On March 7th, 2014, I submitted the following comment to the United States Department of State on whether or not it is in the national interest to grant a Presidential Permit to TransCanada to build the Keystone XL pipeline.
You can find a PDF version of this comment here.
Office of Europe, the Western Hemisphere and Africa
Bureau of Energy Resources
U.S. Department of State.
Keystone Pipeline, L.P, National Interest Determination (Docket #: DOS-2014-0003)
Presidential Permit would serve the national interest.
The State Department’s Final Environmental Impact Statement (“FEIS”) appears to have been drafted in order to reverse engineer justification for Keystone XL. This is not surprising, given that the FEIS’s
author, Environmental Resources Management (“ERM”), is marred by a conflict-of-interest, with a prior business relationship with TransCanada. Science and facts should not be bent to serve the demands of industry, and the State Department should not stand idly by when its hired contractors disclose
Keystone XL is not in the U.S.’s national interest in the realms of international diplomacy, public health (both domestic and foreign), capital markets liquidity, economic stability and job creation. Thus, the State Department should recommend against approval of the Presidential Permit to TransCanada.
The FEIS was Marred by Inherent Conflicts of Interest
That ERM has done previous work on a TransCanada project was a fact disclosed only after ERM won the contract to conduct the State Department’s FEIS. This late disclosure raises questions as to whether or not the State Department violated its agency responsibilities under the National Environmental Policy Act (“NEPA”) which insist that:
Contractors shall execute a disclosure statement prepared by the lead agency, or where appropriate the cooperating agency, specifying that they have no financial or other interest in the outcome of the project.
This failure to address potential conflicts of interest between TransCanada and ERM within the FEIS compromises its integrity. To address this failure, the State Department should re-start the process,
selecting a new third-party contractor without ties to TransCanada or other parties with an economic interest in the approval of the Pipeline permit.
The FEIS Makes Flawed and Inaccurate Assumptions
The FEIS makes the flawed assumption that pipeline or not, Canadian tar sands will most likely be brought to the global marketplace. Statements by carbon industry leaders prove this assertion to be false. Brian Ferguson, CEO of Cenovus Energy Inc., a Canadian oil company, has stated that “if there were no more pipeline expansions, I would have to slow down” Cenovus’s tar sands expansion plans.
Another conclusion the FEIS draws is that Keystone XL’s rejection would have limited impact on tar sands expansion. But once again, the State Department’s conclusion here is based on an assumption that WTI prices will exceed $105 by 2020. But the Jun 2020 futures contracts currently trading on the Chicago Mercantile Exchange (the CLZ9 contract) closed at 78.72 on March 7th, 2014. And this is a contract that has been in steady decline for the last one year (see Figure 1.1).
In addition, the IMF’s Price Forecast for Spot Crude in 2019 is 86.6. Given market expectation for lower oil prices in the future, the FEIS’s conclusion that a rejection of Keystone XL would not limit tar sands expansion is patently false.
Building Keystone XL would Threaten International Diplomacy
The United States must put in a good faith effort to address our carbon footprint at home before we can have a meaningful dialogue with other nations about climate change and reducing emissions. How can the United States, in our efforts to encourage other nations to take steps to curb emissions, be taken seriously in this advocacy when by the FEIS’s own account, the bitumen transported by Keystone XL is 17 percent more carbon intensive than conventional crude, and will have total emissions of up to 168 million metric tons CO2e, which is equivalent to the tailpipe emissions of 35 million passenger vehicles 
Approval of Keystone XL would seriously undermine our legitimacy in the realm of international diplomacy, as climate change will severely destabilize both island nations and nations with significant economic presences on their coasts.
Keystone XL Creates Significant Risks to Domestic and International Public Health
The World Health Organization estimates that 150,000 deaths per year are already caused by climate change. This estimate is on the low end, as a study commissioned by 20 of the world’s governments whose nations are most threatened by climate change found that 400,000 are killed each year due to climate change. Failure to reject Keystone XL would be an irresponsible decision given that these number of deaths due to advanced climate change will only continue to rise without significant commitment from the United States.
Natural disasters create great market volatility. As one example, a study from Stanford and Purdue University warned that climate change could lead to increased price volatility in the corn market.
Increased climate change will create more regular natural disasters, discouraging investments and loan-making in areas along the coasts globally. Volatility (and uncertainty) reduces liquidity, shrinking the pool of those willing to provide it, and increasing the premiums charged by them. These increased premiums and reduced liquidity providers fuels additional volatility, which further reduces the liquidity, creating a vicious cycle.
The risks climate disasters present to liquidity providers and investors alike are widely recognized. A survey by the Global Investor Coalition on Climate Change of 84 participating investors from ten different countries with assets in excess of $14 trillion (USD) found that 81 percent of asset owners and 68 percent of asset managers view climate change as a material risk across their entire investment portfolio.
Climate disasters also create increased costs to financial businesses, which need to invest significant funds in developing disaster recovery systems. As a recent example, the DTCC had 1.3 million stock certificates ruined by Hurricane Sandy.
More concerning, the risks associated with climate change are not easily diverted through diversification, and may thus lead to significant market losses.
Keystone XL Will Not Create Significant, Permanent U.S. Jobs, and Could Impact Economic Stability
The FEIS noted that during construction, Keystone XL will only create 1,950 per year over 2 years, and once Keystone XL enters service, it will only required 35 permanent employees, and 15 temporary contractors.
Contrast this with the impact on jobs from just one tar sands oil spill, the Kalamazoo River Oil spill of 2010. This spill in Kalamazoo, MI, led to the direct loss of 12 jobs following the closure of a daycare center near the pipeline, and a carpet store owner reported:
Business profits are 35 percent lower than their pre-spill levels. In the months immediately following the spill, workers required regular access of miller’s property in order to conduct cleanup operations. Miller said that more than 100 cleanup workers came onto her property with trucks and equipment, blocking the roads and preventing public access to both her office and her warehouse. The business was also closed for 13 weeks to facilitate cleanup efforts.
The spill has cost Enbridge, the operator of the pipeline, $765 million to date, though the cleanup effort is ongoing over three years later. The Enbridge pipeline carried the same diluted bitumen as Keystone XL.
In addition, a 2011 study by Cornell University’s ILR Global Labor Institute concluded Keystone XL may destroy more jobs than it creates. The study found that:
[Keystone XL] will divert Tar Sands oil now supplying Midwest refineries, so it can be sold at
higher prices to the Gulf Coast and export markets. As a result, consumers in the Midwest could be paying 10 to 20 cents more per gallon for gasoline and diesel fuel. These additional costs (estimated to total $2–4 billion) will suppress other spending and will therefore cost jobs.
The study also found that:
Pipeline spills incur costs and therefore kill jobs. Clean-up operations and permanent pipeline spill damage will divert public and private funds away from productive economic activity. In 2010 US pipeline spills and explosions killed 22 people, released over 170,000 barrels of petroleum into the environment, and caused $1 billion dollars worth of damage in the United States.
The meager 35 permanent jobs Keystone XL will create is also vastly insufficient given the vast economic losses due to recent climate and natural disasters. Hurricane Katrina caused losses estimated at over $200 billion, and the loss of 95,000 jobs during the first ten months after the hurricane.  Hurricane Sandy was estimated to have caused $50 billion in estimated damages.
The Keystone XL pipeline is not in the national interest of the United States of America, be it our diplomatic, public health, or economic interest. Ostensibly, Secretary of State John Kerry is in agreement, as evidenced by a speech he gave in Indonesia where he said that climate change is a weapon of mass destruction, “perhaps the most fearsome weapon of mass destruction.” But if the State Department does not reject Keystone XL, it will be Secretary Kerry himself responsible for launching those very weapons of mass destruction.
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FEIS, Section 1.4.4, p. 1.4-105
Technical Chart, Crude Oil WTI December
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