Oil Sands Pipeline Moves Closer to Approval, But Will it Save You Money at the Pump?

Published August 29, 2011

The U.S. State Department has released an environmental assessment declaring “limited adverse environmental impacts” associated with a proposed extension of the Keystone oil sands pipeline—which would transport as much as 900,000 barrels of oil per day from Alberta, Canada, to United States Gulf Coast. Environmentalists have taken news of the report as a sign that the Obama administration plans to back the Keystone XL project, which has galvanized protests outside of the White House calling for it to be blocked.

In a 2010 paper, the Natural Resources Defense Council claims that extending the pipeline is “not in the national interest of the United States,” citing the increased environmental harms of extracting gasoline from tar sands and the overriding interest in decreasing national demand for petroleum. In its analysis, the NRDC says that increased fuel efficiency, a higher reliance on public transportation, and alternative fuels offer more promise in the push end oil dependency and cut greenhouse gas emissions. Those policies, say the group, could reduce gasoline consumption by 2.3 million barrels per day by 2020 and 3 million barrels per day by 2030.

The Obama administration favors a mixed approach to reducing dependence on foreign oil, through expanded domestic petroleum production and increased fuel efficiency standards for vehicles. The White House is yet to officially weigh in on tar sands, but protesters claim that the unspoken policy of the administration has been to expand use of so-called unconventional petroleum resources while avoiding the issue publicly in an attempt to minimize the potential political fallout from such a stance.

Supporters of tar sands extraction point to rising fuel prices and increasing international oil demand as reasons why the 1,700-mile Keystone XL expansion is in the best interest of the United States. But according the the NRDC, tar sands production would not be capable of filling the pipeline's promised capacity until at least 2025, when petroleum consumption will already have to be cut dramatically to meet the EPA's proposed 54.5 mpg fuel economy mandate.

Furthermore, the environmental cost of tar sands include 20 to 30 percent higher emissions and the potential for underground contamination from spills. In the first year of the original Keystone pipeline's operation, there have already been 12 such spills, including one that released as much of 1,000 barrels of oil into the Yellowstone River. Diluted bitumen—as the transportable form of tar sands is often called—is also thought to present special risks to the physical integrity of pipeline.

Regardless of where one comes down on the environmental harms of tar sands, the market justification for their production may not be very strong to begin with—except for the companies extracting and selling them. An increase of 500,000 barrels per day in oil production (which is the production target that supporters of the pipeline say would be possible in the near future,) would have a far smaller effect on international energy prices than, for instance, the recent revolution in Libya, which produces roughly 1.8 million barrels of crude per day. With international demand for oil at more than 80 million barrels per day, an additional 500,000 barrels would have a limited impact on gas prices. Furthermore, the cost of recovering usable petroleum from tar sands is significantly higher than refining conventional crude, which further minimizes its economic benefits to consumers.

For drivers frustrated with high gasoline prices, the best solution doesn't come from tar sands, offshore drilling or oil exploration in ANWR, but buying more fuel-efficient vehicles.

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