Blocking the Keystone XL Pipeline – the $7 billion, 1,700-mile project that could create 20,000 construction jobs and eventually transport 830,000 barrels of tar sands oil from friendly, stable, democratic Canada to hubs in Oklahoma and Texas — has become the environmental movement’s top agenda item.

This is not surprising, because Canada’s booming oil sands industry demolishes two popular narratives of green ideology — the claim that oil is a dwindling resource from which we must rapidly decouple our economy before supplies run out, and the notion that most of the money we spend on gasoline ends up in the coffers of unsavory regimes like Saudi Arabia. In reality, more than half of all the oil we consume is produced in the USA, and we get more than twice as much oil from Canada as from Saudi Arabia.

Much of the anti-Keystone agitation is vintage ’60s stuff. In late August, during a weeks-long protest rally outside the White House, 800 demonstrators (including celebrities Margot Kidder and Daryl Hannah) were handcuffed and bused to local police stations. In late September, more than 100 demonstrators were arrested trying to enter Canada’s House of Commons. In October, 1,000 protesters showed up outside President Obama’s $5,000-a-head fundraiser in San Francisco, and organizers claim 6,000 demonstrators will encircle the White House on Sunday, Nov. 6.

Meanwhile, oil bashers on Capitol Hill are engaging in some political theater of their own. Last week, Sen. Bernie Sanders (I-Vt.), two other senators, and 11 congressmen requested that the State Department’s inspector general (IG) investigate an apparent conflict of interest in the preparation of State’s Environmental Impact Statement (EIS) for the Keystone XL Pipeline.

Sanders et al. point out that Cardno/Entrix, the firm State commissioned to conduct the EIS, listed TransCanada, the corportion proposing to build the pipeline, as a “major client.” This “financial relationship,” they suggest, could lead Cardno/Entrix to low-ball the project’s environmental risks. They even insinuate that Cardno/Entrix may have understated oil spill risk just so it could later get paid by TransCanada to clean up the mess.

Earlier this week, State responded to Sanders et al. As far as I can see, there’s no there, there.

First, though, some background on the procedural issues.

Because the proposed pipeline is “international” (crossing the U.S.-Canada border), State is the agency tasked with granting or denying approval, known as a “Presidential Permit,” based on a “National Interest Determination.” That is, Secretary Clinton must determine whether or not the pipeline is in the national interest.

State’s EIS is a key step in the overall review process. Such analyses are mandatory under the National Environmental Policy Act (NEPA), which obligates agencies to consider all significant environmental impacts of a major action before undertaking it. However, notes the Congressional Research Service, NEPA ”does not require federal agencies to elevate environmental concerns above others.” An agency may decide that ”other benefits outweigh the environmental costs of moving forward with the action.” That is widely expected to happen with Keystone, and it is driving the warmists bonkers. Keystone foes’ last desparate hope is that a scandal over the EIS will turn things around and doom the pipeline.

As State explains in its letter to Sanders, the EIS — over 1,000-pages long and three years in the making — was quite thorough. State conducted two rounds of public meetings, more than 40 in total, along the proposed route, the first after publication of the draft EIS and then again after release of the final EIS, “to inform the national interest determination.” This was the first time State ever convened a second set of public meetings in connection with an EIS. In addition, State worked closely with the Department of Transportation Pipeline and Hazardous Materials Safety Administration (PHMSA) “to identify a set of 57 conditions, with which the applicant agreed to comply should the permit be granted, that go above and beyond the safety requirements of other pipelines.”

Of course, many protesters — and even some congressmen – may feel that any oil spill risk is intolerable and disqualifying. But by that standard, no pipeline should ever be built, all existing pipelines should be dismantled, and all commerce in petroleum should stop. And then we could all live in Medieval squalor — planet saved!

As to alleged conflicts of interest, when Cardno acquired Entrix, the new firm, Cardno/Entrix, did issue a press release listing TransCanada as a “major client.” However, TransCanada was a client only in the sense that “the federal government had selected Entrix to do third-party contract work for four TransCanada permit applications — two with the Federal Regulatory Commission (FERC) and two with the Department of State” (emphasis in original).

State’s letter continues:

Under NEPA regulations, this does not constitute a conflict of interest; the federal government is the client — the federal government is selecting and directing the work of Entrix (now Cardno/Entrix) — not TransCanada (whose projects were being assessed). While the pipeline applicant pays the contractor — in this case Entrix (now Cardno/Entrix) – the contractor (Entrix) takes direction from, and reports solely to the Department in accord with NEPA’s regulations, which prioritize the taxpayer over the applicant company by ensuring the taxpayer does not bear the financial burden of the assessment.

So yes, Sanders is correct, Cardno/Entrix had a “financial relationship” with TransCanada. But only because Entrix had conducted environmental reviews of other TransCanada projects for State and FERC. If Sanders considers that to be an ethically compromising conflict of interest, then logically he should oppose all other NEPA-mandated environmental reviews as similarly tainted!

To avoid such alleged conflicts of interest, will the Sanders gang advocate that taxpayers fund environmental reviews when corporations seek federal agency approval to drill oil wells, dig mines, inject fracking fluids, construct pipelines, build dams, harvest timber, etc.? But wouldn’t that (according to their worldview) be giving corporate welfare to “polluters”?

State’s letter does not say whether Cardno/Entrix has a contract to provide oil spill response for the Keystone pipeline. Until the IG investigates this, I will assume that Cardno/Entrix’s expertise in spill response is one of the reasons the company was well qualified to conduct the EIS.

The United States imports almost half of its oil (49%), and about 25% of our imports come from one country — our friendly neighbor to the North, Canada. Today, Canada supplies more oil to the USA than all Persian Gulf countries combined.

With an estimated 175 billion barrels of technically recoverable oil, Canada has the world’s third largest oil reserves. About 170 billion of those barrels, or 97%, are located in geologic formations called oil sands — a mixture sand, water, clay, and bitumen, a sticky tar-like form of petroleum.

Unlike “conventional” oil, bitumen is too viscous to be pumped without being heated or diluted.

Last Wednesday and Thursday, courtesy of the good folks at American Petroleum Institute (API), I and other bloggers toured two large Canadian oil sands projects near Fort McMurray, Alberta.

The Surmont Project, operated by ConocoPhillips, uses a technology called steam assisted gravity drainage (SAGD) to melt the bitumen so that it can be pumped back to the surface. At each well site, two parallel pipes descend to about 1,000 feet below the surface and then extend horizontally for several thousand feet. Heated steam in the upper pipe melts the bitumen, which then flows back up to the surface through the lower pipe. Natural gas may also be injected in the upper pipe to further reduce the viscosity of the bitumen. Along with the melted bitumen, the lower pipe brings hot water and natural gas back up to the surface for capture and reuse in a closed cycle.

This process is relatively new but within a few years it is expected to dominate Canadian oil production, because about 80% of Canada’s oil sands are too deep to be mined. The Surmont Project, which started production in 2007, currently produces about 23,000 barrels per day (bpd). It is expected to be producing 136,000 bpd by 2015.

The Millennium site, operated by Suncor Energy, relies mainly on mining to access the bitumen. The oil sands here are at a relatively shallow layer — about 350 feet below the surface. Millennium started production in 1967, making it the world’s first commercially-successful oil sands venture and the longest-running oil sands project in Canada.

Millennium’s scale is truly breathtaking. Suncor’s leases (which also include SAGD drilling sites) cover more than 1,800 square kilometers. A fleet of giant trucks with shovels that remove 100 tons of earth at a bite operate day and night. Some trucks remove the “overburden” — a surface layer composed of muskeg (a peat-like substance), clay, and rock, while others dig up the oil sands beneath. The largest of these trucks, which are built by Caterpillar, haul loads up to 400 tons. Each day, the trucks haul about 2,000 loads of overburden and 1,600 loads of oil sands.

The next photo is me pretending to be the master of all I survey. The distant object to the left of my outstretched hand is a monster truck.

After being mined, the oil sands are sent to massive facilities that use water and steam to extract the bitumen from sand and other minerals, separate the bitumen from water, and chemically treat the bitumen until it has the consistency required for transport as crude oil through pipelines.

My reaction to the Millennium project was one of awe. I could not but marvel at the immense scale of market-driven coordination that has turned an otherwise worthless material – sticky, smelly, black sand – into a valuable resource empowering literally millions of ordinary people to enjoy a degree of mobility unknown to the kings and potentates of old.

Some of course may only see — and decry — the industrial footprint, the “scars upon the land,” as the John Denver song put it. What they may not know is that Suncor also engages in land reclamation on a gigantic scale.

The overburden is not only removed, it is also saved, so that it can used to restore landscapes and create habitat after mining operations are completed. In addition, Suncor has developed a process (Tailings Reduction Operation, or TRO) for accelerating the extraction of suspended particles called “mature fine tailings” (MFT) from its tailing ponds (small lakes where water, sand, and clay are sent after separation from the bitumen). After drying, the MFT hardens and is used as landscaping material.

Suncor’s first tailings pond operated for 40 years from 1967 through December 2006. This 220-hectare area today is a contoured medowland with more than 600,000 planted trees and shrubs. Called the Wapisiw Lookout Reclamation, the area’s rock piles provide habitat for small animals, its tree poles provide habitat for raptors, and its wetland provides habitat for aquatic waterfowl. The picture below shows three raptor poles. While our tour group was there, we spotted a black bear cub moving among the hillocks a few hundred yards away.

Canada already ships almost 2 million barrels of oil a day to the USA, but the existing pipeline infrastructure must be expanded not only to handle the larger volumes that Canada will produce in the future but also to transport Canadian oil to U.S. Midwest and Gulf Coast refineries, where it can be turned into gasoline, jet fuel, and other finished petroleum products.

In March 2008, the U.S. State Department granted TransCanada Keystone Pipeline a permit authorizing the company to construct pipeline facilities from Alberta to refineries in Illinois and Oklahoma.

Then in June 2008, Keystone proposed to build an extension, called the Keystone XL Pipeline, to move Canadian oil to refineries in Port Arthur and Houston, Texas. Initially, Keystone XL would be able to deliver 700,000 bpd of heavy crude to U.S. refineries.

From 2010 to 2035, this “shovel ready” project could create 85,000 U.S. jobs, provide $71 billion in U.S. employee compensation, and boost cumulative U.S. GDP by $149 billion, according to the Canadian Energy Research Institute.

Predictably, green pressure groups and their allies on Capitol Hill have mounted a campaign to block the Keystone project, alleging that the pipeline will expose neighboring communities, aquifers, and wetlands to oil spill risk and increase America’s “dependence” on “dirty” energy. Let’s briefly consider these accusations.

The State Department’s massive April 2010 Environmental Impact Statement (EIS) notes that the pipeline “would be designed, constructed, and maintained in a manner that meets or exceeds industry standards and regulatory requirements” (ES 6.13.3). Although some leaks and small spills are bound to occur, “There would be a very limited potential for an operational pipeline spill of sufficient magnitude to significantly affect natural resources and human uses of the environment” (ES 6.13.2). If zero risk of even minor spills is the only acceptable standard, then no petroleum should ever be shipped anywhere. That may be what green groups ultimately have in mind. Such a standard, however, would condemn mankind to Medieval squalor, not enhance public health and welfare.

By “dirty,” Keystone XL opponents refer to the fact that the process of transforming oil sands into petroleum emits more carbon dioxide (CO2) than conventional petroleum extraction. However, whatever Canadian oil does not get shipped to the United States will eventually go elsewhere — mainly to China and other Asian countries, which are investing billions of dollars in Canadian oil sands projects. Just last month, for example, the Chinese company CNOOC agreed to buy Canadian oil sands producer OPTI for $2.1 billion. On a life-cycle basis, shipping oil to China is more carbon-intensive than shipping oil to the USA, because it must be transported on mammoth CO2-emitting tankers.

As for the Keystone XL Pipeline itself, yes it will deliver more Canadian oil to U.S. refineries, but this will mostly offset declining oil shipments from Mexico and Venezuela. Thus, “the incremental impact of the Project on GHG [greenhouse gas] emissions would be minor,” concludes State’s EIS (ES 6.14.2). Again, if no incremental CO2 emissions is the only acceptable standard, then we should welcome high unemployment rates, because there’s nothing quite like a deep recession for cutting CO2 emissions.

The long and the short of it is that building the infrastructure to deliver oil from friendly, democratic, politically-stable, environmentally-fastidious Canada is in the U.S. national interest, as the State Department concluded in March 2008. The review process has dragged on, with State in March 2011 issuing a Supplemental EIS that affirms the findings of the earlier document. In May, the House Energy and Commerce Committee held a hearing on legislation to expedite a presidential decision on Keystone XL, and in July the House passed H.R. 1938, the North American-Made Energy Security Act, by 279-147. The bill would require the President to issue a final order granting or denying a permit to construct Keystone XL by no later than November 1, 2011.

Global demand for oil is growing and America will continue to import oil over the next 25 years even if biofuels and electric vehicles achieve unexpected breakthroughs. As Mark Milke of the Fraser Institute explains in a new report, what this means is that blocking Keystone XL and restricting U.S. access to Canadian oil would not move the world closer to some imaginary environmental utopia. The effect, rather, would be to increase U.S. imports from unsavory regimes where corruption is the norm, environmental safeguards are weak, autocrats brutally suppress dissent, and women are denied economic opportunity and equal protection of the laws.

Alas, I suspect this is actually one of the main reasons green groups oppose Keystone XL. They would like us to believe (a) that oil is a rapidly dwindling resource from which we will soon have to decouple our economy anyway, and (b) that using oil = sending $$ to OPEC. The vast potential of Canada’s oil sands and Canada’s emergence as the leading source of U.S. petroleum imports fractures both pillars of their gloomy, scaremongering narrative.

If you hate success but love long meetings, and even longer plane trips, then the State Department is looking for you: Become a climate diplomat.

As I explain here, here, and here, negotiations for a legally binding, multilateral treaty to address the supposed problem of “global warming” are futile. According to the International Energy Agency, it would cost $45 trillion to de-carbonize global energy production to the liking of global warming alarmists. There is simply no precedent for international burden sharing of this magnitude, short of war, and the threat of winters gradually warming doesn’t galvanize interstate cooperation quite like the threat of, say, the Nazis.

Because a global response to global warming is impossible, multilateral climate negotiations haven’t budged since they started twenty years ago, with the foundation of the United Nations Framework Convention on Climate Change. Then, as now, there are two stakeholders pushing for action:  Western European nations, who want the world to agree to the carbon standards they set for themselves* so as to avoid a competitive disadvantage on the international market for energy intensive goods, and developing countries, who want to profit from wealth distribution. Then, as now, everyone else—most importantly the U.S. and China—have ZERO interest in sharing trillions of dollars of sacrifice for uncertain gains. As it is and always will be.

Maybe the money’s good, but, in terms of achievement, this climate diplomacy gig is a dead end.

*N.B. I strongly doubt whether these European nations will meet the lofty goals they set for themselves. There, I see a situation akin to that which is going on in our California, whereby green grandstanding politicians has led to the writing of several climate checks that simply will not be cashed. Here’s my detailed take on where the Europeans are headed.

Two days ago, the New York Times reported that the French Parliament is “leaning” towards a ban on hydraulic fracturing, the American-made technological revolution in production that has vastly increased the known economically recoverable global reserves of natural gas. According to the article,

French lawmakers opened debate on Tuesday on proposals to ban a method for extracting oil and gas deposits from shale because of environmental concerns, throwing up the first serious stumbling block to firms that want to use the practice.

Looking with alarm at the experience in the United States, where shale gas is booming, even members of President Nicolas Sarkozy’s governing conservative party have come out against the practice, known as hydraulic fracturing, in which water, sand and chemicals are pumped deep underground under high pressure to free scattered pockets of oil and gas from dense rock formations.

The article, while interesting, misses the big picture. For starters, it’s unclear why French lawmakers would look “with alarm” at the U.S. experience. While there is some evidence that poorly built “fracking” rigs could lead to the escape of methane into local groundwater wells, this isn’t as disturbing as it sounds. Methane (ie, natural gas) does not make water poisonous, and there is no evidence that the fluids used in the process, which could be toxic, have leaked into well water. Much more importantly, there is ZERO evidence that the process affects water tables used for utility scale water supply, although environmentalist special interests are quick to try to conflate well-water methane contamination with water table contamination. The upshot is that hydraulic fracturing has been used in this country for fifty years, without harming public health and environment.

The article also omits mention of why France might be inclined to dismiss fracking: namely, because it isn’t needed. Since 1980, the French government has made nuclear electricity generation a policy priority, and, as a result, the country gets more than 75 percent of its juice from atomic power. That’s the most in the world—by far. For comparison, the U.S. generates about 20 percent of its electricity with nuclear, and Japan gets about a quarter of electricity generation from nuclear. In light of the government’s singular promotion of nuclear, France has a much lower incentive for other forms of electricity generation, like gas. It can afford to pass on the fracking revolution.

The situation is very much different in the rest of Europe. Spain, for example, uses much imported liquid natural gas for electricity generation, so it is more amenable to domestic hydraulic fracturing. About seven months ago, I had breakfast with a representative from an American gas company that was working closely with Spanish energy companies to develop the technology there.

Then there’s Germany. In that country, the Green Party is anomalously powerful, and their influence renders new nuclear and coal verboten. That’s a problem, because the only alternative to coal and nuclear is Russian natural gas. I won’t review 150 years of European history, but suffice it to say, many Germans aren’t keen on being increasingly dependent on the Russian Bear. The two countries have quite a past.

This applies to much of Central and Eastern Europe. Thanks to the European Union’s climate policies, new coal power is difficult. And thanks to the Japanese nuclear crisis, nuclear is out of favor, too. But for these countries, for whom the Russian yoke is all too fresh on the mind, dependence on Gazprom is out of the question. They are very much amenable to hydraulic fracturing technology.

I rarely sing the Obama Administration’s praises on energy policy, but I must give the President props for identifying the geopolitical opportunity inherent to fracking. The State Department has been actively promoting the technology in Europe, no doubt as a counter to the prospect of European reliance on Russian gas.

To be sure, I hate the way politicians in this country use “energy independence” to justify myriad stupid energy policies, but the gas market is very different from the oil market. Whereas the latter is a global market, the former is bound by the logistical infrastructure (ie, pipes). As a result, it’s relatively easy for Russia to play hardball and use gas deliveries as a diplomatic bargaining chip. It has done so with the Ukraine and Belarus.

France doesn’t need fracking; the rest of Europe does, because it’s much more attractive an option than the alternative, reliance on Gazprom or imported LNG. These geopolitical concerns will drive a European turn to the practice.

There has been a technological revolution in the natural gas industry over the last decade. In that time, a drilling process known as hydraulic fracturing, or “fracking,” has become economically viable, thereby allowing for the exploitation of huge natural gas reserves that had been too expensive to recover. As a result, America’s natural gas supply has roughly doubled.

In his post-election address last Wednesday, President Barack Obama indicated support for the fracking revolution. His administration’s record, however, is decidedly mixed on the issue.

On the one hand, the State Department is a big proponent of the technology, which it sees as a long term deterrent for Russia. As I’ve noted elsewhere, environmentalist policies in some European countries-but especially Germany-have rendered them increasingly reliant on Russian natural gas, even as Russia has proven willing to use its energy resources as a geopolitical bargaining chip. By exporting the fracking revolution to continental Europe, the State Department hopes to weaken Russia’s influence.

Moreover, Obama’s EPA has kept away from regulating fracking, although it easily could. Indeed, with the Clean Water Act precedent set by the its assault on mountain top removal mining, the EPA could shut down whatever industry it wants to in all of Appalachia, which is home to the largest and most promising natural gas resources made available by fracking-the Marcelus Shale in Pennsylvania and New York.

On the other hand, different agencies within the Obama administration are cracking down on fracking. The Bureau for Land Management (within the Department of the Interior), for example, refuses to grant leases to drill natural gas along the Rocky Mountains. Under a new Interior Department instruction memo for implementing the 1987 Federal Onshore Oil and Gas Leasing Act, the BLM can (and is) withholding scores of millions of dollars of leases, pending completion of National Environmental Protection Act litigation. Contemporaneously, the Council of Environmental Quality is making NEPA challenges even easier.

So what to make of these conflicting signals? At first I thought that Obama saw himself as a visionary problem solver, and that his vision was to address supposed global warming by embracing gas at the expense of coal. Now, I’m not so sure. It looks like he’s being jerked around by people who know better how the executive branch works.