Many believe the Obama administration is poised to give the go-ahead to the Keystone X-L pipeline. That’s the project which would bring crude oil from the tar sands of Alberta, Canada to refineries along the U.S. Gulf Coast. Proponents point to the number of jobs which would be created and the benefits of adding more sources of oil in North America, but opponents cite lessons to be learned from a recent oil pipeline spill in Arkansas and overall concerns about the environmental price to be paid for extracting the oil from Canada’s tar sand formations. Please join us for more debate over the Keystone X-L pipeline.

Guests

  • Thomas Homer-Dixon CIGI Chair of Global Systems, Balsillie School of International Affairs.
  • Nicolas Loris energy policy analyst at Heritage Foundation.
  • Steven Mufson energy correspondent at The Washington Post.

Transcript

  • 10:06:56

    MS. DIANE REHMThanks for joining us. I'm Diane Rehm. The Obama administration is expected to make a ruling on the Keystone XL pipeline sometime this summer. Many believe the project will be approved. Skeptics of the plan, which include even some Canadians, continue to voice concerns. Joining me in the studio to talk about unanswered political and environmental questions about the Keystone pipeline: Steven Mufson of The Washington Post, Nick Loris of the Heritage Foundation.

  • 10:07:32

    MS. DIANE REHMAnd joining us from a studio at the Center for International Governance Innovation in Waterloo, Ontario, Thomas Homer-Dixon of the Balsillie School of International Affairs. You're always part of the program. I invite you to call us, 800-433-8850. Send an email to drshow@wamu.org. Follow us on Facebook or Twitter. Good morning to all of you.

  • 10:08:05

    MR. STEVEN MUFSONGood morning, Diane.

  • 10:08:06

    MR. NICOLAS LORISGood morning.

  • 10:08:07

    MR. THOMAS HOMER-DIXONGood morning.

  • 10:08:08

    REHMAnd good to have you all with us. Steve Mufson, I'll start with you. Bring us up to date on the approval project. Where does it stand now?

  • 10:08:20

    MUFSONWell, it stands pretty far down the process because the State Department has recently come out with its environmental impact statement. This is the second try at this because the first time around last year, there were a lot of questions about the route as it went through the state of Nebraska. And there were some outside questions about the contractor who did the report because the contractor had worked for TransCanada before.

  • 10:08:48

    MUFSONSo this is a new report, and from the point of view of the pipeline builder, TransCanada, it's a pretty favorable thing. It says that the -- there will be no significant climate impact. This was an extremely important issue. And it says that there wouldn't be any impact because it's says that that oil sands would be developed anyway and would find some other route to world markets.

  • 10:09:14

    MUFSONAnd so that's the key point. Where we go from here is that there's going to be a public hearing in Nebraska, actually, so that should be quite an event later this month. And then the State Department is supposed to respond to comments, and then the secretary of state is supposed to decide. And ultimately, I think this is really the president's decision.

  • 10:09:39

    REHMIndeed.

  • 10:09:40

    MUFSONSo much is at stake for him here, politically.

  • 10:09:42

    REHMNow, to what extent does the recent oil spill in Arkansas highlight some of the concerns that people have? We've already had a tweet saying that the pipeline bust there spewed Canadian crude all over the neighborhood and threatened the waterway there.

  • 10:10:07

    MUFSONYeah. Well, the Arkansas pipeline is actually a pipeline that was built in the 1940s and was lying about two feet underground, and a breach happened. This is not entirely shocking. We have a very aging pipeline system throughout the country with over two million miles of pipelines stirring all sorts of purposes. At the time it leaked, the pipeline was carrying Wabasca Heavy crude, which is a type of crude oil basically -- essentially the same as the oil sands oil that comes from Athabasca region in Alberta.

  • 10:10:43

    MUFSONAnd it was carrying that from Illinois down to the Texas Gulf Coast, so a very similar function that the Keystone XL would play. And an important point is that a lot of critics of the Keystone XL pipeline say that leaks are a risk and that oil sands increase the chances of corrosion in a pipeline. The Pipeline Safety Agency, when it investigated a similar spill in Michigan, said that the type of oil didn't play a role. But the National Academy of Sciences is still studying this, and a lot of people think that that may have been a contributing factor and that's why this has gotten a lot of attention.

  • 10:11:22

    REHMWhat is it about the oil coming from the tar sands that makes it more corrosive of the pipes?

  • 10:11:32

    MUFSONWell, it's what we call heavy oil. It's got a lot of contaminants in it, and it's a lower quality. And so I think that's the question: Does it -- is it more likely to produce corrosive acids or other substances that might eat away at the pipeline?

  • 10:11:48

    REHMAnd the Arkansas spill came just four days after a fine was levied against Exxon for the 2011 spill into Montana's Yellowstone River. What happened there?

  • 10:12:05

    MUFSONWell, there -- that was a little bit of a different story because it was a pipeline that was going under the river -- it had been there a long time -- and there was flooding. And the riverbed changed, and probably some sort of tree or other debris floated down and tore at the pipeline. So this is another important issue for pipelines in general.

  • 10:12:28

    MUFSONAnd TransCanada has tried to respond by drilling very deep under certain waterways. But the Keystone XL, you know, is covering 1,700 miles from Alberta to Texas that crosses a lot of waterways. And that's something else that people have discussed as a potential danger of this pipeline.

  • 10:12:48

    REHMSteven Mufson, he is energy correspondent for The Washington Post. Turning to you, Nick Loris, how many thousands of miles of oil pipeline already exist in this country?

  • 10:13:05

    LORISA lot. I mean, you're talking about hundreds of thousands of miles. If you look at the map of the United States and the pipelines that exist, not just oil but natural gas and everything else, it looks like a spider web underneath the United States. And even Nebraska, even the Sand Hills region where the alleged problem with the Keystone pipeline and the environmental sensitivity in that area, there's thousands of lines of pipeline even in that area.

  • 10:13:32

    LORISSo it's well-known that transporting oil by pipeline is by far and away the safest method of transporting oil, and it's something we've done in the United States for a long time now. And I don't think that the Arkansas spill is a systemic problem with our pipeline system in the United States, and I certainly don't think it should have any impact on the Keystone XL decision.

  • 10:13:53

    REHMNow, what percentage of those pipelines already in existence carry that same type of crude oil that would be coming from tar sands?

  • 10:14:07

    LORISI don't know the exact percentage, but what I know is more is certainly going to come in from Canada if Keystone is built and as more -- as we receive more oil from Canada because that's the majority of the oil that they are producing.

  • 10:14:19

    LORISSo I think, while it's important to understand the corrosive sensitivity to oil sands in our pipelines that have already been built, especially since those are the ones that are aging and the increased probability of a spill from those is more likely to occur than the Keystone pipeline because Keystone is a state-of-the-art pipeline with -- equipped with 16,000 sensors that will monitor if there's any oil pressure drops or increases, so they can shut down the pipeline quickly. So I think the fact that we have a state-of-the-art pipeline will only improve the less likelihood that a spill would occur with that pipeline.

  • 10:15:01

    REHMNick Loris, he is energy policy analyst with the Heritage Foundation. Turning to you, Thomas Homer-Dixon, I gather you prefer to be called Tad. In a piece published in The New York Times yesterday, you wrote, "If President Obama blocks the Keystone pipeline once and for all, he'll do Canada a favor." Tell us why.

  • 10:15:33

    HOMER-DIXONI certainly understand the concerns that people in the United States have over the potential environmental risks associated with shipping oil from Canada. But in Canada, we have a somewhat different set of concerns. The oil sands as we call them up here -- tar sands as many people refer to them in the United States do -- that the industry there does an enormous amount of damage to the boreal forest in Northern Alberta, pollutes enormous quantities of water.

  • 10:16:05

    HOMER-DIXONMy article in The New York Times focused on a somewhat different set of issues, though, and that is the way the oil sands industries are distorting the Canadian economy in many respects, sucking capital into the Western part of the country, reducing our rate -- broad rate of innovation in our economy and also fundamentally distorting our political system and undermining, in some respects, our democracy because it's very difficult actually to criticize the oil sands in Canada right now.

  • 10:16:36

    HOMER-DIXONIn fact, frankly, you're not even allowed to use the phrase tar sands. If you do, you're automatically deemed to be not just critical of the industry, but in some respects unpatriotic. Anybody who speaks against the industry in Canada is, in some corners, deemed to be anti-Canadian. And that's a real problem. It's really closed down the debate, and we're not having a full and well-informed debate, democratic conversation about the oil sands in Canada at the moment.

  • 10:17:04

    REHMWhat do you think is wrong with Canada's becoming more of a petro-state?

  • 10:17:14

    HOMER-DIXONWell, there are a number of consequences, one is that the political system especially the federal political system is increasingly influenced by oil sands, lobby groups, oil sands special interests, and that has consequences all through federal government and Canadian national policy. One of the places where we've seen it most obviously is with respect to research on climate change.

  • 10:17:45

    HOMER-DIXONThere are many scientists within the Canadian public service working in federal government laboratories across the country, working on various aspects of climate change issues, some of which relate directly to the oil sands and the emissions from the oil sands. Much of their funding has been cut. Labs have been closed. And in many cases -- in fact, just about all cases, the scientists have been told that they can't speak to the public, can't speak to journalists about their research without prior political approval.

  • 10:18:14

    HOMER-DIXONAnd often, that political approval is not provided. And these are scientists whose salaries are paid by the Canadian taxpayer, and I think that's an enormous disservice to gain the public discussion in Canada when we can't have them speak about the risks associated with climate change more generally and the oil sands specifically.

  • 10:18:34

    REHMThomas Homer-Dixon of the Center for International Governance Innovation. He's chair of Global Systems at the Balsillie School of International Affairs. When we come back, we'll talk about where this oil is going.

  • 10:20:06

    REHMAnd welcome back. We're talking about the Keystone XL pipeline. A decision from both the State Department and the White House is expected probably by the end of the summer. Here in the studio: Nick Loris, he's an energy policy analyst for the Heritage Foundation, Steven Mufson is energy correspondent for The Washington Post.

  • 10:20:37

    REHMAnd on the line with us, Thomas Homer-Dixon. He is chair of Global Systems at the Balsillie School of International Affairs. He joins us from Canada. And to you, Nick, I want to ask about the processing of this oil. It would be done here in American refineries, I gather, and then shipped to where?

  • 10:21:08

    LORISWell, it would certainly depend on the price of gasoline in the United States. Some of it might be shipped up to the Northeast. Some of it might be shipped to European markets, where we can export refined petroleum products, and I think that's the best thing about this is this oil is being shipped down to the United States to our Gulf Coast refineries, which are world-class refineries. And if this oil is shipped elsewhere to Chinese markets, which have less stringent environmental regulations on their refineries, you're talking about a bigger climate impact, a bigger environmental impact.

  • 10:21:43

    REHMAnd how much -- if you do not use this oil here in the United States, where would it go?

  • 10:21:52

    LORISLargely to Asian markets. I would say a lot would go to China. Steve might know that answer better than I do, but I think most of it will go to the Asian markets.

  • 10:22:03

    REHMSteve.

  • 10:22:04

    MUFSONWell, I talked to Valero, which is going to be one of the main customers. They've already contracted to buy 150,000 barrels a days from the pipeline. They're selling about 18 percent of their gasoline outside the United States and about 10 percent. This is for all their refineries. So it probably will be a bit higher. Most of it is going to Europe and Latin America. The Europeans burn a lot more diesel. We burn more gasoline. So we tend to send diesel to Europe. Europe tends to send some gasoline to us. And Latin America needs more refining capacity, and they're in the market for both of those products.

  • 10:22:41

    REHMSo to what extent could the oil coming from tar sands -- forgive me, Tad -- actually affect the price of oil and gas here in this country?

  • 10:22:56

    MUFSONWell, I think it affects the price in the sense that it's a global market for oil. And the more oil is on the market, the cheaper the price will be. But it's not like the United States. Gasoline price exists in isolation from the rest of the world. So I don't think that whether it's shipped abroad after refining is the key question. The key question is: Is it coming on to the market at all?

  • 10:23:19

    MUFSONA lot -- but, you know, it's relevant because a lot of opponents to the pipeline, especially those who are concerned -- landowners who are concerned about being pressured through imminent domain and to sign the agreements with TransCanada say why should this be an imminent domain project, it's not oil coming to the United States. It's oil going through the United States. And it's not a common carrier, and I'm not getting any benefit from it. Those people pretty much lost those arguments in court, but it's an interesting issue and one that a lot of people feel very strongly about.

  • 10:23:58

    REHMTad, a recent report issued by Nick's organization, the Heritage Foundation, noted that Canada is not a third-world despoiler of nature, that there were going to be stringent standards in place to ensure that the petroleum would be produced safely. Tell us about those standards and your reaction to the Heritage Foundation's report.

  • 10:24:35

    HOMER-DIXONWe have to be clear that it's true Canada has, by world standards, fairly rigorous environmental regulations. There's a lot attention paid to -- I'll call them the tar sands from now since that seems to be vernacular here -- a lot of attention paid to the tar sands in Canada so the countries -- the companies feel that they're under the magnifying glass of public attention and generally follow the regulations very closely.

  • 10:25:09

    HOMER-DIXONThat being said, as I pointed out in my New York Times article, this is junk energy. It takes an enormous amount of work to get it out of the ground, convert it into something useful, such as diesel fuel or gasoline. And there's a way of thinking about that I find very useful. It's called the energy return on investment. How much energy do you have to invest in getting this resource out of the ground to produce a unit of useful energy?

  • 10:25:36

    HOMER-DIXONWell, in the case of, say, conventional oil in the United States, the energy return on investment is around 15-1, so you get around 15 barrels of energy back for every barrel of energy you invest to get that energy out of the ground. In the case of the tar sands, the energy return on investment is around 4-1, perhaps, at the outside, 6-1. This is not food energy. It's not high-quality energy because it takes a lot of work to develop it and process it.

  • 10:26:06

    HOMER-DIXONAnd almost all of that work is done by fossil fuels, either petroleum directly, diesel to run the machinery to run the trucks, for example, natural gas to crack the bitumen, to heat the steam, to melt the bitumen underground. Since almost all of that work is done by fossil fuels, inevitably the carbon dioxide output in producing this energy is high compared to conventional oil, somewhere between 15 and 20 percent higher barrel for barrel than conventional oil.

  • 10:26:41

    HOMER-DIXONAnd that's something you can't do anything about because this is junk energy. And yes, we can have good regulations. But the bottom line is that in terms of the physical characteristics of this energy source, you do a lot of damage, and you create a lot of environmental havoc when you extract it and process it.

  • 10:27:01

    REHMSteve Mufson, you've written a new e-book just published by TED Books. It's called "Keystone XL: Down the Line." And you've written it on the basis of your travels by car, journeying the length of the proposed pipeline to see really what this policy debate looks like from the ground. Talk about that.

  • 10:27:33

    MUFSONWell, the thing about the trip is that the issues were a little bit different in each leg of the trip. So we started off in Canada and in the oil or tar sands. And even having read a lot about it, just seeing it as a, you know, awesome sight in every sense of the word is…

  • 10:27:55

    REHMHow so?

  • 10:27:56

    MUFSONWell, because it's really more like -- half of it's really more like strip mining than oil drilling because you're peeling back the tree -- cutting down the trees, peeling back the wetlands and getting to the oil sands underneath.

  • 10:28:11

    REHMAnd you're saying that that's already happening along this route.

  • 10:28:17

    MUFSONYeah. That's where it's all starts from. The pipeline starts a bit south of there, but the oil is coming from there and that's why we started there. So that's a very -- really an incredible sight, especially from the helicopter which we rented for an hour to get a good look. And then, you know, you get down to the Dakotas, and you've got this huge boom going on in North Dakota. And again, no matter how much you've read about it, seeing it's just another matter and...

  • 10:28:46

    REHMNow, that's the shale boom.

  • 10:28:48

    MUFSONThat's the shale boom.

  • 10:28:49

    REHMRight.

  • 10:28:49

    MUFSONAnd thanks to the arm wrestling of the Montana governor, TransCanada has agreed to -- had agreed to take some oil from North Dakota into the Keystone XL pipeline, which wasn't in the original plan. So we thought it would be good to get a view of that. And there's a tremendous amount of pressure on schools, on housing, on all sorts of things.

  • 10:29:11

    MUFSONEven the industry itself can't really keep up with the infrastructure it needs in terms of transportation. They're flaring a tremendous amount of gas. That was kind of an impressive sight because that really hasn't happened too much in this country in recent decades.

  • 10:29:27

    REHMAnd what about the Ogallala Aquifer and the threat of leaks there?

  • 10:29:32

    MUFSONRight. And so having dealt with the climate issue mostly when you're Alberta, you get to Nebraska and their concerns are different. They're worried about leaks. They're worried about the Ogallala Aquifer, which is the biggest aquifer in the country. It supplies water to, I think, at least a quarter of our crop land.

  • 10:29:51

    MUFSONIt's tremendously important, and it's -- and in some places, it's very close to the surface, pretty much in the same range as where the pipeline would be in some places. So there is a tremendous outpouring of opposition. And this wasn't from the same group of people who were opposed to the climate issue. These are from -- this is in a bedrock Republican state. But the pipeline really touched a sort of old prairie populace nerve that is shared across party lines there.

  • 10:30:23

    REHMAnd you're also talking about Native Americans and their desire to protect the Trail of Tears.

  • 10:30:34

    MUFSONRight. And this was a kind of surprising thing as well because Native Americans, one of the big issues for them for many years has been how -- the treatment of burial remains and burial sites. As you know, a lot of remains were here at the Smithsonian for many years. It's a huge fight to try to get those repatriated, and a special law was enacted. And under that law, Indians have been trying to get -- to influence the route of this pipeline.

  • 10:31:07

    MUFSONAnd TransCanada has actually been very careful not to try to cross a lot of Indian reservations to avoid that. In South Dakota, it winds its way through the state without touching on reservation, so it comes very close in a couple of places. So the TransCanada CEO said, well, this is just the most direct route, but really it looks very much like they took some care to try to minimize conflicts that it would have there. But in Oklahoma, there were still some tribes that were trying to negotiate with the pipeline company when we were there.

  • 10:31:39

    REHMSo, Nic Loris, with this kind of developing opposition from landowners, from, as Steve said, die-hard Republicans, how much of an argument can be made for the use of eminent domain crossing these privately owned lands and publicly owned as well?

  • 10:32:08

    LORISYeah. I think that's a -- excuse me -- a critical question certainly because I think TransCanada really tried to work with the people as much as possible to lay the route of this pipeline. And if you look at the Department of State's environmental review, they considered 17 major routes. They looked at 341 minor altercations to the route, just to make sure that they could appease the citizens' concerns as much as possible because the Department of State looked at this and concluded that it would pose no significant environmental risk.

  • 10:32:41

    LORISSo, absolutely, Nebraska had legitimate concerns about the pipeline, and those need to be addressed. And I think that they have been now. And as you can see with the Nebraska governor supporting the pipeline now that they're ready for it to move forward.

  • 10:32:56

    REHMNic Loris, he is energy policy analyst for the Heritage Foundation. And you're listening to "The Diane Rehm Show." Tad Homer-Dixon, what do you make of the sort of conclusion at the end of the day by the governor of Nebraska, say, and others, the State Department in particular, that this really does not pose environmental risks here in those parts which have been closely examined, and yet there you are in Canada looking at both the environmental and governmental risks to this project?

  • 10:33:52

    HOMER-DIXONSteve was absolutely right that the State Department supplemental environmental report concludes that there is likely not to be any additional climate environmental risk associated with construction of Keystone. And the underlying assumption which he pointed to is that Canadians will find a way to ship the stuff anyway. They'll get it out. They'll export it. If they don't export it through the United States via Keystone, they'll find other routes.

  • 10:34:23

    HOMER-DIXONAnd the major possibilities are to the west, through the Rockies, across the Rockies, to the Pacific Coast, the east, to Quebec and the Maritimes to refineries there. But the one the State Department examined in most the detail -- and I thought this was actually very interesting, and I read this part of the report very closely -- was shipping enormous quantities of tar sands product, diluted bitumen, for example, by rail down through the United States, up to 60 trains a day of 100 cars each.

  • 10:34:58

    HOMER-DIXONAnd I don't think we've actually considered this possibility in great detail in either country. I find that it's actually, in some respects, quite improbable. So I'm not sure the State Department's conclusion is and underlying assumptions are really accurate, that this material would be exported in -- at the quantity that is envisioned in the absence of pipelines like Keystone. So I think actually Keystone will make a difference.

  • 10:35:27

    HOMER-DIXONIf Keystone is not approved, it's going to create real difficulties for the industry. And frankly that's why our senior Canadian officials and leaders of the tar sands industry in Canada have spread out across the United States in part of a full-court press, basically, in the United States to try to make sure that this pipeline is approved.

  • 10:35:49

    REHMAnd, Steve, you've talked to some of those senior Canadian officials.

  • 10:35:55

    MUFSONWell, that's right, and looked at some of the obstacles that might come up in some of these other routes. There's been a lot of talk about, if the Canadians don't sell it here, they'll sell it to China. But, you know, that's not so easy. There are First Nations in Canada, which probably have more influence than Native Americans here. There's a strong environmental movement. Canada's west coast and people who live in British Columbia don't -- not only don't want the pipeline, but they don't want tankers that would be associated with that and having that kind of increased tanker traffic.

  • 10:36:32

    MUFSONBut in addition to that, Chinese refineries aren't really equipped to handle this kind of crude oil anyway. So that's why, I think, the State Department looked a little bit more at the rail option and also because we ourselves are doing much more than anyone ever could have imagined by rail. We transport over one million barrels a day by rail in the United States now.

  • 10:36:51

    REHMBut doesn't rail itself pose its own problems?

  • 10:36:59

    MUFSONSure. And just last week, there was a derailment in Minnesota, and there was some oil spill there. So there's no safe -- 100 percent safe way to do that.

  • 10:37:13

    REHMWhen we come back, Steve, I'd like to hear about your conversations with Canadian officials as to their perspective, some of whom, I gather, are very much in favor and some of whom are very much opposed. We'll take a short break here. And when we come back, of course, we'll include your calls in our conversation.

  • 10:40:05

    REHMAnd, Steve Mufson of The Washington Post, in writing your new e-book "Keystone XL: Down the Line," you did talk up the line with Canadian officials. Tell us what they had to say.

  • 10:40:22

    MUFSONWell, I talked to Thomas Mulcair, the opposition leader, and he has raised a lot of the same questions that Tad has. Is this really good for Canada's economy? Is the oil income driving up the value of the Canadian dollar, which makes other Canadian industries less competitive in the international market?

  • 10:40:42

    MUFSONAnd this is part of the petro state phenomenon is that you develop this industry, but a lot of other industries sort of die on the vine. And he was very vehemently, you know, attacked for that by the main -- the ruling party. And -- but, you know, there is some evidence to show that that's true, and we've seen that in other countries. Some of those industries, the ones that will die off first, are probably the least competitive actually, but there's still definitely an impact. And we see that even within our own country, Diane.

  • 10:41:17

    MUFSONYou know, in Louisiana, at the time of the oil spill, a lot of people said, oh, you know, poor Louisiana. But Louisiana's been our own sort of petro state too. And we see the same kind of thing even within countries where they have a low education rate, high crime rate, low, you know, low development rate in all the kind of social measures. And that's what Mulcair doesn't want to happen in Canada.

  • 10:41:39

    REHMAll right. I'm going to open the phones. First caller is in Warsaw, Poland. Good morning, George. You're on the air.

  • 10:41:50

    GEORGEAnd a good morning to all of you. Let me cut to the chase. There's a bold-faced lie that lately I haven't heard but before I heard quite a bit, and it goes like this, that the Canadian oil somehow will contribute to the security of the United States by reducing our foreign oil dependence. Now, I'd like to tell you that I know -- and I have very many sources confirming -- that one barrel of oil will not be refined and not on United States. But 100 percent of all the oil, if they build the pipeline, will be refined and shipped as a refined product overseas.

  • 10:42:42

    REHMCan you confirm or negate that statement, Steve?

  • 10:42:49

    MUFSONWell, clearly, some of it is going to be shipped to overseas. This is the way oil is being shipped -- oil products are being shipped overseas right now. So that doesn't seem like that it'll change that much. I do think the question of energy security is sort of interesting one because people tend to talk about this as though this will make the United States energy independent.

  • 10:43:10

    MUFSONYou know, Canada is still a foreign country. One of the benefits of importing from Canada aside from its proximity and stability is that Canadians tend to recycle more of those dollars into the United States economy than, say, Saudi Arabia would. But it doesn't end our energy problems in that sense because the price will still be high for motorists. It'll help our balance of payments and perhaps some.

  • 10:43:40

    REHMNick Loris.

  • 10:43:41

    LORISYeah. I would just like to quickly echo that I don't think the policy goal should be energy independence because it usually leads to more subsidies for fossil fuels or for renewables. And I think we need to focus on opening access to markets both foreign and domestic because as Steve mentioned earlier in the program, oil is a globally traded commodity. And what happens on the global market affects what we do here and how much we pay here in the United States. So increasing access should be the policy goal, not energy independence.

  • 10:44:12

    REHMBut you do not see this oil from Canada lowering the price of oil and gas here in the United States.

  • 10:44:26

    LORISI do, but it's not going to be a dramatic price decrease.

  • 10:44:29

    REHMWhat does that mean?

  • 10:44:30

    LORISIt's not going to lower from $3.50 per gallon to $2 per gallon. As you mentioned, some of the refined gasoline and diesel is going to stay here in the United States. Some is going to be shipped to European markets and Latin American markets. But the reality is increasing supply lowers prices, and more oil on the global market will drive down prices a little bit.

  • 10:44:53

    REHMAll right. Let's go to St. Louis, Mo. Good morning, Alfred. You're on the air.

  • 10:44:59

    ALFREDThank you for taking my call. The price of gasoline in California and the West Coast is so expensive because there are not enough refineries there. Build a refinery on the West Coast and run it -- run a pipeline there from Canada, and it will bring the price of oil, of gasoline down. If you want to export it to China, Japan, so forth, if you're much closer from -- to bring it from the West Coast to Japan than you would be from the Gulf of Mexico all around to the Panama Canal or the tip of South America and (unintelligible)...

  • 10:45:40

    REHMAll right. Tad Mufson, (sic) do you want to comment? Sorry. I said Tad Mufson, but I meant you, Tad.

  • 10:45:51

    HOMER-DIXONI'd just like to echo what was being said previously by Steve and Nick. The price of oil and derivatively gasoline is influenced by things like the availability of refineries, and the various kinds of oil that are available for those refineries at a given time is also influenced by demand, especially global demand. Oil is a fungible commodity. It's traded in a global market.

  • 10:46:17

    HOMER-DIXONAnd to a large extent, what's happening with, for instance, the price of Brent Crude, the price of West Texas Intermediate being driven by the state of -- very importantly the Chinese economy and the level of oil consumption in that economy. So we can do a certain number of things to sort of shuffle the deck and move things around and move oil around within North America. But ultimately, there are larger factors at play that are going to be very influential in determining the price of gasoline that we put into our cars.

  • 10:46:50

    REHMAnd here's an email saying, "We're up against corporations so rich and powerful, they are doing their best to buy our democracy. All we have on our side is unbought science and a growing movement of all ages and all kinds of people willing to fight for the future. This is not just an issue of environmental and climate risk, it's an issue of intergenerational justice. What right do we have to put our kids and grand kids at any level of added risk for an unlivable future?" Tad.

  • 10:47:41

    HOMER-DIXONWell, I'm very glad that email has been sent in because there are really a number of overlapping conversations here, and we have a conversation about the environmental risk of the pipeline in the United States. We have conversation about the price of fuel for cars. But the larger context really is the climate conversation and climate change and the emerging reality that we're having some trouble digesting that humankind as a whole is going to have to move to a global, zero carbon energy system through the course of this century. The climate change problem is not going away.

  • 10:48:19

    HOMER-DIXONIt could do enormous damage to the stability of our societies, the availability of food, the livability of our costal areas. And we need to get ahead of this problem, and that means ramping down carbon emissions. And really, in many respects, the debate in Canada is about when we start to make that shift. In Canada, we are deeply, deeply committed to carbon-based resource extraction and energy extraction.

  • 10:48:45

    HOMER-DIXONAnd we have decades and decades of investment, billions and tens of billions of dollars of infrastructure built up around that industry. And that has created a whole panoply of special interest groups that pushes further down that road. We're going to be in a very bad place in the future if the world decides to move away from carbon energy. And the argument, I think, here now in Canada, the larger argument is about how and when we're going to start that process in Canada and move to a different kind of economy and different kind of energy system.

  • 10:49:19

    REHMSteve.

  • 10:49:20

    MUFSONWell, and I think that the average person just doesn't realize what an enormous, giant energy infrastructure we have and need to fuel the kind of economy we have. And the economy we have is still basically a fossil fuel economy. And, you know, this is an environmentally -- this project has environmental hazards, but take your pick.

  • 10:49:46

    MUFSONYou know, do you want to drill for oil off the Chukchi Sea coast in Alaska? Do you want to put another 10,000 holes in the ground in North Dakota? Do you want to import oil from some country that doesn't give a hoot about environmental issues? Do you want to drill in deep water in the Gulf of Mexico? Basically, all the places we go to look for oil to fuel this economy have environmental drawbacks and risks, so you really come away thinking...

  • 10:50:19

    REHMWe have to make a choice.

  • 10:50:19

    MUFSON...maybe we need to do something about the way -- yeah -- and greater fuel efficiency. I would argue the most important piece of energy policy that the president has done in his term -- time in office has been to raise fuel efficiency standards for automobiles.

  • 10:50:34

    REHMLet me talk with you for a moment about the political situation that the president is in, Steve, because he was very strong in his State of the Union address on environmental matters. How much pushback is he going to get from the environmental community, which came out so strongly for him, if he now -- considering all the risks that we've talked about this morning, if he goes forward with the State Department and allows the construction of this tar sands pipeline?

  • 10:51:23

    MUFSONWell, that's a good question because environmental groups have really made this the priority, which is a little surprising to me because in some ways, there are other issues that are equally or maybe even more important such as regulating emissions from existing coal plants, another issue that the president is going to have to decide on this year.

  • 10:51:44

    MUFSONSo, you know, was it a mistake for the environment -- will environmental movement look back and say, it was a mistake to emphasize this versus something else? It's hard to say. The president is under more pressure than I would have expected last year when I kind of assumed he would approve this. And now I'm a little less sure, but I still think he probably will.

  • 10:52:04

    REHMNick.

  • 10:52:04

    LORISYeah. I think the real loser in this battle is going to be coal because ultimately, I think the president is going to approve the Keystone XL Pipeline because it has a veto-proof majority support in the Senate. Seventeen Democrats recently supported it, as 70 Democrats in the House supporting it.

  • 10:52:22

    LORISAnd while this puppet show of Keystone is going on on the sideline, I think there is going to be a real movement from the Environmental Protection Agency to regulate, finalize new source performance standards on power plants as well as on existing power plants. So I think that's going to be the real pushback just to cave in to the environmental movement.

  • 10:52:40

    REHMBut how much authority and power does the EPA currently have?

  • 10:52:49

    LORISI would argue a lot. I mean, granted there has been some shift and it's taking them some time to finalize these regulations as we nominate and approve a new administrator, but I think once they get the ball rolling, I think that's where a lot of the environmental -- stringent environmental regulations are going to come down the line especially against building new coal power plants, existing coal power plants and the ability to mine for coal in the United States and export it to countries that may want it.

  • 10:53:16

    REHMDo you agree, Steve?

  • 10:53:18

    MUFSONAbsolutely. The Clean Air Act gives a tremendous amount of authority to the Environmental Protection Agency, and the Supreme Court in 2007 ruled that CO2 was a pollutant that should be regulated under the Clean Air Act. And that gives the EPA even clearer authority.

  • 10:53:33

    REHMAnd you're listening to "The Diane Rehm Show." Let's go to Fort Worth, Texas. Good morning, Tracy.

  • 10:53:42

    TRACYGood morning. I have asked this question by letter of the secretary of the interior, my U.S. senator and a reporter who wrote about the pipeline. And the -- and I never received an answer from any of them. The question is: Why doesn't Canada refine its own oil?

  • 10:53:58

    REHMTad.

  • 10:54:01

    HOMER-DIXONWe asked that question up here a lot, too. Refining our own bitumen would keep the value added in the country and help increase investment in Canada. However, it appears in the judgment of the extraction companies that there isn't much to gain economically from refining bitumen in Canada, especially when you have a large number of refineries along the Gulf Coast that are specifically adapted for this kind of heavy sour crude. It makes much more sense to get it down to the Gulf Coast where it can be refined there, and economically, that appears to be the winning argument at the moment.

  • 10:54:40

    REHMTad, what percentage of Canadians do you believe agree with you in wishing that the Obama administration will decide to reject this pipeline?

  • 10:54:56

    HOMER-DIXONI would say according to the polls that somewhere between 40 and 50 percent do not support the Keystone pipeline. The country is almost split on the oil sands or the tar sands more generally. Of course, in the West, especially Alberta, industry is strongly supported. The support is probably lowest in the province of Quebec and Ontario itself, which is the most populous province, is largely split on the issue. I want to add one additional thing in response to Nick and Steve's comments earlier.

  • 10:55:25

    HOMER-DIXONThe Obama administration actually has a great deal of potential leverage over Canada and its environmental policies and its climate change policies in this period. The Harper government has said that it will basically adopt American emissions policies. They have now accepted the new fuel efficiency or CAFE standards for the American automobile fleet into the Canadian market.

  • 10:55:49

    HOMER-DIXONI think that there's an opportunity here potentially for the Obama administration to work with Canada on a larger North American carbon compact, perhaps with Mexico, too, under the auspices of the NAFTA agreement. Give us Keystone, but tell us that there is going to be a price, and that price is ultimately going to be a continental agreement for ramping down carbon emissions going out into the future decades.

  • 10:56:13

    REHMAnd what happens in Canada if President Obama rejects the proposal?

  • 10:56:23

    HOMER-DIXONThere will be increased pressure to try to open up the Northern Gateway Pipeline to B.C., but I think Steve is right that that project is probably dead. There is an announcement this morning of much -- more significant prospects for the development of a pipeline out east to Quebec and the Maritimes, carrying about the equivalent of the Keystone.

  • 10:56:44

    HOMER-DIXONAnd, of course, rail transport will be used. But I think if Keystone is cancelled or stopped, ultimately, it will have an effect on the oil sands industry overall and will reduce its economic viability, not totally but it'll have an impact of some significance.

  • 10:57:06

    REHMThomas Homer-Dixon, Nick Loris, Steve Mufson. He is the author of a new e-book published by TED Books titled "Keystone XL: Down The Line." Thank you all so much. Thanks for listening. I'm Diane Rehm.

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