends of Earth 5). The acidic water will be dumped in human made pool thus the possibility of mixing with the neighborhood drinking water is high. Most of the communities living near the pipelines and crude oil refineries suffer from water borne diseases and dangerous respiratory infections thus such cases will increase if the pipeline is approved (Bassey 56). The people of North Alberta have unique cultural lifestyles and rich traditions that may be destroyed by the construction of the pipeline. The pipeline will lead to massive relocation of people thus many families and societies that have lived cohesively will be interrupted by the construction of the Keystone XL pipeline. Communities will suffer from rare cancers and other water borne diseases when the pipeline is constructed. TransCanada has in the past tried to justify the safety of the pipeline from oil spillage by claiming that it will be much thinner than the normal steel and pumping will be done at normal pressure. The threat of crude oil spillage is still high. A million gallons of tar sand oils that poured in to Kalamazoo River in Michigan from pipeline spillage was associated with poor work of another Canadian company (Friends of Earth 6). The spillage exposed the communities to high health risks and totally damaged the surrounding ecosystem (Jere 246). The proposed pipeline is extensive and will cover six States and cut through major rivers like Yellowstone and Missouri Rivers that are key water resources for agricultural production like the Ogallala Aquifer (Friends of Earth 7). Increased carbon dioxide emissions will lead to acidic rainfall and respiratory complications like asthma. The pipeline will also increase global warming and air pollution. The US congress should stick to its climate policy of investing in sustainable and clean energy and reject any plans of constructing the Keystone XL pipeline (Flynn and Burnett 220). Politics Keystone XL pipeline project has attracted intense political debate. Republicans assert that Keystone is a job creating a project that is being thwarted by environmentalists. Job creation and environmental concerns are two major issues currently affecting the US. According to Democrats, oil spillage will also end the jobs created by the pipeline. According to Democrats, the pipeline will have unfavorable consequences on the health of the people thus lowering the expected quality of life. The Democrats assert that other vital sectors in the South like tourism and robust agricultural activities will be adversely affected since the pipeline will pass through major rivers (Flynn and Burnett 219). According to Democrats and reliable reports from the State Department, tourism employs 780,000 people in the six States while agriculture employs 571,000 people in the six States. Keystone XL pipeline will only create 20,000 additional jobs but reduce more jobs in the agricultural and tourism sectors. Gas prices have been a weapon in every election year. Republicans assert that construction of the pipeline will help in reducing the gas prices. According to Perryman Group, the pipeline may lower the average cost of gas in the US by 4 cents a gallon (Perryman Group 59). However, opponents of the pipeline assert that the oil and gas production will be carried out near the Gulf of Mexico ports, thus there is high likely hold the products will be shipped to overseas markets and priced at a higher price. The pipeline will undermine US efforts in becoming a clean energy economy and its efforts in steering global climate change (Hiscock 220). Geopolitical issues High oil prices have been a leading concern for the US economy. The rising demand for oil by emerging economies and increased imports from the Middle East has forced the US to find new stable supply (Coburn 210). In 2010 alone, the US imported about 2 million barrels of oil per day from Canada through land based pipelines which is about 24 percent of total imports in the economy. However, oil production output in Canada need to expand to match with the rising demand in the US market. In 2010, the US -Canada ‘bilateral trade totaled $ 525 billion while 10 million Americans were employed by trade activities from Canada (Bassey 79). Canada has been a close ally of the United States. Canadian authorities have expressed their displeasure with the recent postponement of the approval of the pipeline (Nerurkar 6). Canadian authorities may decide to export the crude oil if US authorities reject plans of constructing the Keystone XL pipeline (Flynn and Burnett 219). Proponents of Keystone XL pipeline assert that it will aid the US in increasing its energy security. Due to security tensions between the US and leading oil producing countries in the Middle East, the US need to invest in Keystone XL pipeline in order to enhance its energy security. According to the opponents, Keystone XL pipeline will deliver oil to the Gulf of Mexico thus it will not help in ensuring national security since most of oil will be exported to Asian markets by the refiners (Coburn 214). Major suppliers of oil to the US like Saudi Arabia, Nigeria and Venezuela have faulted the plans to construct the Keystone XL pipeline claiming that it will bring dirty tar oils that are unfriendly to the environment (Coburn 219). Oil supply to the global markets have been interrupted due to political uprisings in some countries like Syria and Yemen thus the US is looking for a more friendly supply of crude oil. The US worries about Iran and North Korea nuclear plans and the future peace of Asian continent. The 2003 US invasion and occupation of Iran and Afghanistan made Iran ditch the US currency as the standard currency in the global oil markets. Iran , which is a leading oil supplier in global markets, has since cut trade ties with US thus new sustainable sources of energy should be implemented. High hostilities among Asian countries could draw other oil trade allies like Russia in to military confrontations thus reducing the oil supplies in the international markets (Byers 94). Though Canada is a friendly supplier, the US government should not approve the construction of the pipeline since it will cause massive environmental damage. For sustainable energy supply, the government should invest in clean and renewable energy sources like hydroelectric and geothermal power (Nerurkar 10). Recommendations If Keystone XL pipeline is constructed from Alberta to Texas, the tar sands oils will damage the ecosystem. Keystone XL pipeline will increase supply of crude oil to the global oil market and not the US market. The prices of crude oil and gasoline may not decline since much of the refined oil will be exported to Middle East emerging economies. The growing tensions between Asian oil producing countries and decline in production in Nigeria and Brazil will force the US to invest in alternative energy sources. Oil sands are part of the large trade and investment relations between the US and Canada and rejection of the project will not strain the diplomatic and trade relations between the two close allies. The gaseous emissions from the oil sands crude oil are dangerous to the public healthy of communities living near the pipeline. The risk of oil spillage is high thus this pipeline will jeopardize the public health of communities living near the pipeline. The Republican governors and senators should stop politicizing a national issue of greater environmental concern. Oil spillage will lead to destruction of the ecosystem and loss of more jobs. The long term adverse impacts of the pipeline like increase in respiratory diseases, global warming, acidic rains and relocation of communities will outweigh the temporal economic benefits like increase in construction jobs. The adverse environmental damage of the pipeline outweighs the economic benefits such as stable oil supply and reduced prices. The energy policy should aim at investments in sustainable and environment friendly sources of energy such as geothermal power and hydroelectric energy. Works cited: Alperrovitz, Gar and Speth, James. America beyond capitalism: reclaiming our wealth, our liberty and our democracy. 2011. Bassey, Nnimmo. To cook a continent: destructive extraction and climate crisis in Africa. London. Pambuzuka Press. 2010. Bureau of National Affairs. Construction labor report. Washington, DC. Technology and Engineering. 2011. Byers, Michael. Intent for a nation: a relentlessly optimistic manifesto for Canada’s role in the world. Vancouver. Douglas & Mcintyre. 2008. Coburn, Tom. The Debt bomb: a bold plan to stop Washington from bankrupting America. New York. Routledge. Fickling, Meera and Schott, Jeffrey. NAFTA and climate change. Washington, DC. Peterson Institute for International Economics. 12 Flynn, Gregory and Burnett, Debra. The Keystone XL pipeline project: proposals and considerations. New York. Nova Science. Friends of Earth. Keystone XL pipeline viewed on 15th February, 2012 from http://www.foe.org/projects/climate-and-energy/tar-sands/keystone-xl-pipeline Hiscock, Geoff. Earth wars: the battle for global resources. New York. John Wiley & Sons. Jere, Wade. Environmental risks of the Keystone XL pipeline. New York. Routledge. 2011. Morton, Joseph. Testy Pipeline (Keystone XL) debate expected amendment oil travelling through stays in USA. Viewed on 15th February, 2012 from http://www.democraticunderground.com/101446027 Nerurkar, Neelesh. US oil imports: context and considerations. Washington, DC. Congressional research service. Perryman Group. The impact of developing the Keystone XL pipeline project on business activity in the US. Washington, DC. Perryman Group. Rapier, Robert. Power plays: energy options in the age of peak oil. New York. Springer-Verlag. . 2012. Washington Post. Keystone Pipeline debate heats up. Viewed on 15th February, 2012 from http://www.washingtonpost.com/national/health-science/keystone-pipeline-debate-heats- up/2011/11/04/gIQA824rpM_story.html Read More