The Obama Administration is facing a critical choice over whether to approve an extension of the Keystone XL oil pipeline. If approved it will carry heavy crude oil from the tar sands of Alberta to refineries in the Texas Gulf.
The controversial extension (Phase IV of the pipeline) is designed to run the last stretch, from Cushing, Oklahoma to Port Arthur on the Gulf coast. President Obama issued provisional approval in March 2012 for the extension, after the pipeline company changed the route to one with less environmental impact.
Since then, all the talk has been of “energy independence” and the pipeline’s role in turning the US from oil importer to possible exporter.
Lobby firms such as Cambridge Energy Research Associates are heavily promoting the concept, while ignoring the costs in terms of locking the US into a fossil fuels future. Obama’s funding supporters are urging him to back away from the project, to take the US on a new energy trajectory.
Pipeline ruptures should act as warning
In late March the Pegasus oil pipeline operated by Exxon-Mobil, carrying high-pressure heavy oil down to the Gulf, suffered a rupture at Mayflower, Arkansas, spewing thick black “goo” into the surrounding streets and backyards of a suburban neighbourhood.
In early May the same pipeline suffered a second, unrelated rupture 200 miles away, in Ripley County, Missouri.
Exxon had been operating this pipeline more or less as a stopgap. It was built over 60 years ago to carry light refined oil north, from the Gulf coast to the industrial heartland of Illinois. But in 2006 Exxon reversed the flow, and instead pushed heavy tar sands oil under great pressure south to the refineries. It was ageing infrastructure pushed to the limits.
And those limits were breached as the pipeline gushed oil into American suburban neighbourhoods.
The Pegasus rupture couldn’t have come at a worse time for the interests promoting the Keystone XL extension.
The incident itself — a major oil spill on the American mainland, caused by an American firm pushing ageing infrastructure to the limits — would be expected to attract maximum press coverage. But after an initial show of interest, major publications like the New York Times and Washington Post just seemed to back away. The New York Times, for example, ran two articles right after the spill, one reporting it and one a day later discussing the relevance of the rupture and spill to the debate over Keystone.
After that, you would be forgiven for asking: Pegasus oil spill? What spill?
Renewable energy independence
This incident reveals the reality behind the claims of “energy independence”. Proponents of coal seam gas and heavy tar sands oil are looking to make a quick buck out of extending the life of fossil fuel assets.
Oil and gas independence created by what Michael Klare of Hampshire College calls “extreme” forms of energy, with high costs and high risks (highlighted by the Pegasus ruptures), can only last for a couple of decades at most.
China, India and other countries with similar mindsets are banking on securing long-term energy independence in another way — by building their own renewable energy industries.
It makes sense to build up new industries by supplying wind turbines, solar PV panels, the mirrors and lenses needed for concentrating solar power plants, and upgrading power grids. Not just in terms of creating export platforms for tomorrow but in creating real, permanent energy independence.
But the US, just like Australia, finds itself at the wrong end of this debate. Plunging gas prices induced by rising levels of coal seam gas extraction, thanks to technological innovations like fracking and horizontal drilling, are giving fossil fuels a new lease of life, and oil and gas companies a sniff of easy profits for another couple of decades.
The US has already had one major tragedy in its energy policies, when initial ventures into solar and wind in the 1980s raised prospects for rapid decline in costs as markets expanded, but were then dashed as oil prices plunged in the 1990s. Now it faces a second tragedy as coal seam gas and tar sands oil threaten to derail policies to promote real energy independence through the building of internationally competitive renewables industries.
The US really needs a short, sharp wake-up call to get back on track in building the industries of tomorrow. With more media coverage the Pegasus ruptures might have been just that. The Keystone XL pipeline decision really will signal whether the US can break with its fossil fuel past.
Australia is involved in this debate because of the popularity of coal seam gas and its promotion by the federal and state governments, again in the name of 'energy independence'. Coal seam gas promises quick and easy profits for some; but the truth is that energy independence comes from building renewable energy systems, not from drilling holes in the ground.
John Mathews is Professor of Strategic Management at Macquarie Graduate School of Management, Macquarie University in Sydney, where he has taught graduate MBA classes for the past decade.