Keystone XL Revisited

March 11, 2015

I don’t like the Keystone XL pipeline concept for a few different reasons. The project is more of a shoving match between politicians than it is actually worth the time already spent debating it. If our elected officials had spent the time working on actual long-term energy policy, we would be better off. How could we better use the taxpayer money that would go to the pipeline?

The Alberta tar sands oil isn’t new. There has been a pit full of heavy, sandy oil sitting in Canada since a fur trader found it in the 1700s. Oil gushing out of a field in Texas is easy to transport and process. Tar sands oil is neither of those things. Picture if you spilled a quart of old engine oil on to a beach and then had to pump that oil and sand mixture across North America to be processed. This is similar to how tar sands work. The Alberta oil sat in the ground all these years because it isn’t very cost effective to process.

Alberta tar sands oil becomes cost effective when other sources of oil are above $95/barrel, according to a study by Carbontracker.org. As of February 2015, crude oil has fallen to less than $50/barrel. Only if you see gas prices go over roughly $3.20/gallon at the pump, is it worth using tar sands oil from Alberta. The amount of attention paid to Keystone XL would have the average American thinking it is a straw full of liquid gold, when it is really just another way to move oil that is more of a last resort source of energy.

Outside of the energy supply side of the argument, is our goal to create jobs with Keystone XL? Cornell did a study that estimates between 2,500 and 4,650 seasonal, temporary jobs would be created. There are less than 50 sustainable full-time jobs on the horizon after the Keystone XL is built.

What if we took the $1.0-1.8 billion tax break that would accompany the XL pipeline and spent it differently? (While the pipeline itself could be privately funded, new refineries would be needed to make the oil useable. The oil companies could use a tax provision section 179C to write off 55% of the year one expense of upgrading refineries, totaling $1.0-1.8 billion. A company half owned by the Saudis, Motiva, would receive about half of this total, according to priceofoil.org).

What could we do instead of giving a special tax break to three oil companies for building new refineries? We could incentivize energy efficient building upgrades. Let’s say we take $1.8 billion dollars and create a rebate fund that building owners can use to help achieve certain levels of building efficiency. What if you got a $5/square foot rebate to upgrade or build your building to a high LEED, Energy Star, HERS, or some other building standard? With $1.8 billion you could upgrade 360 million square feet of buildings.

How many builders and savvy contractors would it take to build or upgrade 360 million square feet of buildings? Would that create more than a few thousand temporary jobs that we would see from the Keystone XL pipeline? I would rather direct U.S. tax dollars and jobs to energy efficient builders and their subcontractors than to a Saudi oil giant.

There is more benefit to 360,000 of new energy efficient building space than a pipeline for our infrastructure. Having 1,000 different ways to get oil without reassessing the amount of energy we waste is the wrong approach. Energy efficiency is the low hanging fruit for our nation, not tar sands. According to the U.S. Green Builders Council, buildings account for 38% of our nation’s carbon emissions. I would guess that 95% of our buildings use more energy than they need to keep their occupants comfortable.

For a real life example, let’s say you are building a new 2,000 square foot house. According to a World Green Building Council report, basic LEED certification was only a 2% premium on building costs. You could build that house for up to $250/square foot total construction cost and offset the LEED premium with the $5/square foot incentive. This is just one example, the cost of building and LEED cost will vary per case. Overall, even if you didn’t care to build a green building, it would make financial sense to do so.

USGBC has a list of studies that show the dollar value of having a green building. “Operating costs decreased by 13.6% for new construction and 8.5% for existing building projects.” “Building value increased by 10.9% for new construction and 6.8% for existing building projects.” “LEED-certified buildings have been proven to use 25% less energy and a 19% reduction in aggregate operational costs in comparison to non-certified buildings.” These features are not exclusive to LEED, but are common with well-designed green buildings.

Our nation’s capitol has been busy upgrading their buildings. Washington D.C. leads the way with 29.4 square feet of LEED certified space per capita in 2014. Illinois is the number one state in the category with 3.3 square feet per capita last year. Since 2002, new Cook County Illinois government buildings must be upgraded or built new to LEED standards.

While some may see green buildings as frivolous or unnecessary, they are a better investment for our tax dollar. Would you rather your local fire department cut their energy bills or cut things that help them respond to fires? Building green is a smarter business decision. Energy prices are volatile over the lifespan of a building. The best way to reduce your exposure to energy price spikes is to build energy efficient, not just pipelines.

Unfortunately for newspaper headlines and congressional debates, sound U.S. energy policy is probably less than 1% related to the Keystone XL decision. Oil will come from the tar sands in Alberta by pipeline, truck, or train when it is financially viable to do so, but it shouldn’t be our primary objective. Providing additional incentive to build energy efficient buildings would have much more impact on making our country energy stable.

If 38% of our nation’s carbon emissions come from buildings, that makes plumbing, heating, and cooling contractors much more valuable to our national energy policy than the handful of oil companies that would benefit from Keystone XL. You are the actual game changers. We are better off with millions of energy efficient buildings than we are with a new 36” tube filled with sand.

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Max Rohr is a graduate of the University of Utah. He is currently an outside salesperson at Shamrock Sales in Denver. He has worked in the hydronics and solar industry for 10 years in the installation, sales and marketing sectors. Rohr is a LEED Green Associate and BPI Building Analyst, and is RPA’s Education Committee Chairman. He can be reached at max.rohr@mac.com.