If You Build It: More on the Case for Keystone XL

By David Dittman • May 18, 2012 • Canadian Edge Weekly

Mitt Romney has made a pledge–and a campaign ad centered on same–to approve all aspects of TransCanada Corp’s (TSX: TRP, NYSE: TRP) Keystone XL project. The GOP standard bearer’s television spot implores voters to imagine what will happen immediately after he takes the oath of office: “Day One, President Romney immediately approves the Keystone pipeline, creating thousands of jobs that Obama blocked,” says the ad’s narrator.

It might be the first smart move of his still nascent general campaign.

TransCanada recently submitted a new route plan for XL that avoids key areas in Nebraska–including the Sand Hills region entirely and a significant section of the Ogallala Aquifer where groundwater is close to the surface–that were important enough to locals to inspire bipartisan opposition to the original path. Hearings on the new proposal now underway in the Cornhusker State are drawing large crowds.

Opponents object to the new route, too, because it doesn’t avoid the Ogallala Aquifer entirely. The Ogallala Aquifer sits under land that spans from South Dakota to Texas. It’s a significant source of water for drinking and irrigation.

But an environmental study conducted by the US government–and, yes, paid for by TransCanada but according to longstanding practice with regard to projects of this type and impact analyses, though this fact will hardly quell the accusations of corruption–concluded that a pipeline leak wouldn’t threaten the aquifer.

Consider the following facts about pipelines and Ogallala. The Keystone XL pipeline would cross the Ogallala Aquifer for some 250 miles. About 25,000 miles of petroleum pipelines already exist within the Ogallala Aquifer, including 2,000 miles in Nebraska. These pipelines transport billions of barrels of crude oil across the aquifer each year, including millions transported across the aquifer in Nebraska.

Billions of barrels of crude oil have been produced within the Ogallala Aquifer since 1930. Half a billion barrels have been produced from 2,000 oil wells drilled through the Ogallala Aquifer in Nebraska.

And after this oil is refined into gasoline, diesel fuel, aviation gas and other products, pipelines transport much of it back across the aquifer for use on Nebraska farms, ranches and roads.

As for the physical characteristics of the Ogallala Aquifer and its susceptibility to an oil spill, it’s important to know that this is not an underground lake through which dumped crude will easily flow. The aquifer is made up of intertwined layers of sand, gravel silt and clay. Water flows through the small, empty spaces between these geologic structures.

The makeup of the aquifer has been described as resembling a mechanical filter. Like dirt and other particles, oil has a very difficult time moving through such an environment. Even the water itself moves very slowly, about a foot per day, according to US Geological Survey.

Contaminants can certainly dissolve in the water. But this takes time, and movement is very slow and limited in extent. Even assuming a worst-case rupture in an area where the oil could reach groundwater the spread of contaminants won’t be as catastrophic as some suggest. It wouldn’t be “regional” or even “broad.”

The safety of the Ogallala Aquifer was in the Environmental Impact Statement (EIS) prepared for the US Dept of State as a part of a multi-agency regulatory review. The EIS includes detailed information on a major oil release in 1979 of 10,700 barrels, in sandy soils with shallow groundwater, similar to the environment in the Sand Hills of Nebraska. The groundwater impacts were limited to within 650 feet from spill and only in the direction of underground water flow. Details of this analysis are available on page 3.13-55 of the EIS. The discussion forms part of a broader, 100-page analysis of what would and what could happen in the event of an oil release from the pipeline in Section 3.13. The full document is available online at www.keystonepipeline-xl.state.gov.

Ogallala hydrologist and University of Nebraska-Lincoln Professor Emeritus Jim Goeke testified before the Natural Resources Committee that if groundwater were affected, he expected the impact would be measured in the tens of feet or hundreds of feet. And experience from other historical oil releases affecting groundwater shows that movement of dissolved contaminants is typically confined to less than 300 feet.

I don’t begrudge the Nebraskan farmer whose land may be implicated his right to register objections to Keystone XL or to join a ring around the White House in protest of the pipeline. To him even 300 feet could be catastrophic. But decisions of this nature can’t be based on one or even a hundred small farmers.

Bloomberg has an important story up that describes the broader nature of the problem facing the US, which I would extend to encompass North America. It begins:

The US oil infrastructure is the product of four decades of rising imports and falling domestic supply. As those trends have reversed over the last few years, America’s network of pipelines has failed to keep pace. Designed in part to ferry oil and refined gasoline from the coasts to the interior, those pipelines are now ill-equipped to handle the enormous amount of crude gushing from shale reserves in North Dakota and Texas. Which is why so much of that oil ends up trapped in the central Oklahoma town of Cushing, the primary crude oil storage hub for the US.

This week Enterprise Products Partners LP (NYSE: EPD) and Enbridge Inc (TSX: ENB, NYSE: ENB) completed the reversal of the Seaway pipeline, which will allow crude to flow from the Cushing, Okla., storage hub to refineries on the Gulf of Mexico. And TransCanada should have the USD2.3 billion southern leg of the Keystone complex, which will also connect Cushing to the Gulf Coast, built by 2013. Enbridge plans to connect Cushing to a system of pipes that converge around Flanagan, Ill., southwest of Chicago, with its Flanagan South pipeline.

It’s impossible to say what impact these projects will have on gas prices. But I can’t imagine how a guy purportedly as brilliant as Barack Obama will allow himself to get outflanked on this issue, which after all it is a layup: With his pen he can literally create jobs without tapping public coffers, at a time when “It’s the economy, stupid,” may be more germane than ever.

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