Many studies and much uncertainty

The Obama administration’s decision on whether to permit the Keystone XL pipeline to cross into the United States from Canada will be based to some extent on the life-cycle assessments (LCA) of greenhouse gas (GHG) emissions that will result from the proposed project.  Should the U.S. decision be based only on GHG LCAs for Keystone XL, there is virtually no chance that the project will be approved.  A survey by the Congressional Research Service (CRS) of LCAs conducted by about a dozen different parties indicates that in virtually every way a project can be assessed, the production of oil sands that would be transported by Keystone XL will result in more GHGs than a baseline LCA released by the EPA in 2005, which examined GHG emissions associated with fuels produced in and imported into the United States. 

This conclusion is reached even though the LCAs differ in many critical ways—e.g., there is much variety in the assumptions on which the LCAs are built and, consequently, a great deal of uncertainty about the value of comparing the results of different LCAs. 

Also, there is more to Keystone XL than the GHGs it will generate.  The project requires a Presidential Permit, which the Department of State issues for international projects that are in the “national interest.”  Keystone XL supporters argue that the estimated 830,000 barrels per day the pipeline would convey into the United States from our friendly northern neighbor would substantially reduce the energy-security risks the U.S. faces by relying on petroleum imported from nations that are less politically aligned with the U.S.  (In December 2012, the U.S. produced about 7.03 million barrels of crude oil per day and imported about 7.58 million barrels per day.)

Moreover, TransCanada, the company sponsoring Keystone XL, claims that the project will pump over $5 billion into the U.S. economy and create nearly 5,000 direct and 40,000 indirect jobs.  Many of those jobs will last only as long as construction, which is estimated to be completed in about 2 years. 

But the GHG emissions—primarily those resulting from the production of oil sands from Canada’s province of Alberta—will continue for decades.  Alberta's total proven oil reserves are estimated  at 170.2 billion barrels, about 11 percent of total global oil reserves.  Even though President Obama has indicated that he would not approve a project that “exacerbate[s] the problem of carbon pollution,” the Keystone XL pipeline could be an extraordinarily reliable source of transportation fuel.  In that context, determining the national interest is no simple matter. 

There are also legitimate questions about whether denial of the permit would in fact affect production of petroleum in Alberta.  Proponents of the pipeline claim that Canada’s oil sands will be developed and sold with or without a pipeline into the U.S.  This view is based on the assumption that Canadian oil sands crudes would find other ways to market (e.g., other pipelines and the use of tankers, railcars, or trucks).  Others contend that the current lack of transportation infrastructure has already depressed and will continue to depress production.

Well-to-wheel

In simple terms, GHG LCAs attempt to quantify the GHG emissions a project, product, or service will release from cradle-to-grave.  Regarding Keystone XL—and most other projects that develop crude petroleum for use in transportation—the phrase refers to the extraction, transport, and refining of the crude product; distribution of the refined product (e.g., gasoline, diesel, jet fuel) to retail markets; and combustion of the fuel in end-use vehicles.  This entire cycle is referred to as well-to-wheel.  Other GHG assessments of Keystone XL have considered less than the entire life cycle; two of the more common types are well-to-tank (or production) and well-to-refinery.

The CRS states that its review of LCAs indicates that on average and on a well-to-wheel basis, the Keystone XL project is 14 percent to 20 percent more GHG emission-intensive than the average for transportation fuels sold or distributed in the U.S.  What’s more, if the final consumption phase of the LCA is discounted—which makes up 70 percent to 80 percent of well-to-wheel emissions—well-to-tank emissions are on average 70 percent to 110 percent higher for Canadian oil sands.

What are oil sands?

Oil sands are an unconventional petroleum deposit commonly composed of formations of sand, clay, water, and a dense and extremely viscous form of petroleum technically referred to as bitumen.  Most LCAs do not include an assessment of raw bitumen because it is near solid at ambient temperature and cannot be transported in pipelines or processed in conventional refineries. Thus, bitumen is often diluted with liquid hydrocarbons or converted into a synthetic light crude oil to produce the resource known as oil sands-derived crude or simply oil sands crude.  Several types of crude-like products can be generated from bitumen, and their properties differ in some respects from conventional light crude. They include upgraded bitumen (synthetic crude oil, or SCO), diluted bitumen (dilbit), and synthetic bitumen (synbit).

Variables and uncertainty

Following are selected key findings about Keystone XL LCAs reported by the CRS.

• Assumptions.  While most studies agree that Canadian oil sands crudes are on average “somewhat” more GHG-intensive than the crudes they may displace in U.S. refineries, the range of the reported increase varies among assessments.  Key design and input assumptions can significantly influence results.  For example, studies differ on the fundamental unit used to evaluate GHG emissions.  Some evaluate GHG emissions on the basis of a particular final fuel product (e.g., gasoline or diesel).  Others evaluate emissions by an averaged barrel of refined product.  Some studies report emissions per unit of volume (e.g., millions of barrels), and others, by unit of energy produced (e.g., Btus).  “The choice affects how the results are presented and makes it challenging to compare across studies if the data or conversion values are not fully published or transparent,” states the CRS. 
• Potential sources of GHG emissions in oil sands development include:
• Land use changes (e.g., the removal of vegetation and trees, soil);
• Capital equipment (construction of facilities, machinery, or other infrastructure);
• Upstream fuels (production of fuel or electricity imported to the facility for process heat or power for machinery);
• Extraction of the bitumen, including equipment for mining and steam generation;
• Upgrading the bitumen and combustion of coproducts;
• Crude product/coproduct transportation;
• Refining crude oil and the combustion of coproducts;
• Fugitive emissions from the venting or flaring of methane, or fugitive leaks at any stage of production;
• Transportation of the final refined products and coproducts; and
• Combustion or end-use of the refined fuel and coproducts.
• Two methods are currently used to extract Canadian oil sands.
1. Mining. Oil sands deposits less than about 75 meters below the surface can be removed by conventional strip mining.  An estimated 20 percent of currently recoverable reserves are close enough to be mined.  The strip-mining process includes removal of the overburden (primary soils and vegetation), excavation of the resource, and transportation to a processing facility.  Higher intensities of GHG emissions may result from increased land use changes during strip mining.  Mining accounts for slightly more than 50 percent of current production and is expected to remain between 40 percent and 50 percent through 2030.
2. In-situ.  Oil sands deposits deeper than 75 meters are recovered using in-situ methods.  Most in-situ recovery currently in operation involves injecting steam into an oil sands reservoir to heat, and thus decrease the viscosity of, the bitumen, enabling it to flow from the reservoir to collection wells.  Because significant amounts of energy are required to create steam, in-situ methods are generally more GHG-intensive than conventional mining (excluding land use impacts).  With over 80 percent of recoverable reserves too deep for conventional mining techniques, it is assumed that the industry will eventually move toward increased use of in-situ extraction.
• Tons of GHGs.  The U.S. Department of State’s March 2013 draft supplemental environmental impact statement (SEIS) included an LCA that found that the potential annual range of incremental GHG emissions contributed by the pipeline would be 3.7 to 20.7 million metric tons of CO2-equivalent (MMTCO2e) emissions.   The United States reported a total domestic GHG inventory of 6,865.5 MMTCO2e in 2010; therefore, the incremental pipeline emissions would represent an increase of 0.06 percent to 0.3 percent in total annual U.S. GHG emissions.  This overall range is equivalent to annual GHG emissions from the combustion of fuels in approximately 770,800 to 4,312,500 passenger vehicles; the annual CO2 emissions from combusting fuels used to provide the energy consumed by approximately 190,400 to 1,065,400 homes; or the annual CO2 emissions from up to six coal-fired power plants.
• Comparison.  The value of a Keystone XL pipeline LCA can only be determined by comparing it to LCAs of other global crude resources.  But crude oil resources around the world vary significantly in regard to resource quality and production methods. Thus, GHG emissions intensities may also vary significantly. The results of comparisons between Canadian oil sands crudes and other global crudes may depend on which crudes are used as a reference and/or which crudes are evaluated to determine a baseline.
• Measurement.  Accurately measuring GHG emissions intensities is highly uncertain. The CRS states that few of the studies it reviewed fully considered associated uncertainty, and none of them rigorously treated underlying uncertainties in data inputs and models. “Most calculate averages from a wide range of values and develop point estimates without providing statistical bounds,” says the CRS.  “These bounds may prove to be important if their ranges are shown to overlap with other results.”
• Transparency. The quality of the data and the transparency in presentation vary considerably by study.  Most studies do not provide complete transparency about their methodologies, assumptions, or data sources.  This is partially a function of the difficulty in accessing necessary data elements from the field.  Data on Canadian oil sands are more robust than some global resources and less robust than others.  “Lack of transparency impedes the ability to make meaningful comparisons of the results for oil sands crudes and reference crudes,” says the CRS.

In making a final permitting decision, the administration will certainly rely on LCAs conducted by both the U.S. government and others cited in the CRS report.  But, given the large amount of uncertainty in determining the value of LCAs, particularly when comparing the Keystone LCAs with those of other petroleum development projects worldwide, the weight assigned to those LCAs will probably come under attack from those who will not welcome the administration’s decision.

Canadian Oil Sands: Life-Cycle Assessments of Greenhouse Gas Emissions

William C. Schillaci
BSchillaci@blr.com