Pipe Dream: How Environmentalists Stopped Keystone but Ignored an Oil Revolution

On November 6, 2015, after seven years of protest, debate, and deliberation, President Obama finally announced his rejection of the Keystone XL pipeline. The project had called for a new 1,179-mile shortcut in a web of existing pipelines that stretch nearly 3,000 miles from oil fields in Alberta, Canada, to refineries and ports on the Gulf of Mexico. From its initial proposal in 2008, the project was a central issue for the American environmental movement. National environmental groups argued that Keystone would accelerate climate change by facilitating high-emission “tar sands” oil production in Canada, while local activists argued that the project posed a threat to ecological stability in areas around the pipeline due to the risk of spills. In defense of the project, oil corporations and conservative lawmakers argued that it would create jobs, lower energy costs, and increase American energy independence. In his statement rejecting the pipeline, however, President Obama also rejected both the environmentalists’ and conservatives’ arguments. In fact, only seven years after its proposal, Keystone had become virtually moot, thanks to a seismic shift in the world energy economy brought on by fracking. The debate therefore distracted both environmentalists and policymakers from the underlying issue of climate change: economic dependence on fossil fuels. It is hard to overstate the importance of Keystone XL to mainstream environmental groups. Environmentalists mounted record-setting protests against it: about 15,000 activists surrounded the White House in 2011, followed by 35,000 in 2013. Keystone was one of the principal targets of the massive Peoples’ Climate March in 2014, which drew 300,000 in New York City and thousands of others around the world. The rhetoric opposing the project was just as dramatic as the numbers. Leading environmental organizer Bill McKibben claimed that Keystone was “the fuse to the biggest carbon bomb on the planet,” while NASA scientist and Columbia professor James Hansen dramatically predicted that the pipeline would “spell game over for the climate.”

However, detailed assessments of Keystone’s environmental impact were much more nuanced. Oil is a global market, so changes in supply are reflected in production and pricing decisions worldwide. As an infrastructure project, Keystone may have initially facilitated greater extraction of Canadian oil—thereby increasing world supply—but would not have had a substantial effect on world demand. Companies would likely respond by producing less oil elsewhere, resulting in a net zero contribution to climate change. In 2014, a State Department environmental impact review corroborated this prediction, and found that, given global supply-demand interactions, Keystone would “not significantly affect the rate of the extraction” of tar sands oil. Energy experts also challenged environmentalists’ claims that tar sands drilling would cause catastrophically high increases in emissions. Even though tar sands production does lead to more carbon release than other types of oil, Michael Levi from the Council on Foreign Relations predicted that the small scale of the project would make the emissions impact insignificant, causing “no more than a small fraction of 1 percent [increase] in total annual U.S. greenhouse gas pollution.” Furthermore, while complete extraction of the Alberta tar sands would be disastrous for climate change, it would take thousands of years for that degree of extraction to occur. This is a long time even on the scale of climate change; as Levi notes, “the fate of the climate will be determined long before” the Alberta tar sands could be completely depleted.

Conservatives’ predictions of massive job creation and economic growth were also exaggerated. The specific number of jobs promised for the project grew as it became more politically divisive. While its initial proponents predicted in 2008 that the economic activity surrounding Keystone could “support” a few thousand jobs, then-Speaker of the House John Boehner claimed in 2014 that it would directly create 100,000 permanent jobs. In reality, like most infrastructure projects, the pipeline would have permanently employed only a minimal number of people. The final plans from TransCanada—the company that would have constructed the pipeline—projected that Keystone would create exactly 35 full-time jobs.

While President Obama ultimately rejected Keystone, he argued that neither the environmentalists’ nor the conservatives’ claims had been grounded in reality. In his statement accompanying the rejection, he observed: “The Keystone Pipeline has occupied an overinflated role in our political discourse. It became a symbol too often used as a campaign cudgel by both parties rather than a serious policy matter. And all of this obscured the fact that this pipeline would neither be a silver bullet for the economy, as was promised by some, nor the express lane to climate disaster proclaimed by others.” Instead, Obama cited American economic data as proof that the country does not need Keystone: unemployment is low, gas prices are low, and American oil production has skyrocketed.

That last factor—skyrocketing American oil production—seems out of place in the supposedly environmentalist rejection of Keystone XL. But this is a transformation that has been central to the evolution of the pipeline debate. Over the past seven years, while environmental groups and conservatives warred over a relatively insignificant infrastructure project, a revolution in drilling technology created an unprecedented boom in American oil and gas production. Thanks to new technology that allows fossil fuels in dense rock formations to be extracted by hydraulic fracturing, or “fracking,” US domestic oil production has increased by more than 60 percent since 2008. The United States is now the world’s fastest-growing producer of fossil fuels and is poised to surpass Saudi Arabia as the world’s largest producer of oil.

Indeed, the fracking boom has confirmed some of the worst fears of environmentalists—and wildest dreams of conservatives—originally conceived for Keystone. Fracking in North Dakota, for example, has led to an economic renaissance in the state. The state’s unemployment rate, at 2.6 percent, is the lowest in the United States, and the state’s median income growth is the nation’s highest. At the same time, energy experts predict that once fracking technology is used globally, it will effectively double the world’s total accessible fossil fuel reserves. This means that oil and gas will be cheaper and more abundant in the long run—which will exacerbate the challenge of achieving the emissions reductions needed to prevent disastrous climate change.

The fracking boom has created a “revolution and paradigm shift” in global thinking about oil markets, according to energy economist Edward Morse. It is therefore essential to the evolution of the pipeline debate. Eight years ago—before the fracking boom and during Keystone’s conception—the energy world looked very different. In the mid-2000s, according to Morse, there was “near-global consensus” that oil production was in “inexorable decline.” This theory of “peak oil” suggested that production, due to limited supply, had reached a maximum around 1970 and would permanently decrease to be replaced by other, cleaner sources of energy. Historically, this idea had increased the incentive for the United States to intervene in the Middle East, as American dependence on oil from the region made it a vital focus of American geopolitical strategy. In response, given Canada’s large known oil reserves, many on the left spoke of “North American energy independence” as a way to alleviate the necessity of involvement in conflicts like the Iraq War. In this context, projects like Keystone—which would increase production of “friendly” oil in Canada to substitute for “dangerous” oil from the Middle East—made obvious economic and geopolitical sense.

However, the fracking revolution has turned that strategic logic on its head. No longer is the United States dependent on oil from the Middle East—we are nearly surpassing the region’s largest producer. Indeed, the “peak oil” theory was borne out in statistics and widely cited in policymaking until about 2008, when the fracking revolution began. Since then, American oil production has shot up to approach the old “peak.” Morse predicts that domestic oil production will surpass the historical maximum of 9 million barrels per day, and even suggests that fracking could lead to an American oil industry that produces a previously unimaginable 12 million barrels per day.

The economic revolution of fracking has engendered a shift in American geopolitical strategy. With energy independence, the US government no longer needs to prioritize oil import safety in its foreign policy. The top energy official at the State Department, Carlos Pascual, hinted at this shift as early as 2012: “Whereas at one point there were real and serious concerns about the ability to maintain sustainable access of [oil] supply to the United States if there were disruptions in the Middle East, that has changed” due to fracking. Other energy experts, like Chip Register of Sapient, have even suggested that the increase in domestic oil production is one reason that the United States has been reluctant to intervene in the Syrian, Libyan, and Iraqi civil wars—each of which began after the fracking boom. Register argues that “decreased dependence on foreign oil due to fracking…has enabled the Obama Administration’s increasingly isolationist posture on the world stage.” Furthermore, the executive procedures controlling the Keystone decision, in which President Obama and Secretary of State John Kerry had the final say, suggest that the pipeline was viewed primarily as a foreign policy issue. With the boom in domestic oil production, the foreign policy incentive to construct Keystone evaporated.

Therefore, the geopolitical shift in world oil markets brought on by the fracking revolution is the primary reason for Keystone’s rejection. From its inception, both the environmental and economic impacts of the pipeline were uncertain and relatively insignificant. While protests and rhetoric intensified on both sides of the debate through the years, neither led to a decisive change in the fundamentally strategic decision-making process. The economic context of international oil policy, however, changed massively over the course of the debate. The fracking revolution thus remains the one crucial explanatory factor behind Keystone’s rejection.

In this light, Keystone’s rejection is a pyrrhic victory for environmentalists. While Obama’s decision appears to justify the efforts of the protestors, Keystone is, in reality, a victim of the oil industry’s own success. Furthermore, by focusing so much effort and public attention on the pipeline, the environmental movement became distracted from the underlying problem: the American economy’s overall dependence on fossil fuels. Fracking has exacerbated that dependence by increasing domestic production and driving oil and gas prices down. Indeed, if environmentalists are serious about stopping disastrous climate change, they must switch their focus away from specific infrastructure projects—like Keystone—and towards the broader institutions—like fracking—that enable fossil fuel dependence.

That is not to say that anti-fracking activism is nonexistent. The anti-fracking movement has achieved several notable political victories already, including a complete ban on the practice in New York State. Compared with the anti-Keystone movement, however, anti-fracking activism has largely been decentralized and focused on local effects. Fracking has not garnered nearly the same level of national attention that Keystone had, nor has it achieved the same symbolic status for global climate policy. However, as we have seen, the fracking boom in hydrocarbon production suggests that it has already had a much bigger effect on climate change than Keystone would have had. It therefore deserves even more vigorous, well-organized, and national environmental opposition. Only that level of opposition can reverse skyrocketing American fossil fuel production and begin to slow our destruction of the planet’s climate. •