Keystone Moves North, Where Big Oil Is Losing

Obama may have stopped the U.S. pipeline, but now the fight has shifted to Canada

tar sands
Michael S. Williamson/The Washington Post via Getty Images
Alberta's tar sands contain enough carbon to wreck the climate.
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When president Obama halted the Keystone XL pipeline last January, Canadian prime minister Stephen Harper revved up an alternative scheme to deliver oil from the tar sands of northern Alberta to the international market: Sell the oil to the Chinese. Within weeks, Harper was traveling to China to personally court Chinese president Hu Jintao and push a new route for the pipeline – one that would establish Canada as a leading petro-state, a kind of North American Saudi Arabia with ice hockey.

There was only one problem with Harper's grand scheme: Canadians, it turns out, don't want a new pipeline any more than Americans do.

ExxonMobil, Koch Industries and other oil giants currently produce some 1.6 million barrels of oil a day from the tar sands in northern Alberta. The oil – it's more of an acidic, corrosive goo – is expensive to extract, dangerous to transport and more damaging to the climate than conventional oil. The problem is, the oil companies want to triple their production over the next 20 years – but existing pipelines will reach full capacity in only three years. And if you can't move the oil, you can't sell it. "Alberta is just like Texas," says Keith Stewart, climate and energy campaign coordinator for Greenpeace Canada, "except it's landlocked."

Keystone represented the most profitable route to move the oil to sea, traversing 2,480 miles on the way to the Gulf Coast. But now that Keystone is on hold, pending further environmental review, Canada is pushing for a new route called the Northern Gateway, which would cut through three major watersheds in western Canada and turn the fragile coast of British Columbia into a bustling tanker port. Under the plan, hundreds of tankers loaded with up to 2 million barrels of oil would be forced to navigate a treacherous, rocky passage – conditions that practically ensure another mishap like the Exxon Valdez.

Harper began pushing for the new pipeline the minute Obama put the brakes on Keystone in January. Expressing his "profound disappointment" over Obama's decision, the prime minister insisted that getting a new pipeline built is in Canada's "national interest." Enbridge, a Canadian pipeline company, launched a campaign to sell the public on Northern Gateway, running ads on TV and in movie theaters that said, "It's more than a pipeline. It's a path to our future."

Harper also went after those who oppose the pipeline. Days before Obama's decision on Keystone, Harper's minister for natural resources was denouncing "environmental and other radical groups" who "hijack" regulatory bodies and "use funding from foreign special interest groups to undermine Canada's national economic interest." Just to make sure environmentalists got the message, Harper issued a budget that gutted protections for endangered species and pushed through new laws requiring nonprofit groups to "provide more information on their political activities, including the extent to which these are funded by foreign sources."

In reality, it's not environmental groups that are funded by foreigners – it's the companies eager to exploit the tar sands. Many of Canada's biggest energy companies – firms that are headquartered in Canada and trade on Canadian stock exchanges – are in fact largely owned by foreign interests, including Suncor (57 percent), Canadian Oil Sands (57 percent) and Husky Energy (91 percent). All told, some 70 percent of all tar-sands production in Alberta is owned by non-Canadian shareholders.

It's these foreign-owned companies, not the environmental groups targeted by Harper, that pose the real threat to Canada. The Northern Gateway pipeline would slice through 700 miles of environmentally sensitive land in western Canada, exposing ecological treasures like the Great Bear Rainforest to major oil spills. In Alberta alone, there were 687 pipeline failures in 2010. Three spills in a single month last spring dumped 400,000 gallons of oil – including 132,000 gallons into a river that provides drinking water to Alberta residents.

Many of the spills were caused by incompetence and slipshod engineering – a fact underscored by a report released last month by the U.S. government detailing a massive spill that took place in Michigan in 2010. The disaster, which was caused by a six-foot gash in a pipeline carrying tar-sands oil from Canada to U.S. refineries, dumped nearly a million gallons of oil into a tributary of the Kalamazoo, poisoning the river and exposing residents to benzene and other toxic chemicals. The spill cost nearly $1 billion to clean up, making it the most expensive inland oil disaster in U.S. history. The company responsible for the spill? Enbridge, the Canadian firm behind the Northern Gateway.

Even more damning is what the report, issued by the National Transportation Safety Board, reveals about Enbridge's mishandling of the spill. The NTSB noted that the company's inspectors had found hairline fractures in the pipeline five years before the spill, but did nothing about it. What's worse, oil oozed out of the pipeline for 17 hours without being detected by operators at Enbridge's high-tech control room, which is outfitted with sensors to prevent exactly such an oversight. (The spill went undetected until a utility worker happened to wander by the pipeline and noticed the gushing oil.) In the report, NTSB chairwoman Deborah Hersman cites "a complete breakdown of safety at Enbridge," adding that the firm's employees "performed like Keystone Kops" during the emergency.

Given Enbridge's track record of disasters – and Harper's heavy-handed support for the firm – public opposition to the new pipeline has soared. "Why should we trust this company to do anything right?" asks Gillian McEachern, deputy campaign director at Environmental Defence Canada. "And why would we trust the Harper government – who is clearly very close with the company – to ensure tough regulatory oversight?" In recent weeks, Christy Clark, the premier of British Columbia, has backed away from the pipeline, arguing that it poses "a very large risk" to her province with "a very small" benefit. Barbara Yaffe, a columnist for The Vancouver Sun, is even more blunt: "If Enbridge has not yet got the message," she writes, "it needs to be told: Its proposal to build the Northern Gateway pipeline through B.C. is dead."

But it is the opposition of Canada's original inhabitants that may ultimately doom the pipeline. The chiefs of more than 100 First Nations tribes, who control half of the land that the Northern Gateway would traverse, have signed a declaration to stop the project, calling it "a grave threat" to their lands and waters. "We will defend our rights, no matter what bully tactics the federal government throws at us," declared Jackie Thomas, chief of the Saik'uz First Nation, issuing what could prove to be the death knell for the pipeline. "Enbridge will never be allowed in our lands."

This story is from the August 16th, 2012 issue of Rolling Stone.

From The Archives Issue 1163: August 16, 2012