The proposed northern portion of TransCanada's (NYSE:TRP) Keystone XL pipeline, which would transport massive quantities of mainly heavy crude oil from Alberta's oil sands to the U.S., has drawn harsh criticism from groups that oppose its construction largely on environmental grounds.
They argue that the pipeline would promote further development in Alberta's oil sands, a region whose oil production is thought to be significantly worse for the environment because it spews more greenhouse gases into the atmosphere than more conventional methods of oil production.
Some also argue that the type of oil the pipeline will carry – heavy bituminous crude – is more corrosive, more prone to spills than lighter types of oil, and much more costly and difficult to clean up once spilled. Let's take a closer look at this second argument and see what TransCanada is doing to ensure Keystone XL's utmost safety.
TransCanada maintains that Keystone will meet or exceed federal pipeline standards. The company's CEO, Russ Girling, has said that Keystone will be "the safest, most advanced pipeline ever built in North America." The company also suggests that, in addition to being closely monitored at all times, the pipeline will be equipped with a state of the art leak detection system.
TransCanada spokesman Shawn Howard has said that experienced personnel will monitor the pipeline around the clock from a state of the art control center, while another spokesman, Grady Semmens, has said that company personnel would be able to shut down the pipeline within just 10 minutes of detecting a leak or other pressing issue. The company has also promised to follow 57 guidelines that it claims go above and beyond the safety precautions required by federal law for most crude oil pipelines.
But others have suggested that TransCanada's claims are either grossly exaggerated or patently false.
For instance, some argue that the leak detection system proposed for Keystone XL is nothing special and is actually quite standard among most crude oil pipelines. In fact, as an excellent piece by InsideClimate News detailed, Keystone would not be equipped with some key safeguards that are prominent features of Magellan Midstream Partners' (NYSE:MMP) Longhorn pipeline, which was built more than a decade ago.
As the article notes, while the Longhorn pipeline boasts sensor cables capable of detecting leaks as minor as three gallons a day, Keystone's leak detection system would probably be unable to detect leaks that are less than 1% of the pipeline's capacity. Given that Keystone has a proposed capacity of 29 million gallons per day, a spill would likely have to exceed 290,000 gallons per day to be detected by the system.
By comparison, the worst bituminous crude oil spill ever in the U.S. discharged a little under four times that amount, when about a million gallons of oil spilled into Michigan's Kalamazoo River after an Enbridge (NYSE:ENB) pipeline ruptured in 2010 (according to estimates by the EPA, Enbridge's estimates are much lower).
Keystone also doesn't plan on installing two other key safeguards adopted by Longhorn – a concrete cap intended to defend the line against punctures, and daily aerial or foot patrols to prevent minor spills that could rise to the surface.
According to experts interviewed by InsideClimate News, installing external sensor cables, a concrete cap, and deploying additional patrols to the environmentally sensitive areas of Nebraska would cost less than $10 million – pocket change compared to Keystone XL's monstrous $5.3 billion budget.
But according to a TransCanada spokesman, external sensing technology would not be the ideal method to use for Keystone XL, because it is "subject to localized conditions such as water table and soil conditions and therefore reliability and maintenance can be an issue." Perhaps. Or maybe TransCanada just doesn't want to shell out the extra millions of dollars to install external sensors.
As for TransCanada's claim that it will be following 57 guidelines that exceed standard pipeline requirements, an analysis conducted by the Natural Resources Defense Council (NRDC) in 2011 suggests otherwise. The NRDC study concluded that the majority of the 57 conditions are part of minimal standards set forth by the Department of Transport, with just 12 of the 57 conditions being materially different in any way from the minimum standards enforced by the department.
As you can see, TransCanada's claims don't always match up with claims made by other credible sources. The company also has a few major blotches on its safety track record, including more than a dozen leaks along its first crude oil pipeline – Keystone I – and a major accident along its Bison natural gas pipeline, which exploded in a remote location in Wyoming just six months after going into service.
If Keystone XL is approved – a scenario that looks increasingly likely – concerned parties, including regulatory bodies, landowners along the line's proposed route, and anybody worried about the environment, should continue to demand that the most stringent safety requirements be enforced and followed. I think we all deserve at least that much for jeopardizing our environment.
Motley Fool contributor Arjun Sreekumar has no position in any stocks mentioned. The Motley Fool recommends Magellan Midstream Partners, L.P. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.