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On Keystone XL Pipeline Opposition: Review of the Major Claims, Relevant Facts, and Most Probable Impacts

Bob, my comment is based on the fact that half the U.S. economic recessions since 1970 have been largely caused by rapid rise in energy costs or energy crises.  One factor that has not been included in the analysis you accurately reference is that oil prices also increased rapidly prior to the Great Recession 2007-09.  How much this price increase contributed to the developing recession has not been analyzed to my knowledge, but could have been significant both in contributing to the recent recession and making the 2010-14 economic recovery relatively/historically slow.  I could be wrong, but if we witness a large jump in economic growth due to the recent 50% drop in oil (similar to price levels prior to the 2007-09 economic recession) it is possible that oil price increases also contributed significantly to the Great Recession.

January 16, 2015    View Comment    

On Keystone XL Pipeline Opposition: Review of the Major Claims, Relevant Facts, and Most Probable Impacts

In this case the Federal Government’s involvement with the Keystone XL pipeline involves regulatory issues that are ‘international’, not interstate.  Hundreds of pipelines have been build involving only affected States and Agencies within the Continental U.S.  After over 6 years of numerous State and Federal reviews of the Keystone XL project and analyses-reporting, how can you even suggest any Foreign or Domestic Company is free to do anything without required building permits?

Those Companies that make significant poor investment decisions don’t stay in business very long.  If they are Publicly owned their stock values deteriorate fairly quickly and eventually drop towards zero; followed by shutdown and liquidation of the company’s remaining assets.  Those Companies that don’t go bankrupted, usually change management and make changes as needed to mitigate the financial impacts and ensure a repeat error-incident is not made in the future.  If they didn’t make reasonably changes or management improvements most stock brokers/investors would rapidly sell their shares and invest in more sound investments-companies.  Once again, this has nothing to do with any kind of psychology, it’s how Free Markets operate, grow and learn from their mistakes. 

January 16, 2015    View Comment    

On Keystone XL Pipeline Opposition: Review of the Major Claims, Relevant Facts, and Most Probable Impacts

Gerry, the decision to build the pipeline was approved by TransCanada back in 2008, following the investment-construction of a phase one cross-border pipeline project 10-years ago.  Heavy Canadian oil sands crudes typically market at a 20-25% discount to average U.S. crudes produced domestically and imported.  Despite oil prices dropping about 40% in 2009 (refer to Figure 3 of an article I wrote last year) and recovering a year later it’s very doubtful the project is no longer viable since no mention of delaying or cancelling the project was made during 2009-10.

Yes, the recent 50+% drop in world market crude oil prices has created a ‘temporary’ barrier to many plans to develop ‘new-added’ production fields, but has generally not affected existing oil sands production levels from established in-situ oil fields and ex-situ open-pit mines.  Even if oil market prices were to drop significantly below the $50/Bbl. range (or less than breakeven total production cost levels) most the current oil sands crudes will continue to be produced as long as ‘revenues exceed variable expenses’ and at least pay a small fraction of fixed costs.  Low market prices will primarily impact new developments, with their much higher initial development costs, which will put new development projects on hold until market prices increase to reasonably profitable levels again. 

The real investment risk level question becomes: “How long can the Saudi’s afford the 50+% reduction in their recent annual revenues?”.  The current low market prices are affecting all oil producing Countries; including OPEC and non-OPEC Countries.  All Producers have and are losing very large revenues with the 50+% decline in world markets.  At some point export Countries are going to have to cut production to restore markets and their revenues.  Canadian imports are not trending downward in recent months.

“So why are US politicians wasting time and energy to allow the ‘Free Market to make a’ business decision?”.   As far as TransCanada’s investment decision in the Keystone XL pipeline, it should be their Management and Stockholders decision, not the U.S. Federal Government’s based on insignificant environmental impact claims.  If the project is truly not needed or significantly uneconomic, as you apparently subscribe, TransCanada or any Corporation would cancel the project and stop wasting their time, energy and money. 

Part of this decision to build the Keystone XL pipeline is still based on the fact that this mode of transportation is more economic and safer than the rail alternative, and their plans/forecast to continue to further and substantially increase future oil sands production

January 16, 2015    View Comment    

On Keystone XL Pipeline Opposition: Review of the Major Claims, Relevant Facts, and Most Probable Impacts

Keith, I absolutely agree that the optimal solution is developing cheaper alternatives to fossil fuels rather than getting bogged down in the politics of anti-petro/NG/coal rhetoric based largely on debatable/questionable SCC, and denying the fact that higher density and reliable energy sources are still needed during the development-transition to cleaner and truly renewable energy sources.  Developing alternative-clean energy alternatives to fossil fuels that are actually less costly (without wasteful-perpetual Government subsidies) than current and future Free Market fossil fuel prices is definitely the ideal solution compared to most existing Government policies.  As I am sure you are very aware, most Government lower-carbon/fossil fuel policies are often based on various forms of consumption taxes (VAT, carbon, etc.) or other consumption rationing strategies often designed to increase fossil fuels costs; and not to specifically achieve low alternative renewable energy costs as you have highlighted.

In the case of the Keystone XL pipeline it is merely an interim Free Market action needed during the period required until more cost effective alternative-renewable energy sources become a reality.

January 15, 2015    View Comment    

On Keystone XL Pipeline Opposition: Review of the Major Claims, Relevant Facts, and Most Probable Impacts

And, pipelines are the most reliable, efficient and substantially cleaner modes of transportation vs. rail.  In addition to increased safety, pipelines consume about half the energy per unit volume-distance vs. rail shipments, have lower carbon emission impacts (power generation vs. RR diesel consumed by trains), and have insignificant air emissions vs. typical RR Engines (PM, SOX, NOX, CO and VOC’s).  The same positive environmental benefits also apply to pipelines vs. marine transport; from countries outside North America such as OPEC.

January 15, 2015    View Comment    

On Keystone XL Pipeline Opposition: Review of the Major Claims, Relevant Facts, and Most Probable Impacts

Homo sapiens have evolve and developed many different civilizations for over about a half million years.  Major civilizations have developed, grown and declined over the past 3,000 -4,000 years.  The development of major civilizations was largely affected by their ability to produce food and heat in order to adapt-survive local climates and other environment conditions; such as competing civilizations.  Prior to development and utilization of fossil fuels many civilizations largely perished after depleting their sources of food (animal and vegetable) and heat (primarily wood) resources.  Living-off-the-land limited world population’s to very slow growth rates until about the mid 1000’s.  The development of fossil fuels and associated technologies beginning the mid 1800’s supported both substantial increases in (Developed Country) living standards and life-spans, and a more rapid increase in nearly all (Developed + Developing) Countries’ populations.

The total world population is projected to grow from 7.0 Billion up to about 9.5 Billion in 2050.  If all access to petroleum oils were to be totally shut-off by 2050, could the world feasibly feed, house and support 9.5 Billion people?  Not likely based on current and developing alternative energy sources.  A more reasonable approach would be to controllably displace a large fraction of petroleum with renewable fuels, but only do so if the renewable energy sources are reasonably cost effective & clearly have ‘positive’ net energy values, and are truly sustainable and reliable energy supply sources.  During the interim, large volumes of petroleum oil will continue to be required (and should be supplied by civilized-reliable sources such as Canada via the Keystone XL) and should be properly and safely managed to the maximum benefit of affected economies and a given Country’s Residents.

January 15, 2015    View Comment    

On Keystone XL Pipeline Opposition: Review of the Major Claims, Relevant Facts, and Most Probable Impacts

Rick, I much appreciate the feedback.  As you state, World population is the major challenge to transitioning to non-fossil fuel/petroleum energy sources.  Remember back in the 1970’s when the apparent scientific consensus was that growing world famine was going to create massive starvations within essentially all Developing Countries.  Those doomsday predictions proved to be totally inaccurate due to rapid and continued improvements in food production and yields.  What I am sure you know much better than most is that the combination of improved crop seeds and improved cultivation techniques have increased most food crop yields by 50-100% since 1970.  Major contributing technologies include more efficient cultivating/harvesting equipment, and use of improved fertilizers and pesticides.  All of these food production improvements require petroleum oil fuels and feedstocks.

The World population is projected to increase from 7 up to about 9.5 Billion by 2050.  The major technology challenge becomes: “how will we feed this growing world population without petroleum and other fossil fuels?”.   Yes, part of the solution will be replacing coal with nuclear power and different renewable power sources.  But, petroleum will continue to be required to help feed the growing population well into the second half of this century.  This makes current programs of displacing petroleum where possible with cost effective biofuels and EV’s an important part of the solution.  But until the dominance of renewables truly exceed current levels of required petroleum we should ideally obtain this critical energy/oil source from the most reliable sources such as Canada.  These factors also help support the Keystone XL pipeline vs. OPEC import alternatives.

January 15, 2015    View Comment    

On Keystone XL Pipeline Opposition: Review of the Major Claims, Relevant Facts, and Most Probable Impacts

Hops, I have enjoyed our debate.  Have a wonderful rest of the week.

January 14, 2015    View Comment    

On Keystone XL Pipeline Opposition: Review of the Major Claims, Relevant Facts, and Most Probable Impacts

Let me see if I understand your points.  ‘Corporate income is bad’, so the jobs created for the country’s Citizens and tax revenues generated for State and Federal Governments are also bad?

And, just because a given Free Market project generates profits, jobs and tax revenues and does so while reducing the need for higher risk imports from outside North America (i.e. increases energy security), it has nothing to do with energy independence?

And, yes there are many ways to make profits and generate jobs, but unfortunately the majority of the currently available job-markets must rely on fossil fuels to generate the energy required to produce, transport and deliver the vast majority of goods and services required by the Consuming Public.  With time the development of non-carbon energy sources will displace increasingly levels of petroleum fuels, but this will take well into the second half of this century.  During the interim, tapping oil sources like Canadian bitumen crudes may increase carbon emissions by about 7.4 MMT/yr., but this only represents about 0.00002% of total world carbon emissions today; a very, very small faction of increased annual carbon emissions in major Developing Countries.

January 14, 2015    View Comment    

On Keystone XL Pipeline Opposition: Review of the Major Claims, Relevant Facts, and Most Probable Impacts

Bob, yes, blocking the production and supply of any commodity demanded by Consumers raises market prices.  And, it also creates incentives for developing alternatives.  Those who oppose the Keystone XL pipeline apparently hope that increased prices will make alternative-renewable energy sources (biofuels & EV’s) more economically attractive.  This, of course, overlooks the economic risks and impacts on the Middle-Lower Classes and the overall economy if this strategy (increased petroleum costs) is carried out too quickly and inefficiently.  Also this condition misses the fact that available supplies almost always find some way into the markets with high, economically attractive demands-prices.  That’s why Canada/Oil Companies have more fully utilized available transport infrastructures (pipelines & rail primarily) to increase shipments of Oil Sands into the U.S. in recent years.  And, at some point or time, other transportation options to existing pipelines/rail, and without the Keystone XL pipeline, will be increasingly pursued.  I.e. building pipelines around the U.S.

The recent drop in world oil market prices have made many higher cost new oil production projects (temporarily) uneconomic.  However, to make existing Canadian Oil Sands production projects uneconomic will require about $30/bbl. market values.  This will not only impact Canada, but almost all world oil producers, beginning with the U.S.  How long could the Saudi’s survive with losses over 70% of their recent country’s income revenues (compared to a year ago)?

And, yes, higher gasoline prices will reduce future demand.  But, how do you accomplish this without risking another Great Recession?  The EU gasoline prices are 2-3 times the U.S.  This is a major contributing factor why per capita EU gasoline consumption is significantly lower than the U.S. historically.  But, since world oil prices have dropped by 50%, the EU’s apparent recovery from their recent economic recession(s) has stalled and may be repeating.  Also, what are the odds that Congress will pass a new carbon tax or consumption/VAT tax to raise the price of U.S. gasoline?  Even when the Democrats had a super majority during the first two years of the Obama Presidency, they failed to pass any carbon or carbon tax related legislation.

This posted article expands on the previous post both in level of details for the economic impacts and includes environmental issues/impacts.

January 14, 2015    View Comment    

On Keystone XL Pipeline Opposition: Review of the Major Claims, Relevant Facts, and Most Probable Impacts

Doug, I’ll let you in on a secret concerning Big Companies and Corporations.  Yes, the Project Manager has my calculations and estimates, in far more detail than I summarized here.  But, the Project Management is rarely part of the Public Relations (non-project/technical) group that is responsible for the Website.  That’s why I do (and most Companies complete) independent analyses to verify if the published details/data are reasonable accurate and not confusing to the Public; both Government and Industrial.  In the case of ‘7 million man-hours’, this estimate is obviously low (based on the total project manpower requirements) and only represents a fraction of the total labor required to refine the raw steel, fabricate the building materials and equipment, dig & fill the trenches, assemble the pipelines & build the pump stations, install the utility/maintenance infrastructures, manage the crews, etc.  

January 14, 2015    View Comment    

On Keystone XL Pipeline Opposition: Review of the Major Claims, Relevant Facts, and Most Probable Impacts

Doug, let’s begin with a 1,179 mile, schedule 40, 36” pipe which weighs about 283 pounds per linear foot.  That requires ((1179 mile x 5280 ft./mile x 283 lbs./ft.) / 2000 lbs./ton =) 881thousands tons of steel to begin with.  While it would take only about a month or so to produce this incremental amount of raw steel, fabricating the 36” pipe within the U.S. will take a many months (assuming its domestically produced).  Then you have to dig the trench, producing ((1,179 mile x 5,280 ft./mile x 5ft. wide x 10ft. deep) / 36 cuft./yd. = ) 8.6 million cubic yards or about 10 million tons of removed dirt+rock.  Yes, modern excavation equipment can dig and move about 5 tons/minute of dirt+rock and let’s assume there are 20 excavation crews in operation 8 hours per day, this would take at least 7 months to dig the trench.  It will of course take somewhat longer due to the complexities of crossing water streams or rivers and other environmentally sensitive areas in order to safely and cleanly route the pipe through these more complex areas.

In parallel to digging the trenches, the 50 ft. pipeline sections or (1,179 miles x 5280 ft.) / 50 ft./section =) 125 thousand 50’ pieces of pipe must be transported from the fabrication facilities to the field construction sites.  Next the pipe sections must be welded (125,000 pipes x 9.4 ft. weld length/pipe = 1.2 million linear feet of welds), which will take another 20+ construction crews several more months to complete (at least), followed by lifting the longer-multiple pipe sections into the trenches.  Then the pipe must be inspected and hydro-tested before being buried.  Correcting and repairing substandard welds adds a few more weeks.  And, did I mention the time required to restore and reveg. the surface above the pipe after burying it.

As far as the 19 or 24 pump stations, it probably takes much fewer than 19 sales people to market the equipment.  And, at least 100 production/fabrication operators-mechanics just to produce up to almost 100 large pumps (including spares) required to fully and reliably pump 830 KBD of oil, 1179 miles, 24-7.  Of course the scope of the work is much greater than just the pumps, electric drivers, foundations and valves.  Each pump station requires installation of utilities (power lines/transformers & water supplies), operating controls-communication equipment (including computers and wireless/hardwire systems), and maintenance infrastructures (access roads, on-site storage, shops, etc.).

How many of these jobs are labeled as construction, manufacturing and support services jobs of course depends based on how the overall job is planned, scheduled, executed and managed.  The Federal Government’s estimate of only 1,950 construction jobs required to do the above listed work within just 2 years, in addition to the numerous other required workloads (safety, inspection, security, administration, etc.) is grossly underestimated.

January 13, 2015    View Comment