California Dreams and Low Carbon Fuels

Michael Whatley
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Posted: Dec 19, 2011 12:24 PM

Last month the Obama Administration announced it would delay a decision on whether to permit the construction of the Keystone XL pipeline – a 1,700 mile long proposed pipeline that will connect the Alberta oil sands and Bakken crude oil reserves to Gulf Coast refineries – until after the 2012 election. The decision was no doubt influenced by the boisterous protests led by environmental groups like the Sierra Club, the Natural Resources Defense Council (NRDC), and Tar Sands Action among others.

What casual observers of the Keystone XL debate don’t realize is that opposition to the pipeline is only one front in a broader anti-oil sands campaign. At the heart of the oil sands opponents’ position is their contention that the carbon content of the oil sands is higher than other crude oils. The NRDC refers to the Alberta oil sands as “dirtier and more corrosive” than other oil supplies. Tar Sands Action referred to Keystone XL as “the fuse to North America’s biggest carbon bomb.” Indeed, these advocates have routinely circulated the alarmist claim that development of the oil sands means “game over” for the climate.

Another major front in the anti-oil sands campaign is an effort to implement Low Carbon Fuel Standards (LCFS). An LCFS is, in a nutshell, a cap-and-trade program for transportation fuels that forces consumers to ditch affordable fuels like gasoline and diesel and replace them with alternative and renewable fuels and technologies that are not fully developed yet, like electric cars and cellulosic biofuels. Ironically, the NRDC even admits that the advanced biofuels necessary to achieve the mandate “have yet to be produced on a large scale.”

Fortunately, the American public has not embraced the LCFS concept. According to polls by CNN and Rasmussen, 51% of Americans oppose carbon credit trading and energy mandates called for under LCFS. Even larger majorities of Americans oppose paying more in taxes and higher energy costs to artificially prop-up renewable energy. This explains why Congress failed to enact an LCFS mandate even when the Democrats had massive majorities in both the House and the Senate.

Realizing that they’re arguing against public opinion, environmental groups have shifted their strategy to the state level. As a result of intense lobbying by environmental activists, California – which has proven itself more than willing to sacrifice its economy in the pursuit of ideological goals – has adopted an LCFS that calls for a ten percent carbon intensity reduction in the state’s transportation fuel pool over 10 years.

Anti-oil sands activists hope that California’s LCFS will serve as a model for a national LCFS. However, a recent study by Charles River Associates finds that such a mandate would increase the costs transportation fuels by up to 170 percent over ten years, reduce household purchasing power by between $1,400 and $2,400 annually and kill up to 4.5 million jobs nationwide.

Environmental activist claims that enacting low carbon fuel standards or killing the Keystone XL pipeline will reduce demand for oil in the United States also fly in the face of government projections that we will continue to rely on gasoline, diesel and jet fuel for decades.

Similarly, claiming that blocking imports of oil sands to the U.S. will stop the Canadians from developing them ignores the fact that Asian markets will gladly take the oil. In fact blocking imports of oil sands into the U.S. – either by killing the Keystone XL pipeline or enacting low carbon fuel standards – would actually result in higher carbon emissions due to what’s known as “crude shuffling.” Instead of obtaining crude oil from a geographic neighbor through a pipeline – the safest and most efficient form of transport – America would instead import more oil via ocean tankers from places like Saudi Arabia, Nigeria, and Venezuela (countries also not exactly known for ‘green’ policies). Meanwhile, the Canadian crude originally destined for the United States would go to Asia on bunker fuel-burning tankers. According to a 2010 study by Barr Engineering, this crude shuffle could result in a nearly three-fold increase in global GHG emissions from crude oil transport.

Blocking imports of Canadian oil into the United States is a terrible policy goal. In addition to increasing carbon emissions, it would drive up transportation and home heating prices, kill jobs and reduce household spending power.

Our economy is already a disaster. Do we really want to make it worse by following California off an anti-oil sands cliff?