Last week I discussed the different perspectives on Keystone XL and how much of the differences of opinion can be explained by people's view on what Keystone XL means for the environment. President Obama is currently deciding whether or not to let the project go ahead and regardless of whether he says yes or no, there will be some very upset people. One innovative way out of this dilemma could be to forget about regulating the pipeline itself and instead to regulate the oil that flows in it. This method would have a number of advantages that both proponents and opponents of Keystone XL might be able to live with.
Under this approach, the US would let pretty much any oil pipeline be built, but would instead impose dynamic standards on the oil being transported within the pipeline. The standards would say that any oil transported must not exceed a given threshold risk of being spilt. In addition, the standards would also dictate that the oil transported must not exceed some carbon intensity or GHG limit. The advantage of this approach is that it does not discriminate between otherwise similar projects and it allows the standards to evolve as technology improves.
For example, if Keystone XL is built, it will be one of the most advanced pipelines in the world. It will be less susceptible to a rupture, (and therefore an oil spill) than the existing pipelines which were mostly built in the 60's and are approaching the end of their design lives. By imposing a standard that states that oil may only be transported if the chances of an oil spill are below some objective measure, it is likely that the oil will flow on newer modern pipelines and older riskier pipelines will be taken out of service. This will lower the risk of oil spills not for any single pipeline but for the US as a whole.
Imposing a standard on the GHG emissions associated with oil transported via a pipeline is even more interesting. Canadian oil sands are more carbon intensive on a full life cycle "well to wheels", basis largely because of the upgrading process to convert bitumen to oil, (estimates vary from between 8% to 40% more intensive). The US could impose a standard that says any oil imported into the US must not exceed some specified carbon intensity. The European Union is already going down this road with its Fuel Quality Directive and California has taken similar steps. Not only would this put Canadian oil on an equal footing with other similar oil (such as the heavy oil the US imports from Venezuela), but it would allow the US to gradually tighten the restriction as time goes by. If Canadian oil sands producers are unable to lower the carbon content of their oil to meet the standard, then they would not be permitted to export it to the US.
Keystone XL is a controversial subject on both sides of the border. Perhaps the most frustrating part to the dilemma is that approving or disallowing Keystone XL would lock the US into one energy future or another for a very long period of time. One way around this would be to forget about the one off decision as to whether or not to build Keystone XL or not, and instead focus on regulating the oil itself. Maybe, just maybe, both sides of the Keystone XL debate might be able to live with that solution.
