Who Needs the Dakota Access Pipeline?

by Frank Ackerman, member green economist of the E3 network

reposted from CommonDreams

A packed Seattle City Council chamber cheers passage of the bill to drop Wells Fargo as its bank last week. (Photo: Ken Lambert / The Seattle Times)

The final link of the Dakota Access Pipeline (DAPL) can now be built, thanks to a recent decision by the Army Corps of Engineers (although the Cheyenne River Sioux have filed a last-minute suit to stop it). In light of the disappointing but unsurprising federal approval of the pipeline, it is worth pausing to ask who and what DAPL is good for.

Who needs the pipeline? There are four main answers: three are silly and one is dangerous.

Silly answer #1 is that the ravenous ego in the White House needs a continual flow of evidence that he is always a winner and his enemies are all losers. Indian tribes and environmentalists can get in line next to Muslims and Mexicans as obstacles, which he shall overcome, to the huge success of making America some kind of great again.

Answer #2, only slightly less silly, is that Energy Transfer Partners (ETP), the company that built the pipeline, has $3.8 billion invested and won’t earn a dime on it unless the pipeline is finished. ETP is a well-connected company – at least until recently, Rick Perry was on its board of directors and Donald Trump was one of its stockholders. Surely that’s irrelevant to the recent decision.

But it is well established in economic theory that people who make bad investments should lose money on them. Milton Friedman, the forefather of conservative free-market economics, was emphatic on this point. As Friedman might have asked, why is DAPL a worthwhile investment that deserves to make money? Who actually needs this pipeline?

Answer #3 is only silly if you pay attention to the numbers. Building a pipeline creates jobs. Good, high-paying jobs making and laying pipe. In fact, building anything creates jobs. Building a bridge to nowhere or a pipeline that no one needs will create jobs – but building things that people need can create even more jobs. An in-depth study of alternatives to the proposed Keystone XL pipeline found that the host states could gain many more jobs by investing in much-needed infrastructure for clean water and natural gas distribution.

Moreover, almost all the jobs created by building DAPL have already happened, because the pipeline is almost complete. It makes no sense to count past jobs as future benefits. If construction jobs are an important benefit of the pipeline, I hope you enjoyed them; they’re all but over. Once a pipeline is completed and in operation, it needs very few workers to keep it going.

Finally, the dangerous answer is that DAPL would be useful to keep oil flowing if the price of oil was much higher than it is today. The danger involves the factors that might cause higher prices. But first, a little back story.

DAPL was planned in early 2014, at a time when the price of oil had been above $80 per barrel, often closer to $100, for the past several years. Oil production in North Dakota was booming, and there were early signs of a shortage of pipeline and rail capacity to carry the state’s oil.

Then, in the second half of 2014, the price of oil collapsed. Since the beginning of 2015, the price of oil has been below $60 per barrel, occasionally far below. Oil production in North Dakota has slumped, and the volume of oil carried out of the state by pipeline or rail transport has plunged so low that there is no hint of a capacity shortage.

North Dakota is among the most expensive on-shore locations for oil production in North America. Several oil experts have estimated that the break-even price for North Dakota oil is $60 per barrel or more. In my own study of the state’s data, I found that North Dakota oil production tends to go up when the price has averaged more than $61.50 per barrel for the last few months. The flip side is that North Dakota output tends to drop when the price of oil lingers below $61.50 – as it has done for the last two years, ever since early 2015.

So DAPL will only be needed for oil transport if the price of oil goes, and stays, much higher than it is today. Here comes the dangerous part: suppose that an out-of-control White House was inflaming conflict in the Middle East, threatening bad relations or even war with major oil producing nations. If OPEC countries cut off oil shipments to the United States, the price of oil will soar, North Dakota’s oil boom will resume, and DAPL will become key to Fortress America’s oil supplies.

Normal diplomacy would prevent that, of course. But normal diplomacy is so 2016.

 


Desert Year: Doing a 180 on Energy

Running with the lizards and doing a 180 on energy!

The heat of the season is beginning to arrive earlier in the morning. And on this particular day it seemed especially sensible to get out ahead of the sun – well before it began to beat down with any real strength.  So I headed out early for a leisurely morning amble.  The route took me up a road that has very high curbs to channel the water from the fall monsoons. On this specific stretch of curb there was a single lizard, hugging the side of the concrete wall.  It scurried maybe 10 feet ahead of me as I approached, and then it stopped.  As I again advanced within three feet, it jumped ahead maybe another 8-10 feet, still hugging the curbside. And then again. . . .

I don’t have a clue why the lizard insisted on moving forward with me, hugging tightly to the pavement sidewall. The smarter thing, it seemed to me, would have been to scurry at a very quick right angle away from me to safety.  Yet, as I again approached it for perhaps the fifth time, it suddenly turned 180 degrees and bolted past me in the opposite direction – leaving me alone with my thoughts.  Although the suddenness of its movement startled me, I reflected a little and thought . . . that was very cool. And I immediately wondered why it is that we are so often dogged in maintaining our existing course of action?

A Changing of the Minds?

The good news is that people can and they sometimes do change their minds. Not to distract from his current predicament, in 2006 Rupert Murdoch, for example, “had a change of heart on climate change and now believes global action is needed.” Also changing his mind on climate change? Bjorn Lomborg who claimed for many years that climate was not an especially important issue to address. Yet in 2010 he released a new book with new equations stating the exact opposite. The indication is that while did change his mind, he hugely underestimates what might be an appropriate scale of mitigation effort. His current thinking recommends that we should spend $100 billion a year to mitigate and avoid the impacts of greenhouse gas emissions. The evidence, however, suggests it should be many times larger.  Continue reading…


Desert Year: Meeting Energy Needs is All About Perspective

It had been in my mind for some time.  Picacho Peak is a fascinating and major focal point of the Arizona landscape, located perhaps 40 miles north of Tucson.  I’ve wanted to explore both the peak and its surrounding area almost since my first return to Tucson last May.

Earlier this year Arizona celebrated the 150th anniversary of the only Civil War skirmish that occurred in Arizona — right there in Picacho Pass. The Union forces lost that particular encounter because of the disobedience of an overeager young lieutenant. They also suffered three fatalities in that fight.

The little bit of publicity I saw about this anniversary only heightened my interest in climbing the peak.  So I set out one fine Friday with a friend to get it done.

Picacho Peak at a Distance

Our very first picture was taken at about 7:30 am in the morning as we approached Picacho Peak from the south on Interstate 10.  At that angle and distance one might begin to wonder, how the heck do we even begin to think that we can actually make the ascent? And if we look at the seemingly insatiable demands for energy, how might we do anything but dig for more coal or drill for more oil? Continue reading…


Costs of Inaction: Energy and Water Demands Collide

A new report by the Union of Concerned Scientists details how our electricity demands are colliding with our fresh water needs. Though often overlooked, the electricity sector’s dependence on fresh water runs deep, and not only in regions that rely heavily on hydropower. Fossil-fuel and nuclear power plants rely on fresh water for cooling purposes. Power plants demand the largest share of U.S. freshwater withdrawals: 41%. Just as hydropower plants operate at reduced capacity or shut-down during periods of prolonged drought, steam-generating power plants cut back production or shut down during dry and hot periods.

The bottom line: the energy system is not only the primary driver of global climate change but is highly vulnerable to its impacts. As climate change reduces the availability of fresh water supplies and contributes to greater irregularities in the timing of peak stream flows, the capacity of our energy system to reliably produce power declines. The solution: we need to embrace lower-water technologies such as air cooling for power plants and no-water options such as wind farms and energy efficiency.

 You can read the full report here.

 Releated posts: The Costs of Inaction: Southwest Water Crisis; Costs of Inaction: Energy, Water, Infrastructure