Letter to State Dept 14-02-12 KXL

8/13/2019 Letter to State Dept 14-02-12 KXL

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Douglas A. GrandtPO Box 6603

Lincoln, NE 68506

February 12, 2014

Bureau of Energy Resources, Room 4843

Attn: Keystone XL Public CommentsU.S. Department of State2201 C Street NWWashington, DC 20520

Re: TransCanada permit application for the Keystone XL pipeline

Dear John Kerry and Barack Obama:

After pouring over the droning, endless repetitions of words and phrases in the FSEISattempting to find the assumptions and guidelines of the report which would shed light on thevalidity of the conclusions, I found the goldmine of explanations and the Achilles Heel that

invalidates its conclusions. Hidden in plain sight, the evidence is potentit kills Keystone XL.

What is infuriating is it is buried. The shimmer of precious insight appeared eight pages intothe first three subsections in Section 1.4 Market Analysis, which begins with the following:

1.4.1 Introduction and Executive Summary Page 1.4-11.4.1.1 Introduction Page 1.4-11.4.1.2 Methodological Overview Page 1.4-11.4.1.3 Summary of Analysis Page 1.4-2

What fills those pages is a distraction, slight of hand, tricks like a magician uses to keep hisaudiences focus away from is really happening in the other hand, like the distracting redtassel on a Shaolin Warrior Monk's long tassel sword. What you see is what the warriorwants you to see (the tassel), not the blade that will finish you off when your eyes shift away.

Figure 1.4.1-1 is thefirst of four redtassels that open thesection with growth ofrail transport of

Western CanadaSedimentary Basincrude oil. The FSEISauthors give us a

quick glimpse at whatwill be the key to theirKeystone insignificantimpact conclusionright off the bat: railtankers.

More rail informationfollows:


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Figure 1.4.1-3 is thelast of four redtassels that open thesection with complexand mind bogglinginformation taking themind into a tail spin

virtually: What is themeaning of it all? Thisis over my headwemust t rus t theseexperts to tell us whatit means. I dont havethe ability to sort it out.Etc.

Read on, there aremore pretty imagesover the next 120+

pages. Surely thosewill make it clear.

That was false hope!

What nearly escaped me was a footnote on page 1.4-9 which I overlooked at first. It wasntuntil I had read hundreds of pages, sifting and searching for the questions,let alone theanswers to the questions I had not yet formulated.

It gives a few clues as to where the Achilles Heal lies, while crushing ones hopeof everunderstanding the erudite and complex modeling and analysis that is bound within thismulti-volume tome. But dont fret, you are in good hands and we know what we are doingwe have done this beforeand have the knowledge and experience to use our magnificenttools with skill and craft, or should it be craftily?

Dear reader, I know you work for the Department of State, but what do you make of this?

The medium is message. Marshall McLuhan

What is the message footnote 1 on page 1.4-9 is sending? Trust us, dont ask for details!

1EnSyss WORLD model provides an integrated analysis and projection of the

global petroleum industry that encompasses total liquids, captures the effects of

developments, changes, and interactions between regions, and projects theeconomics and activities of refining crude oils and products. WORLD has been used

for DOEs Office of Strategic Petroleum Reserve since 1987, and has been appliedin analyses for many organizations, including the EIA, U.S. Environmental

Protection Agency, the American Petroleum Institute (API), the World Bank, theOrganization of the Petroleum Exporting Countries (OPEC) Secretariat, the

International Maritime Organization, Bloomberg, and major and specialty oil andchemical companies.


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Footnote 1 is presented within the context of introducing the WORLD model:

1.4.1.4 Previous Analysis

The assessment of the potential market impact of the previously proposed Keystone XL Projectwas released in the August 26, 2011, Final EIS document. That assessment of the petroleummarket drew on several studies, including one commissioned by the U.S. Department ofEnergy (USDOE) Office of Policy and International Affairs. The USDOE contracted with

EnSys Energy and Systems, Inc. (EnSys) to develop a study of different North American crudeoil pipeline scenarios through 2030 using EnSyss World Oil Refining Logistics & Demand

(WORLD) model.1

The conclusions included the following:

There was commercial demand for WCSB heavy crude oil in the Gulf Coast. Thedemand identified by the EnSys 2010 Assessment was sufficiently high that were apermit for the Keystone XL pipeline, as then proposed, denied, the market would likelyrespond by adding broadly comparable transport capacity over time. The EnSys 2010Assessment forecasted that the demand for WCSB heavy crude from the oil sandswould be such that irrespective of whether a permit for the Keystone XL pipeline, asthen proposed, was granted, transport capacity in excess of the Keystone XL pipelinewould likely be built.

In a situation in which the industry and market react based on normal commercialincentives, neither the production rate in the oil sands nor refining activities in the GulfCoast would change substantially based on whether Keystone XL, as then proposed,was built.

The 2010 EnSys report found the production rate in the oil sands was only substantiallyreduced in scenarios that assumed all pipeline transport capacity was frozen at 2010levels through 2030. The scenario also assumed that incremental non-pipeline transportcapacity (such as rail or tanker) was not available. The EnSys 2010 report concludedthat a No Expansion scenario had a low probability of occurring. Nonetheless, to betterassess the No Expansion scenario analyzed by EnSys in 2010, the Department and theUSDOE commissioned EnSys to further examine the likelihood of the No Expansionscenario, including assessing in greater detail the potential of non-pipeline

transportation of crude oil. In the 2011 No Expansion Update, EnSys concluded thateven if there were no new pipelines added beyond those existing in 2010, rail supportedby barge and tanker, as well as expansions to refining/upgrading in Canada, couldaccommodate projected oil sands production.

Other sources consulted in preparing the 2011 Final EIS included input from experts at theUSDOE, information from industry associations (CAPP) and private consulting companiessuch as Purvin & Gertz, IHS Cambridge Energy Research Associates, Inc. (IHS CERA), HartEnergy, and ICF International, as well as the numerous comments received from the public.Taking account of all of the relevant information, the 2011 Final EIS concluded that the proposedProject is unlikely to significantly affect the rate of extraction in the oil sands or in U.S. refiningx

1 EnSyss WORLD model provides an integrated analysis and projection of the globalpetroleum industry that encompasses total liquids, captures the effects of developments,changes, and interactions between regions, and projects the economics and activities ofrefining crude oils and products. WORLD has been used for DOEs Office of StrategicPetroleum Reserve since 1987, and has been applied in analyses for many organizations,including the EIA, U.S. Environmental Protection Agency, the American PetroleumInstitute (API), the World Bank, the Organization of the Petroleum Exporting Countries(OPEC) Secretariat, the International Maritime Organization, Bloomberg, and major andspecialty oil and chemical companies.


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The 80 pages that follow are filled with colorful charts and graphs that display the facts

and figures generated by the WORLD modelit is daunting, and mind-numbing. They

look the same, and the explanations by the authors all sound the same, with conclusions

repeating over and over and over. Readers have no choice but to believe the experts

who run and interpret the model. Appendix C presents the same charts and graphs

without any explanation, so I wonder how the authors interpreted EnSys work.

Eighty pages later, on page 1.4-90, footnote 124 is a ray of light, spilling to page 1.4-91:

This footnote is a bit less intimidating, and actually offers clues as to the assumptions:

124The WORLD model simulates the global petroleum liquids downstream

industry, capturing the interactions of crude and non-crudes supply, product

demand, refining, trade, investment and regulation (EnSys 2009). By marryingtop-down scenarios with bottom-up detail, WORLD generates near-term and

long-term projections of the industrys activity. EnSys maintains bottom-updatabases of global crudes, crude oil and product transportation routes,

pipelines, refining capacity and future developments. Shipping rates arebased on the World Scale system. The Refining Technology (RTEC) module of

WORLD simulates the technology and economics of refining. //page 1.4-91//By

combining this bottom-up detail in WORLD with upstream liquids production,downstream fuels consumption, and world crude oil (Brent) price outlooks froma range of EIA AEO 2013 cases, EnSys projected strategic industry parameters,

notably, global refining activities, investments and economics, crude andproduct pricing/differentials, trade flows and logistics through to 2035. For

more details, see WORLD Model Overview and Results in Appendix C,Supplemental Information to Market Analysis.


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One key phrase is EnSys maintains bottom-up databases of global crudes, crude oil andproduct transportation routes, pipelines, refining capacity and future developments.

What would such databases include? Actuals , suppositions, estimates and forecasts.Whose forecasts? What are the assumptions? Are they point values or likely ranges?

My hopes were raised by For more details, see WORLD Model Overview and Results in

Appendix C, Supplemental Information to Market Analysis. More disappointment.

More clues appear in footnote 125 (highlighted on the image of Page 1.4-91:

125The WORLD model was run on projections from the EIA AEO 2013,

published May 2, 2013 (EIA 2013a). The Early Release of the AEO2014Reference Case occurred December 16, 2013. AEO Early Release editions only

have a Reference Case, which may be revised before a final edition and othercases are published sometime in 2014. While projections in the AEO2014 Early

Release Reference Case differ from the AEO 2013 Reference Case, the issuesconsidered are similar and the projections generally fall within the range of

AEO2013 cases used here. U.S. crude oil production is higher in theAEO2014 Reference Case than in the AEO2013 Reference Case, but

generally lower than in the AEO2013 High Resource Case and Low/No NetImports Case. Reference Case crude oil production retains its former

profile, peaking later this decade and then declining, but it now peaks at 9.6million bpd in 2019 and falls to 7.9 million bpd by 2035. AEO2014

projections for U.S. total liquid fuel consumption and Canadian liquid fuelsproduction are nearly unchanged. U.S. petroleum product exports are higher in

the AEO2014, moving closer to the levels projected by WORLD.

The disclaimers near the bottom of footnote 125 are less relevant than the revelation that

the fundamental assumption is the forecast in EIA AEO 2013. That is the U.S. EnergyInformation Administrations Annual Energy Outlook in 2013. Without getting into details,that is a point in time which is understandably unadjusted for any possible fall out fromrecent leaks, spills, fires, explosions, earthquakes, etc.a rash of derailments, rail tankerexplosions and devastating fires, recent gas pipeline ruptures and fires, infamous dilbitspills, coverups and ongoing clean-up in Mayflower, Arkansas, the Kalamazoo River, andelsewhere. All have triggered public outcry which could precipitate fundamental financialchanges in terms of a rail disaster surcharge, or a carbon pollution tax, or a methane leakfee, or a preventive potable water protection or fracking penalty, or any other unforeseenregulations to internalize the externalized damages and costs associated with extraction,processing, transportation, refining, distributionundoubtedly altering FSEIS conclusions.

Imperative to a complete and honest assessment is that the WORLD scenarios includesensitivity tests for fossil fuel penalties beginning at, say, $20-$30/ton CO2 with a rapidrise to $200-$300/ton over a decade-or-so period. Not to test for intolerable downsideeffects would be unprofessionalindeed, criminal for those who should know better.

Sincerely yours,

Doug Grandt

Encl.: Snapshot of Keystone XL FSEIS page 4.1-96


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Snapshot of Keystone XL FSEIS page 4.1-96

Letter to State Dept 14-02-12 KXL

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