Evidently Big Oil is going to lay pipelines and hogwash all over South Dakota. Oil and Gas Association dirctor Adam Martin is running around East River telling folks that having the Dakota Access pipeline shoved through their land is somehow a glorious chance to participate in the oil boom.

Help me understand: my neighbor Charlie Johnson gets a big oil pipeline under his organic farm that will carry potentially leaky, explosive oil for maybe 30 years, then sit there and pollute and collapse long afterwards, and he capitalizes on that... how?

As long as America and the industrialized world remains addicted to oil, there's probably no getting around pipelines. But if we buck long enough, we might get the pipelines to go around us. Look at Keystone XL. President Barack Obama as been keeping TransCanada's tar sands pipeline at bay for years with his cowardly but clever delays. And now Alberta's oil producers may take a different route, east through Canada to the Atlantic!

In this period of national gloom comes an idea -- a crazy-sounding notion, or maybe, actually, an epiphany. How about an all-Canadian route to liberate that oil sands crude from Alberta’s isolation and America’s fickleness? Canada’s own environmental and aboriginal politics are holding up a shorter and cheaper pipeline to the Pacific that would supply a shipping portal to oil-thirsty Asia.

Instead, go east, all the way to the Atlantic.

Thus was born Energy East, an improbable pipeline that its backers say has a high probability of being built. It will cost C$12 billion ($10.7 billion) and could be up and running by 2018. Its 4,600-kilometer (2,858-mile) path, taking advantage of a vast length of existing and underused natural gas pipeline, would wend through six provinces and four time zones. It would be Keystone on steroids, more than twice as long and carrying a third more crude [Rebecca Penty, Hugo Miller, Andrew Mayeda and Edward Greenspon, "Keystone Be Darned: Canada Finds Oil Route Around Obama," Bloomberg, 2014.10.08].

Running even more tar sands oil through Canada instead of South Dakota wouldn't make Bill McKibben, climate-change crusaders, or alternative-energy advocates happy. But it would keep South Dakotans from bearing the costs of a pipeline that does not serve South Dakota interests.

And if Energy East supplants Keystone XL, it will be because committed activists kept up the pressure that forced the market to seek other solutions. That's not a total win, but it's better than nothing.

So Charlie, what can we do to get Dakota Access to seek alternatives?

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Stick to your guns, Rick and Corinna!

Mr. Tsitrian extends and revises his August remarks to maintain that opposition to the Keystone XL tar sands oil pipeline loses votes for Democrats. Tsitrian and I continue to disagree on the merits of the new argument onto which Republicans have latched, that building Keystone XL will free up rail cars to ship South Dakota grain.

Whether or not moving more oil out of Alberta by pipeline would result in more available rail cars in South Dakota remains a dubious prospect. U.S. oil may make up less than 8% of what flows through Keystone XL. Bakken producers can make more money shipping their product by rail east and west rather than south via Keystone XL to the Gulf Coast refineries, which already have plenty of light crude like North Dakota's product.

I maintain that we could get more direct and immediate transportation results for our farmers by a variety of policies:

  1. Nationalize the railroads.
  2. Build more railroads.
  3. Impose a "bumper crop" rule requiring railroads to dedicate a percentage of their hauling capacity to crops that rises with reported stockpiles at prairie elevators.
  4. Mandate priority for domestic products: U.S. grain moves before Canadian oil.
  5. Create big immediate tax incentives for training and hiring new truckers to relieve the shortage of road haulers, move more transport to trucks, and free up rail cars for farm products.

Those policy options would have at least as much impact on rail shipping as building Keystone XL, without the harmful side effects, like raising gasoline prices and lowering property values. Imposing regulations on the railroads (who exist by the good graces of government and eminent domain) would not be as socially or environmentally harmful as forcing a pipeline on landowners with eminent domain. Even if we used eminent domain to build a new railroad right along the Keystone XL route instead of the pipeline, we would at least be using eminent domain in its intended spirit, to create a true common carrier that could benefit multiple shippers and other businesses rather than a pipeline that profits one company and hauls one product from one region.

The problem is that to beat Tsitrian and the new GOP spin, we have to explain all that. Tsitrian and I will have immense fun digging up evidence to support our claims (we need a TV show! John, let's buy Gordon Howie's studio!), but we're both past the 30 seconds we need to convince voters, and I'm the one swimming uphill against popular sentiment in favor of Keystone XL.

Even so, beam my brain into Rick Weiland's or Corinna Robinson's body, and I stick to their guns and keep saying to South Dakotans, "You and I agree on most issues, but I'm telling you what I've told you from the start of this campaign: Keystone XL is a net loss for this state. A few more available rail cars won't make up for a letting a Canadian company take our land. I'm just being honest, and that's more than you'll get from my opponents."

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TransCanada has put in motion the official process to renew its expired construction permit for the Keystone XL pipeline. On Monday, the Canadian pipeliner asked the South Dakota Public Utilities Commission to recertify its project.

While TransCanada and its dupes peddle their inflated jobs numbers, let's look at the original arguments the coaxed the PUC to approve the project in 2010. The PUC's Amended Final Decision greenlighting Keystone XL included the following findings of fact on the purpose of and demand for the project:

14. The purpose of the Project is to transport incremental crude oil production from the Western Canadian Sedimentary Basin ("WCSB") to meet growing demand by refineries and markets in the United States ("U.S."). This supply will serve to replace U.S. reliance on less stable and less reliable sources of offshore crude oil.

24. The transport of additional crude oil production from the WCSB is necessary to meet growing demand by refineries and markets in the U.S. The need for the project is dictated by a number of factors, including increasing WCSB crude oil supply combined with insufficient export pipeline capacity; increasing crude oil demand in the U.S. and decreasing domestic crude supply; the opportunity to reduce U.S. dependence on foreign off-shore oil through increased access to stable, secure Canadian crude oil supplies; and binding shipper commitments to utilize the Keystone Pipeline Project.

25. According to the U.S. Energy Information Administration ("EIA"), U.S. demand for petroleum products has increased by over 11 percent or 2,000,000 bpd over the past 10 years and is expected to increase further. The EIA estimates that total U.S. petroleum consumption will increases by approximately 10 million [sic] bpd over the next 10 years, representing average demand growth of about 100,000 [sic] bpd per year (EIA Annual Energy Outlook 2008).

26. At the same time, domestic U.S. crude oil supplies continue to decline. For example, over the past 10 years, domestic crude production in the United States has declined at an average rate of about 135,000 bpd per year, or 2% per year.... Crude and refined petroleum product imports into the U.S. have increased by over 3.3 million bpd over the past 10 years. In 2007, the U.S. imported over 13.4 million bpd of crude oil and petroleum products or over 60 percent of total U.S. petroleum product consumption. Canada is currently the largest supplier of imported crude oil and refined products to the U.S., supplying over 2.4 million bpd in 2007, representing over 11 percent of total U.S. petroleum product consumption (EIA 2007) [South Dakota Public Utilities Commission, Amended Final Decision and Order, TransCanada Keystone XL Pipeline application, 2010.06.29].

First let us note that Finding of Fact #14 is not fact. TransCanada is not seeking to ship more oil to the U.S. Keystone XL will ship more oil through the U.S. to the international market, raising our gasoline prices in the process.

Besides, TransCanada can't count on the U.S. market, because we are using less oil. Let's look at new EIA data and projections showing the significant changes in the oil market in the four years since the PUC issued its findings:

U.S. demand for petroleum is no longer increasing. U.S. demand for petroleum peaked in 2007, which appears to be the final year the PUC considered in formulating its economic analysis. Petroleum demand plunged during the recession. The EIA projects U.S. petroleum use will remain flat over the next 25 years.

EIA AEO 2014-primary energy use by fuel 1980-2040

EIA Annual Energy Outlook 2014, p. MT-6

EIA projects U.S. crude oil consumption will decrease 0.1% a year through 2040 (see EIA AEO 2014, p. A-1).

U.S. domestic crude production is no longer declining. U.S. production troughed at about the same time U.S. consumption peaked. Booming oil production on the Bakken and elsewhere has erased the preceding twenty-year decline and will likely remain above the previous 1990 peak through 2040.

EIA AEO 2014 - U.S. Crude Oil Production 1990-2040

EIA Annual Energy Outlook 2014, p. MT-27

The EIA projects domestic crude oil and lease condensate energy production will increase 0.5% a year through 2040 (see EIA AEO 2014, p. A-1).

U.S. petroleum imports are no longer increasing. Same arc: increase to the mid-2000s, followed by a dramatic decrease thanks to recession- and conservation-driven reductions in consumption and Bakken-frackin' production increases. In the best-case scenario, the U.S. is a net exporter by the mid-2030s. Worst-case, our imports return to a bit above current levels, still less than 50%.

EIA AEO 2014 - Net import share of US petro-liquids 1990-2040

EIA Annual Energy Outlook 2014, p. MT-29

The EIA projects that U.S. crude oil imports will decrease 0.2% a year through 2040 (see EIA AEO 2014, p. A-1).

TransCanada does not have to make an economic case to the Public Utilities Commission. The pipeliners' burden of proof consists mostly of showing that they'll follow the rules and not kill anybody.

But if Commissioners Hanson, Nelson, and Fiegen are going to include economic and energy security justifications in their discussion of the merits of Keystone XL, they'll want to revisit the oil market and consider the significant changes that have taken place in U.S. oil consumption, production, and imports since the PUC issued TransCanada its initial permit.

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The Bakken oil boom is making North Dakota rich! Too bad its universities are falling apart:

Students returning this week will attend classes in buildings without adequate ventilation or fire detection systems and in historic landmarks with buckling foundations. A space crunch is making it difficult for researchers to obtain grants and putting the accreditation of several programs at risk, administrators say.

“It’s embarrassing,” said North Dakota state Representative Kathy Hawken, a Republican from Fargo who sits on the higher education funding and budget committees. “We have a divided legislature on higher ed: Some think we put too much money into it and some think we don’t put enough. Buildings aren’t people, so we don’t put dollars there” [Jennifer Oldham, "North Dakota Universities Crumble as Oil Cash Pours In," Bloomberg, 2014.08.26].

Moving that money from petro-tax revenues to classrooms is complicated: Oldham reports that 30% of the money is locked up in a state trust fund until 2017, while another big chunk goes to municipalities. The $300 million the North Dakota Legislature gets faces competition from road needs. While the universities need $808 million in repairs, the state also needs $925 million to fix roads statewide over the next two years, including $485 million for repairs to industry-battered oil-patch roads.

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...and your gasoline prices will still go up.

A new study from researchers at the Stockholm Environment Institute (based in the U.S., not Sweden) says the U.S. State Department could be off by a factor of four in its estimate of greenhouse gas emissions that the Keystone XL pipeline would facilitate. The State Department says Keystone XL could lead to 1 to 27 million more tons of carbon dioxide belched into the atmosphere each year. Researchers Peter Erickson and Michael Lazarus say the additional carbon pollution could be almost nil, but they could also be as great as 110 million tons per year.

But check out the reason: Peterson and Lazarus say the State Department failed to include in its model the economic impact of Keystone XL, which will increase supply, lower global oil prices, and thus increase oil consumption. A working version of the Peterson-Lazarus paper from December 2013 suggests the new oil Keystone XL will bring to the market (510,000 barrels per day, 62% of the pipeline's capacity) would lower the global price of oil by $1.50 per barrel, from $101.10 to $98.60.

Attentive readers are saying to themselves, "Wait a minute! Heidelberger told us Keystone XL would raise our gasoline prices. These eggheads are saying Keystone XL will lower global oil prices. Heidelberger's an idiot! Build the pipeline!"

But here, you have to think locally, not globally. Not all segments of the market are created equally (as anyone traveling across the country last week and getting a motel room in Minnesota one night and the Black Hills the next can attest). As I've reported for years, the whole business case for Keystone XL hinges on clearing the relative glut of oil in middle America and connecting Canada's oil to the global export market. Keystone XL would erase the discount we Midwesterners get and divide it up among the Chinese and other global players.

Now if you want to give China your credit card reward points or the money you save on your capital gains tax rate, then hey, Keystone XL is for you. But if you're putting American interests first and/or if you would like to take one more action to mitigate carbon-induced climate change, you tell TransCanada to keep its pipeline out of South Dakota and leave more of that tar sands oil in the ground.

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While Mike Rounds fantasizes that the Albertan tar sands oil that Keystone XL would ship to the Gulf of Mexico for export to China somehow secures American energy independence, and while pols and hustlers insist that maybe South Dakota can stick a straw in West River and suck some Bakken oil our way, the Union of Concerned Scientists notes that South Dakota has the resources to cash in on a real, renewable domestic source of energy growing and plopping right in our backyards... or the back forty.

UCS-Top 10 States for Crop Residue Manure Bioenergy 2030

According to a new UCS analysis, by 2030, South Dakota can sustainably produce the ninth-most biomass—crop residues and manure—for renewable energy production. (Add Mike Rounds's speeches on coal and oil, and we boost our rank to seventh.) We're not talking about turning more food into fuel; we can squeeze energy from all that stuff we and the cows leave in the fields without burning one more bean or kernel of corn.

UCS crop residue manure by county 2030

(click to enlarge!)

Why would we want to convert cornstalks and cowpies into energy?

Clean, renewable energy resources for transportation and electricity are an im- portant part of the solution to the climate, economic, environmental, and security challenges posed by our fossil fuel use. Bioenergy—the use of biomass, including plant materials and manure, to produce renewable fuels for transportation and to generate electricity—can provide a sustainable, low-carbon alternative to fossil fuels while enabling communities to benefit from local resources. Bioenergy is one of several elements of a comprehensive climate strategy that can cut projected U.S. oil use in half by 2030, and help put the nation on track to phase out the use of coal in producing electricity [Union of Concerned Scientists, "Turning Agricultural Residues and Manure into Bioenergy," July 2014].

Oh, those darned scientists, trying to get us to use less of a polluting fuel source that will run out. Don't they know that all this talk of conservation and renewability messes up the business model for Mike Rounds's favorite industries?

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Todd Epp reported Friday that Mobridge, Aberdeen, Harrisburg*, and Canton* are all in "oil train blast zones," near rail lines carrying explosive crude oil shipments. According to the ForestEthics map, so are Lemmon, Milbank, much of Sioux Falls, and North Sioux City. (McCook Lake, we will destroy you one way or another!)

Meanwhile, Energy Transfer Partners of Dallas, Texas, would like to run a 30-inch pipeline carrying an initial volume of 320,000 barrels a day of Bakken crude from the oil fields down to around Mobridge, then hypotenusally to the Hartford–Sioux Falls–Harrisburg metroplex and then from corner to corner across Iowa to Patoka, Illinois, the same refining terminus served by TransCanada's original Keystone pipeline. Doing business via subsidiary Dakota Access, LLC, ETP is sending letters to landowners along the proposed route seeking permission to survey the land and announcing ETP's plans to seek a temporary 150-foot construction easement and a permanent 50-foot access easement. And if landowners don't want to play ball, they could face eminent domain, exercised by a private company for its private profit.

As a purely domestic pipeline, ETP's Bakken–Patoka project is not subject to the State Department review and Presidential approval that (let us give thanks!) has delayed the Keystone XL pipeline. But ETP will need approval from South Dakota's Public Utilities Commission. PU Commissioner Gary Hanson, who is seeking re-election this year, promises the PUC will listen to public input. Dusty Johnson, who traded his seat on the PUC for the seat at Governor Daugaard's right hand, says the Governor hasn't taken a position on ETP's pipeline, but golly gee, we gotta move that oil somehow:

“I know as a country we’re trying to diversify how we use and create energy. But for the foreseeable future, oil’s going to be a big part of that,” said Dusty Johnson, chief of staff to Gov. Dennis Daugaard and a former member of the Public Utilities Commission. “If we’re going to use oil, the question is, where do we want that oil to come from? I would prefer North American oil, whether that comes from North Dakota or Canada or elsewhere.”

Johnson said Daugaard, sympathetic to pipelines in general, hasn’t decided about the Energy Transfer Partners pipeline. The governor’s primary issue is whether the pipeline is safe, Johnson said.

“There can be good pipelines and there can be bad pipelines,” he said [David Montgomery, "Oil Pipeline Plan for Eastern S.D. May Trigger a Battle," that Sioux Falls paper, 2014.07.12].

Oh, the easy surrender to inevitability! Dusty sounds a bit like the mean dad saying, "You can pick: belt or stick. But you will get your beating." We do have the option to not use the oil, or not use as much as fast. We do have the policy option to make the use of petro-products more expensive to protect the general welfare and counter any economic impacts with the stimulus of investing in renewable energy.

We don't have to move more crude through South Dakota by rail or pipeline. We don't have to double or triple the chances of blowing Harrisburg off the map. We don't have to burn that oil.

*Correction 2014.07.14 23:51 CDT: An eager reader and "railfan geek" says the Forest Ethics folks may have read the map wrong and unnecessarily alarmed the good folks hearing train whistles in Sioux Falls, Harrisburg, and Canton. Rick tells us that the line running southwest from Willmar enters South Dakota at Sherman, continues to Garretson, then bounces east across the border again. Big oil trains would take that line. A secondary BNSF line does branch off at Garretson and head down Harrisburg- and Canton-way, but you won't find oil trains on that secondary line.

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South Dakota is "under-explored" for oil, says Sturgis consultant and former cop Adam Martin, the new exec of the South Dakota Oil and Gas Association.

"Under-explored" appears frequently in press dealing with South Dakota and oil exploration. State officials are doing a lot of petro-wishing, but geology and economics are still working against them. Heck, we can't even find the right sand to use in the fracking process—except for maybe one isolated patch of the Black Hills near Hill City where South Dakota Proppants thinks it can mine a million tons of frac-sand a year... and turn the central Black Hills into a dusty freeway for trucks thundering out to Wyoming and the Bakken. Yay.

Plenty of folks have made money punching holes in the Black Hills. If we punch more holes across the state and find oil, more folks will make money. But not all of them. Texas is far from under-explored, but the growing petro-wealth still doesn't flow smoothly to the greater good:

...[D]espite the boom, Texas has some of the highest rates of poverty in the nation and ranks first in the percentage of residents without health insurance. Republican leaders have supported tapping the Rainy Day Fund for one-time investments in water and transportation infrastructure, but they have blocked attempts to use the fund for education and other services, arguing that it was designed to cover emergencies and not recurring expenses.

“Despite the bounty of the Eagle Ford, which is considerable and on the whole clearly positive, it is not a rising tide that lifts all boats,” said Ray Perryman, a leading Texas economist and author based in Waco. He noted that Texas had long had a philosophy of limited government and an aversion to spending on social services, an attitude intensified by the current political environment.

“Texas is not a good place to be poor, and there is little political appetite for change,” he said [Manny Fernandez and Clifford Krauss, "Boom Meets Bust in Texas; Atop Sea of Oil, Poverty Digs In," New York Times, 2014.06.29].

It may not hurt to go looking for the spare change dinosaurs may have left in the couch cushions in West River. Then again, it might. But don't let the South Dakota Oil and Gas Association or South Dakota's state government fool you: fracking what little oil we may have won't bring easy, widespread wealth to South Dakota.

p.s.: Hey! Anyone strike oil down in the Precambrian rock by Wasta yet?

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