NEPA at Work in the Oil Sands

The Keystone XL Pipeline Saga should focus some attention on NEPA

The 11 volume Environmental Impact Statement (EIS) the U.S. Dept. of State compiled (or had its contractor compile) in connection with the decision whether to permit construction of the KXL pipeline has done its job.  Or has it?  A nagging question about NEPA’s role and best uses keeps coming back to me: did all that analysis and information in such a behemoth make any practical difference?

State’s NEPA routine went through three separate iterations on the current TransCanada permit application (which followed an earlier permit denial that featured in the 2012 presidential election).  They took a lot on board in the public comment process leading to its January 2014 FSEIS.  Besides the 400,000+ comments from the public, U.S. EPA–fulfilling its duties under Section 309 of the Clean Air Act–issued three separate assessments.  EPA issued comments on the Draft EIS and raised seven (7) sets of issues in July 2010.  State then issued a Supplemental EIS which EPA assessed in June 2011 and then again assessed in April 2013.

Greenhouse gas (GHG) emissions featured prominently in each of the EPA assessments.  In its first letter (of July 2010), EPA suggested that

[i]n order to fully disclose the reasonably foreseeable environmental impacts on the U.S. of the [KXL] project, we recommend that the discussion of GHG emissions be expanded to include, in particular, an estimate of the extraction-related GHG emissions associated with long-term importation of large quantities of oil sands crude from a dedicated source.

EPA cited an abandoned CEQ proposal as supporting this suggestion, although I confess I don’t follow the logic connecting that CEQ proposed guidance to the above quote.  But then EPA got more specific, citing its own

estimate that GHG emissions from Canadian oil sands crude would be approximately 82% greater than the average crude refined in the U.S., on a well-to-tank basis.

And this is where much of the concentrated KXL opposition has focused its attention: the “energy penalty” and relatively carbon-intensive extraction of what is called “Western Canadian Sedimentary Basin” (WCSB) oil and other fossil fuels.  The major environmental nonprofits have been joined in this focus by some ad hoc opponents and even their own billionaire bank-roller.

The opposition’s focus on WCSB oil’s relative merits–as compared, say, to “West Texas Intermediate” or other benchmark crudes–is a fascinating question for NEPA.  EPA even filled out its argument in its July 2010 comments to the effect that

annual well-to-tank emissions from the project would be 27 million metric tons carbon dioxide equivalent . . . greater than emissions from U.S. “average” crude . . . [or] roughly equivalent to annual CO2 emission from seven coal-fired power plants.

In response, State’s SEIS of March 2013 then mostly adopted EPA’s position: WCSB oil could be as much as ~80% more GHG-intensive on a well-to-tank basis than the “average” crude refined in the U.S.  (Another metric, the “well-to-wheels” comparison, was substantially less disparate, but let’s leave that aside for the moment.)

The “incremental” emissions State and EPA (in its April 2013 comments on the DSEIS) both attribute to KXL for its joinder of U.S. consumers to WCSB were roughly 18.7 million metric tons CO2 equivalent annually.  Over the 50-year expected life of the KXL pipeline, that totals to 935 million metric tons of CO2 equivalent!   Big number.  But what does it mean?  As EPA summed it up in its final comments on the DSEIS,

[i]t is this difference in GHG intensity–between oil sands and other crudes–that is a major focus of the public debate about the climate impacts of oil sands crude.

One could make this number practically meaningful in a few different ways.  You could, as EPA did initially, convert it into “coal-fired power plant” equivalents, as if a central estimate from among all coal-fired generating stations is somehow indicative or meaningful.  Reasonable people can disagree on that one.  One could also try to put a “price” on every ton of CO2 equivalent through benefit-cost analysis of climate change and the incremental contributions we can calculate each emitted ton of GHGs will make to the predicted effects thereof.  This “social cost of carbon” is a number the U.S. Executive Branch calculated–to much derision from some quarters–in February 2010 (and then upgraded substantially–again provoking much derision–in May 2013).  Finally, you might compare this number to what the Intergovernmental Panel on Climate Change has said is our world-wide “carbon budget” if we wish to hold global average temperature gains to ~2%C.  (It works out to about 1.7% of that budget, give or take.)  Reasonable people can disagree about that one, too.  We’re not quite at the point where we can confidently estimate a pollution budget for something as stochastic as the Earth’s climate.

But the nagging question comes back to something like this: how do we know that this tighter coupling of U.S. consumers and the WCSB resource can be causally attributed to KXL?  It would have to be caused by KXL for these incremental emissions to matter for NEPA purposes.  If KXL is never built, something tells me some portion of the WCSB resource will still be refined and combusted, probably even in the United States.  What portion?  Well that’s a hard question.  Will other pipelines fill the void?  Will rail?  If so, when and to what extent?  On these questions, State’s expertise seemed to run out.  Because its answer was simply implausible: other pipelines and rail capacity will essentially do everything KXL will do according to State’s analysis.

State’s FSEIS took the position that essentially all of the bitumen KXL could bring from WCSB to U.S. refineries and then to consumers will simply find other paths to the combustion chamber.  But how can that be right?  It seems to ignore the very reason TransCanada would go to the trouble and a $3.5B expense. I’m no economist, but if so “sunk” a cost–and so specific an asset–as this pipeline would make no marginal difference here, it seems like a pretty bad (or at least very risky) investment.

On the other hand, consider the resource and the market.  The WCSB is an immense fossil fuel deposit.WCSB Map

According to the Alberta Energy and Utilities Board, this region contains the equivalent of over a trillion barrels of recoverable bitumen, over 100 trillion cubic feet of natural gas, and 71 billion tons of usable coal.  Now, in a very real sense, prices will dictate how much of this resource is “recovered.”  And who can predict that?  The industry’s models have a terrible track record.  And let us not jump to conclusions about how future prices will factor into the political equation.  In Canada’s economy, there’s essentially Alberta’s oil boom (growing fast) and everything else (not growing at all).

So why is this about NEPA?  In a word: consequences.  If we accept the “U.S. oil addiction” as fact–to say nothing of Canada’s slight preference for economic growth–what consequences should State attribute to the KXL pipeline, really?  In order for the WCSB oil’s relatively carbon-heavy character to matter at all, there has to be some possible future (some “baseline”) wherein WCSB oil stays in the ground in order for the “environmental consequences” (40 C.F.R. § 1502.16) of this permit to include its supposed excess emissions.  Could that happen?  If it could happen, who else would the State Department have to enlist to make it happen?  This is where NEPA’s notion of causal agency breaks down and broad-scaled environmental problems become virtually intractable for NEPA as it has been administered to date.  Courts usually paper over such dilemmas with pleasant-sounding fig leaves like a “rule of reason.”  This one will have to be a gigantic leaf.

Given the likelihood this EIS will be litigated, I suspect we’re in for some particular court’s confrontation with this nest of issues in the Keystone drama.  And by the way, one risk attributable solely to the KXL pipeline went completely unaddressed in the FSEIS: the risk of a terrorist attack and resultant catastrophic failure.  Undoubtedly that risk for so public and essentially unguardable an asset (and symbol) of U.S. oil addiction has some decision-makers on their heels since this analysis was released.

I teach environmental, natural resources, and administrative law at Penn State Law. Before teaching I was an enforcement lawyer at U.S. EPA. Along the way I've done work for environmental nonprofits and written a fair bit about NEPA.
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