So what happens if Keystone XL fails? Nothing much.

by Brian Bow

The Keystone XL pipeline project never mattered as much as we thought it did.

Proponents argued that it would unlock energy independence and catalyze economic growth. Opponents argued that it would trigger a catastrophic “carbon bomb” that would massively accelerate global warming. Basically, the pipeline came to represent not only the source of the oil it would carry, but also the broader North American revolution in oil and gas, with all of its incredibly complex geopolitical, economic and environmental implications.

There was a way in which the project really was — and perhaps still is — a “keystone” for the restructuring of the oil and gas industry, as it would be the largest and most important outlet for Alberta bitumen (and some oil from the central U.S.) to Gulf refineries, and from there to global markets. But Keystone was always just one option among many.

Over the last couple of years, industry has been finding other ways to bring oil to market. Most of the attention has been on the mega-project alternatives to Keystone XL: the Trans Mountain expansion, Enbridge’s Northern Gateway, and TransCanada’s Energy East. More tangibly, but less spectacularly, there have been dozens of small-scale work-arounds, which are pushing crude oil down to the Gulf.

Some recently-finished pipelines, like Keystone’s southern leg, are being brought on-line. Old pipelines in the Midwest are being reversed, so that instead of carrying refined oil from the Gulf to Midwestern markets, they now bring crude from the north to Gulf refineries. And despite some controversy, more and more oil is being shipped by rail, with new technology and facilities to support it.

With a tidal wave of oil now reaching the market, there is even speculation about the U.S. possibly relaxing its restrictions on oil exports. On top of all this, the world price is dropping like a rock, raising questions about whether it might fall so low that oilsands production is no longer viable. No wonder the business media’s main narrative about Keystone XL today is that it might not matter anymore.

Keystone XL still does matter, though perhaps not in the way most people think. If the pipeline is built, there will be significant economic and environmental consequences. If it isn’t built, there will be … significant economic and environmental consequences.

But most of the differences between these two sets of outcomes will be felt locally, not globally. Some corporate shareholders will reap a windfall, and others will earn less. Jobs will be created in one district rather than another, and some politicians will claim credit while others are criticized. One watershed will be put at risk, rather than another.

The net global effect probably will be negligible, at least in the longer run, because there are other ways for the oil to get through. Even if Keystone XL is ultimately rejected by the U.S. government and abandoned by TransCanada, that would only slow the oilsands’ inexorable march to global markets — not stop it.

In the meantime, a new regional energy production and distribution system is being built, without any overarching strategy or design to guide it. This has enormous public policy implications, as the result seems likely to be a profoundly inefficient and under-regulated system which wastes tax dollars, puts public safety at risk and does nothing to encourage responsible environmental stewardship, locally or globally.

Without viable political and diplomatic mechanisms for developing coherent and sustainable national and regional energy plans, policy will continue to be driven by the results of piecemeal battles over specific private-sector projects or regulatory changes. No one is happy with the way the Keystone XL debacle played out (except maybe public relations consultants), yet in all that has been written about it lately, virtually no one seems to be calling for institutional changes that might guide policy-making toward greater transparency and balanced, “win-win” outcomes.

We seem to have given up on the idea that we could design something better than the mess we have now. That might be the main lesson to draw from the Keystone XL experience: It suggests that we have reached the point where things can get this ugly, and yet we still don’t trust each other — or ourselves — enough to try to negotiate something that might work better.

Brian Bow is an associate professor of Political Science and director of the Centre for Foreign Policy Studies at Dalhousie University, and a Fellow at the Canadian Defence and Foreign Affairs Institute.