According to a report released last Monday by the Royal Bank of Canada (RBC) Dominion Securities, a decision against the proposed Keystone XL pipeline could put nearly $10 billion in investments on hold. Should US president Barack Obama say no to the pipeline, capital spending on the tar sands would drop between $8 billion and $10 billion, with the drop coming most likely in 2015 and 2016.
The report follows news that major investors have begun to shy away from the Alberta tar sands, suggesting a 'No' on Keystone is likely to push investment west toward liquefied natural gas development in BC which drew more than $12 billion in deals last year, according to the report.
RBC says the majority of that money—about $7 billion—could only be delayed until closer to the end of the decade.
Whether or not that capital disappears entirely or is simply delayed by a few years depends largely on alternative modes of transportation. The report is confident that producers will make use of those other means, saying, “Keystone XL impacts will be short-term in nature as operators find other ways to ship bitumen and synthetic crude to markets, leading to project deferrals but not outright cancellations.”
The oil companies’ ability to get tar sands oil to market is one of the key assumptions made in the US State Department’s evaluation of the Keystone XL pipeline. That report, which claimed the Keystone XL would have little impact tar sands expansion or greenhouse gas emissions, was roundly criticized by the Environmental Protection Agency for failing to fully consider the cost and risk of alternatives like oil transport by rail, as well as the “social cost” of emissions, such as human health and damage to agriculture.
Critics say oil transport alternatives like rail are also cause for concern.
The day the RBC’s report was released, a Canadian Pacific Railway freight car moving oil through Saskatchewan derailed, spilling an estimated 91,000 litres of crude oil. Prime Minister Stephen Harper called the spill evidence of the “environmentally challenging” nature of oil transport by rail. There is no known failsafe way to transport the fuel.
In his response to the report, Greenpeace climate campaigner Mike Hudema suggested that there are far better ways to spend the billions of dollars investors may devote to the tar sands.
“We can spend billions to build this pipeline and the new tar sands mines required to fill it or we can invest those dollars in solutions that end our addiction to oil, improve the health of our communities and stop climate change,” he said in a statement.
Image Credit: transcanada.com
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