Afternoon Must-Read: Max Auffhammer: Why I Think Not Building Keystone XL Leaves a Billion Barrels of Bitumen in the Ground. |

Max Auffhammer: It just doesn’t add up. Why I think not building Keystone XL will likely leave a billion barrels worth of bitumen in the ground: “Whenever oil sands come up in casual conversation, many of my economist friends argue that…

…“The Canadians are just going to build pipelines to the East and West and ship the stuff to Asia and elsewhere.”… Alberta’s oil sand reserves are estimated at 168.7 billion barrels, which eclipses the reserves of Iran, Iraq, Kuwait and Russia…. They are in the form of crude bitumen… well to wheel emissions from these oil sands are 14-20% higher than those of a weighted average of transportation fuels used in the United States…. Even if every pipeline project on record is built on time and rail capacity is expanded aggressively, there still is not enough transport capacity to meet industry projected supply. This means, of course, that Keystone XL matters…. I think that… not permitting Keystone XL will likely leave 1 billion barrels in the ground by 2030….

There is simply not sufficient transport capacity to realize the supply projections by Canadian Petroleum Producers out to 2030… regulatory uncertainty… currently oil sands enjoy an unfair advantage… in the absence of a carbon tax or other price based mechanism, its price is artificially lower than socially optimal… delaying extraction of oil sands now will lead to lower demand in the future… higher transport costs by rail… the very costly development of local refining capacity in Alberta…. Of course, globally speaking, 1 billion barrels sounds like a lot, but the US consumes that amount in about 50 days. As carbon is a stock pollutant as far as human time frames are concerned, not permitting Keystone “buys time” for alternative transportation fuels and climate policies to develop…