Did Environmentalists Make a Major Blunder Blocking the Keystone XL?

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Environmentalists are fighting hard to prevent TransCanada Corporation (NYSE: TRP  ) from ever building its proposed $5.3 billion Keystone XL pipeline. The hope is that if the pipeline is never built then it can never burst and spill dirty Canadian oil on American soil. The problem with that concept is that America is still addicted to oil, and, as with every addiction, where there is a will, there will always be a way.

In hindsight it now appears that environmentalists made a major blunder in not allowing that pipeline to be built. America has not only found other ways to get Canadian oil into the country, but it found a way around its own pipeline bottlenecks created by the Bakken oil boom. These new modes of transportation actually pose far more dangers to the environment than TransCanada's Keystone XL pipeline.

Train wreck
One of the ways America is getting around its pipeline bottlenecks is to put more crude oil on America's railways. That has enabled companies like Berkshire Hathaway subsidiary BNSF to transport thousands of barrels of oil per day. In fact, Berkshire Hathaway is handling a lot of the Bakken crude oil volumes that would have been transported by TransCanada's Keystone XL pipeline. That's because the Keystone XL was to transport 100,000 barrels of crude oil each day from the Bakken to the Gulf Coast. Now, that oil is being hauled by Berkshire Hathaway.

While shipping crude oil by rail is relatively safe, there is a big risk of large disaster. That explosive risk was just realized last week, when a Berkshire Hathaway owned BNSF train derailed in North Dakota.

The BNSF derailment caused 2,000 North Dakota residents to evacuate the area around the derailment because of the dangerous fumes from the fire that resulted from the incident. While the damage wasn't major, this incident was just the latest in a string of train derailments over the past year, the worst of which was the tragedy in Canada which took the lives of 47 people. As more crude oil gets shipped by rail, the risk of another disaster only intensifies.

A sinking feeling
Rail, however, is just one of a growing list of problems for environmentalists who oppose the Keystone XL. Shippers are looking at every way to move oil, with the latest proposal being to transport it on a barge through the Great Lakes. This latest project comes from Calumet Specialty Products Partners, L.P. (NASDAQ: CLMT  ) , which is planning on upgrading a dock in Lake Superior to load Canadian bitumen onto barges and ship it through the Great Lakes.

What's worrisome here is that unlike conventional oil, Canadian bitumen is heavier than water, making its clean up difficult as it would sink. Just imagine the environmental disaster if one of these barges sunk in the Great Lakes. The fact the lakes provide drinking water to more than 40 million people makes this proposal all the more risky.

Final thoughts
Canada has the third largest reserves of oil in the world. We need that oil in order to end our ties to OPEC, which is why Canada's oil will be produced and make its way out of the country. The only question is if it will continue to be shipped on riskier trains and barges, or if environmentalists will realize their blunder and back off their opposition to the much safer Keystone XL.

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Read/Post Comments (18) | Recommend This Article (4)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 05, 2014, at 3:23 AM, sklarb wrote:

    First of all, importing oil from Mexico and Canada doesn't make America energy independent. Second, as Charlie Munger, vice-chairman of Berkshire Hathaway states, Energy Independence Is A Dumb Idea:

    http://www.businessinsider.com/charlie-munger-on-energy-inde...

    Third, American energy independence is a myth. The depletion rate of all shale deposits, including the Baaken is much greater than those of conventional drilling, and the largest conventional oil finds in history are producing less and less year after year:

    http://www.businessinsider.com/american-energy-independence-...

    And, finally, look what happened to Indonesia when they didn't follow Munger's advice:

    http://www.businessweek.com/news/2014-01-01/draining-indones...

    "Bekapai, which pumped more than 50,000 barrels a day in 1978, now flows at just 7,000 barrels, a symbol of the decline in Indonesia’s oil and gas production. Aging fields, rising exploration costs and increased fuel demand will force Southeast Asia’s most populous nation to import 90 percent of the oil it needs by 2030, according to the Agency for the Assessment and Application of Technology. "

  • Report this Comment On January 05, 2014, at 7:44 AM, kidshelleen51 wrote:

    Environmentalists nearly always blunder. History has shown us over and over that the noise makers never weigh the benefits against the risks. The perplexing thing is that so many take what they say as gospel. Whether it's the environment, government, or business decisions, the consequences of any decision/action never seems to gets the due diligence that should be part of the process.

  • Report this Comment On January 05, 2014, at 11:44 AM, cdkeli wrote:

    Your egregious sentence: "America has not only found other ways to get Canadian oil into the country,,," is laughable in that "America" (which you evidently accord this honor only to the ecologically clueless 1%) did not in any way endorse the reckless use of inadequately maintained and sub-standard railways to import this Canadian filth!! The oil moguls clearly love to hear reports of crashing railroads and explosions cuz it seems to make a case for pipelines built of cheap steel, inadequately monitored, and incompetently engineered pipelines. If these things were properly engineered the costs would go way up and the greedy and safety indifferent millionaires and billionaires financing these projects and looking to continue to line their pockets would be irate to say the least. Solutions are never cheap but mistakes are far more expensive.

  • Report this Comment On January 05, 2014, at 11:59 AM, boomerang wrote:

    How many of the environmentalist have a financial stake in Berkshire Hathaway ?

    If they truly understood the logistics of moving crude oil products, they could see that pipelines are the safest and most regulated form to move all types of crude oil and refined products made from petroleum.

  • Report this Comment On January 05, 2014, at 12:50 PM, djethereal wrote:

    This is where I feel you are wrong. 1) The environmental disaster that would occur should the Keystone XL pipeline break and contaminate the Ogalala aquifer would be significantly bigger than the train derailment. That's what were trying to avoid, the massive ecological catastrophe. While the train derailment isn't good, it also isn't nearly as big a problem as what could have been. That's the point. 2) They can build, and in fact are building, oil refineries in North Dakota to handle all the oil from not only North Dakota, but Canada as well. Then, we can refine all the Canadian oil like Canada wants us to, as well as our own, without crossing across the entirety of the United States.

    There, all your problems are addressed, and the pipeline is still not needed.

  • Report this Comment On January 05, 2014, at 1:26 PM, charlieK wrote:

    The environmental fascists should be deported to Antarctica;

    there they would enjoy uncontaminated nature as much they like.

  • Report this Comment On January 05, 2014, at 1:27 PM, lm1b2 wrote:

    With the pipeline it could Burst,and do a lot of damage before they found out about it,this happened in Canada a couple times last year.Now at least you know when there is a spill,and action is taken immediately to contain it,Who are you People trying to BS?

  • Report this Comment On January 05, 2014, at 1:50 PM, BubbleBoy wrote:

    Way to go environazis.

  • Report this Comment On January 05, 2014, at 2:16 PM, True411 wrote:

    The pipeline is needed. America imports oil in supertankers, rail cars, and pumps offshore oil in the Gulf, all FAR more dangerous to the environment than the Keystone XL.

    Think about it, pipelines are monitored - they can be shut down within minutes. A pipeline spill will small and on land where it is easier to remediate than a giant supertanker spill.

    "Environmentalists" never consider how best to meet society's needs. "Environmentalists" simply want to obstruct, even if obstructing will lead to a worse solution.

  • Report this Comment On January 05, 2014, at 2:48 PM, TheAncient wrote:

    "We need that oil in order to end our ties to OPEC, which is why Canada's oil will be produced and make its way out of the country. "

    Pure fantasy that the US will get to consume some if any of this oil when prices in Europe and Asia are much more profitable. While the US becomes the dumping grounds for the toxic residue and waste products. I hear a chorus of 'America, the beautiful' in the background.

  • Report this Comment On January 05, 2014, at 4:12 PM, SalEsman wrote:

    Environmentalists consistently blunder. They said no Nukes so we burned coal and had acid rain and 30,000 dead americans a year from air pollution from American power plants. They want to put windmills in shipping lanes. Good Plan. They are against fracking even though it has lead the USA to lower it's CO2 footprint below the Kyoto protocal, the only major country to do so.

    Meanwhile they promote burning trees and trash as renewable energy, while these plants create more pollution than any coal fired plant.

    Bottom line, if Greens are for it, it's probably bad for the planet.

  • Report this Comment On January 05, 2014, at 4:30 PM, SkepikI wrote:

    A useful and interesting article. However, the big blunder does not go to the environmentalists who opposed the Keystone Pipeline...they are typically wrong about many things. The big blunder comes from the Obummer Administration who listened to them and did not sign off on the pipeline - they were the sole roadblock to the pipeline moving ahead to construction. This not only brought forward the risks you so aptly describe, but also prevented several BILLION dollars of PRIVATE investment in construction, infrastructure and the jobs that came with it. This is an incredible blunder by the D advisers and office holders, and they OWN it and WEAR it.

    I would have thought this rated at least a one or two liner in your article, but I can't critique it too much as nobody else in the media or TMF have even thought to broach the whole subject.

    That you did Matt, is to your great credit.

  • Report this Comment On January 05, 2014, at 6:37 PM, bnewman wrote:

    While the combination of transported fracked oil and tars sands has reached 1.2 million barrels/day (the KXL would transport about 3/4 of that) via rail, blocking the KXL is absolutely the right way to go for several reasons. Historically, pipeline transport yields much more spills in frequency and volume than rail. Spills occurring underground and in rural areas are more difficult to detect and publicize, but the big ones are catastrophic compared to a few dozen rail cars blowing up a town. The Enbridge disaster of 2010 spilled a million gallons of tar sands into the Kalamazoo River where it will remain forever on human timescales. Because tar sands crude is not real oil, it sinks in water making clean up nearly in water impossible. So far, the clean-up costs taxpayers nearly $1 billion with little success to show for the immense cost. Enbridge is officially done paying for the clean-up $3.7 million. Though Exxon's Pegasus pipeline disaster of 2013 ‘only’ resulted in 420,000 gallons or about 18.5 rail car tankers (figure taken from gallons recovered), the disaster was quite personal as it occurred in an suburban setting in Mayflower, AR.

    In regards to carbon pollution, the KXL would dramatically make the tar sands production more economically feasible and consequently increase production of the carbon dense hybrid of crude oil and coal. I’ve read that about one BTU of energy go into extracting just 2 BTUs of energy from tar sands crude. To a functioning mind, that is madness that can only exist with the help of $500 billion in annual US subsidies to oil. Yet, even with a blank check, tar sand production probably cannot continue economically without pipeline transport (see the link below). Rail costs 2-3X more to transport. Without pipelines, the tar sands and probably, eventually the fracked oil will become too costly to transport to be profitable and ending growth in production.

    I really must question the author's claims of being free of dirty money or his sanity to say that the blood, sweat, and tears going into the fight against the KXL is not wise. http://www.businessweek.com/.../why-canadas-oil-sands... http://www.bloomberg.com/news/2012-10-12/epa-worries-dilbit-...

  • Report this Comment On January 05, 2014, at 7:03 PM, barent wrote:

    environmentalist wrong again, if they would work with us, not against us maybe we can get along. by the way, what happened to the great solar panels that we paid for? wind turbines vs bald eagles? take a look at the Alaska pipeline its moved a lot of oil in its time. your only making al gore and his cronies rich, rich, rich as they laugh all the way to the bank on your hard work.

  • Report this Comment On January 05, 2014, at 9:44 PM, savage393 wrote:

    The biggest problem for those who want the pipeline, is that NONE of the resulting product is going to help the U.S. at all. It is ALL for export to countries who will pay more for it then we will. If Canada wants to export their oil, let them get it to the port going through their country, not ours.

  • Report this Comment On January 05, 2014, at 10:14 PM, bnewman wrote:

    Funny you asked about solar. This year, the US topped Germany in solar installations for the first time in the last 15 years and CA installed more solar last year than did during the last 30 years combined. In some places like HI, the solar boom has been so big that there is now a legitimate concern that the grid could be over surged with solar and cause a blackout. Wind turbines kill on average 5 eagles annually; though unfortunate, O&G kills far more with the pollution of their habitat and coming into contact with tar sands tailing ponds and fracking ponds. Below are the related sources. I will not respond to anything further without credible citations. http://america.aljazeera.com/articles/2014/1/4/solar-power-s...

    http://www.scientificamerican.com/article.cfm?id=a-solar-boo...

    http://climatecrocks.com/2013/05/20/why-coal-and-nuclear-pla...

  • Report this Comment On January 06, 2014, at 12:39 AM, klausmager wrote:

    What a misunderstanding, monumental. The public, a vast majority of the public, would like to know how we can STOP using carbon fuel. But that message is just so wrong, it must be ignored. So the choice under discussion is clearly only how that oil can be shipped, not IF it should be shipped in the first place.

    THAT is the debate we should be having, but no one has the guts to say so.

  • Report this Comment On January 06, 2014, at 10:43 AM, stevetimeshare wrote:

    I would just point out that the premise of the article is stupid on its face. The amount of crude being shipped by rail to parts of North America has been high for years. The train cars that exploded in Canada, destroying the center of the town, were not a one time shipment. These cars of oil ship every day. And you quite conveniently did not mention the oil spill from a pipeline in North Dakota recently. 20,000 barrels of oil from a pipeline in a farmers field. Not discovered until he went out to harvest his crop. Even Keystone XL would take 5 hours to pump out 20,000 barrels. So how long did this much smaller pipe spill oil with no detection, to be able to spill 20,000 barrels?

    What should be done, is to understand a few important facts.

    1) Canada, not the US, needs the pipeline to get oil from Canada to the Gulf, where it can either be refined or loaded on ships for the world market. They can't go East - to far and you end in the north sea. Can't go west - little thing called the Rocky Mountains, and other, in the way. And you can't go north, unless you plan to sell to Russia. That only leaves south, or the Gulf of Mexico.

    2) The oil from Canada will still run out in 50 years or so. It is a finite source, and it takes million of years to regenerate. So this is simply a stop gap measure to hold us until alternate forms of energy can be found or commercialized.

    3) The route the pipeline takes does not HAVE to go across the aquifer. It was a REPUBLICAN GOVERNOR who requested that Obama block the pipeline. Not to stop it permanently, but to force them to reroute it around the aquifer. That is a perfectly reasonable request, that Keystone is working on. Approve the safer route and get to building.

    4) The "JOBS" that the industry is bragging about are not really American jobs. Most are in Canada. There will be jobs building the pipeline, and some small number to maintain it. But most American jobs will be related to cleaning up any mess if it breaks.

    5) Only building a power grid to get wind and solar power from where it is best to produce to where it is needed; will solve our long term problems with energy. We are wasting our natural gas producing electricity, instead of using it to replace far dirtier oil to run our vehicles.

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