Stanford declines to divest fossil fuels

Should university endowments be invested in fossil fuel companies?  Or should they divest such holdings? Universities across the U.S. are considering these questions.  In the latest development, Stanford University's Board of Trustees has released a statement on climate change, describing the university's initiatives to battle climate change, but declining to divest Stanford's roughly $22 billion endowment from the fossil fuel industry.

In the April 25 statement, the Board describes climate change as "among the most serious challenges of our time."  The statement lists various elements of Stanford's strategic approach to combating climate change, including a $500 million transformative campus energy system, commitments to invest in solar, other renewable energy, wastewater recovery, green transportation, and energy efficiency in campus buildings.  The statement also announces the creation of a new climate task force to be composed of undergraduates, graduate students, faculty and staff, to solicit ideas for further action.

Much of the statement is structured as a response to a proposal by student organization Fossil Free Stanford that the university divest its endowment from the fossil fuel industry.  The trustees cite the university's Statement on Investment Responsibility as outlining a specific set of criteria by which the trustees may evaluate whether a company is inflicting social injury in a manner that warrants consideration of divestment.  The statement notes the establishment of an Advisory Panel on Investment Responsibility and Licensing, which studied the issues and made a recommendation to the Board’s Special Committee on Investment Responsibility, which in turn made a recommendation to the trustees.

According to the statement, the advisory panel "recommended divestment of companies whose primary business is oil sands extraction, a method that studies have found requires more water, and releases more carbon into the atmosphere, than other forms of fossil fuel extraction."  It cites Stanford Management Company as saying that the Stanford endowment has no direct exposure to companies whose primary business is oil sands extraction, so the trustees had no action to take on this point.

On the broader fossil fuel industry, the panel "concluded that it could not evaluate whether the social injury caused by the fossil fuel industry outweighs the social benefit it provides, and therefore did not recommend divestment."  The trustees agreed that the criteria were not met, and declined to divest.

That said, the statement expressed the trustees' belief "that the global community must develop effective alternatives to fossil fuels at sufficient scale, so that fossil fuels will not continue to be extracted and used at the present rate... the long-term solution is for all of us to reduce our consumption of fossil fuel resources and develop effective alternatives."

But despite investment and progress in research, including by Stanford, the trustees note that "at the present moment oil and gas remain integral components of the global economy, essential to the daily lives of billions of people in both developed and emerging economies."  The statement also notes the efforts of some oil and gas companies to explore alternatives.  The statement notes that "the trustees do not believe that a credible case can be made for divesting from the fossil fuel industry until there are competitive and readily available alternatives."

The statement also notes that the university's investment program does take climate change into consideration when evaluating the economic attractiveness of various investments.  In the trustees' words, "Prudent investors acknowledge that the world is beginning a transition away from carbon-based energy sources and that pricing for fossil fuels will reflect this transition."  The statement also notes the efforts of the endowment managers to "identify and support industry best practices that, in addition to positively impacting investment results, may pay significant environmental dividends."

This is not the first time Stanford has considered divesting from fossil fuels.  In 2014, after pressure from Fossil Free Stanford, the trustees announced a decision that Stanford would not make direct investments in coal mining companies, in recognition of "the availability of alternate energy sources with lower greenhouse gas emissions than coal."

Utah oil sands mine slowed

A Canadian company developing an oil sands mining and extraction project in Utah has announced a decision to "reduce the pace of field construction in order to maintain working capital flexibility," based on low oil prices.

Oil sands, also known as bituminous sands or "tar sands", are loose sand or partially consolidated sandstone saturated with a viscous form of petroleum called bitumen.  US Oil Sands Inc. is a Calgary-based company that describes itself as "focused on oil sands exploration and production in Utah."  Its wholly owned United States subsidiary US Oil Sands (Utah) Inc. has bitumen leases covering 32,005 acres of land in Utah’s Uinta Basin.

US Oil Sands' PR Spring Project area consists of 5,930 contiguous acres near the East Tavaputs Plateau in Utah.  According to the company, construction of Phase 1 of the PR Spring Project is approximately 85% complete with costs coming in below budget.  If completed, it would be the first U.S. oil sands mine to enter commercial production.

While the company has not yet entered production, US Oil Sands has described a proprietary extraction process using a citrus-based bio-solvent to extract bitumen from oil sands without the need for tailings ponds.  The company pitched this technique as different from traditional Canadian oil sands production in Alberta, where wastewater management is a controversial environmental challenge.  But the Utah proposal has drawn concern over impacts to groundwater flowing under the Book Cliffs

But the company said it conducted a detailed review of the project "in light of continued low oil prices and the closure of two key contractors’ Utah-based operations."  Specifically, the press release stated, "The low price environment has impacted the Project as two of the Company’s key contractors have closed their operations in Utah and have caused delays to the Project."  Indeed, spot prices for West Texas Intermediate have ranged near $30 per barrel in recent days, with U.S. crude futures falling below $30 earlier this year for the first time since 2003.  The press release also mentions that $10 million in previously-announced royalty financing had not closed, causing the company to explore other options including equity financing.

According to the press release, project work on the PR Spring Phase 1 project will continue at a reduced level, with an expected focus on "critical path items and areas that will lead to the most efficient restart of full construction operations in the future. In spite of delays and increased costs that will occur with restart of full construction operations, the Company is still targeting completion within the original US$60 million approved budget."

How will US Oil Sands survive the low oil price environment?  How will economic, environmental, or other factors affect the fate of Utah oil sands mining?

East coast exports of Western Canadian crude

As Western Canada produces more heavy crude oil, will it be exported from ports on Canada's relatively distant east coast?

Eastern Canadian exports of Western Canadian crude oil may increase, according to Canadian oil producer Suncor Energy Inc.  In its third quarter investor call, company Chief Executive Officer Steve Williams indicated that it could have long-term opportunities to export Cold Lake-grade crude oil by sending it by rail from Alberta to East Coast ports.  According to ExxonMobil, Cold Lake Blend is an asphaltic heavy crude blend of bitumen and condensate.

If long-term opportunities may exist, so too have recent opportunities.  In September 2014, Suncor confirmed that it had sent its first shipment of Western Canadian crude by rail to a storage facility in Sorel-Tracy, Quebec, from which it was loaded onto a tanker ship and sent to Europe.

Many aspects of the Canadian oil industry are regulated, such as the development of new crude oil pipelines from landlocked Alberta to distant refineries, storage facilities and ports.  Several pipelines have been proposed to increase takeaway capacity from the Western Canadian oil sands region, including the Energy East Pipeline in Canada and the Keystone XL Pipeline in the U.S.  But as securing regulatory approvals for pipelines takes time, shipping crude oil by rail has emerged as a quicker alternative.

In its most recent investor presentation, Suncor touted its near-term access to global markets, with over 600,000 barrels a day of sendout capacity.  Its current capacity includes over 80,000 barrels per day by rail, as well as over 70,000 barrels per day via pipeline to the U.S. Gulf Coast.  By 2015, Suncor plans for the 130,000 barrel per day "Line 9" pipeline to be reversed, allowing flows from Sarnia into Montreal.  Beyond then, Suncor is looking at additional pipeline projects including Keystone XL, Energy East, the Trans Mountain Expansion, and the Enbridge Northern Gateway pipeline to British Columbia.

As Suncor and other Western Canadian oil producers eagerly await new pipeline capacity, rail shipments may continue to serve as a temporary measure.  If pipelines can be developed to key market points, they typically offer a lower shipping cost per barrel than railroads can.  At that point, railroads may see a reduction in the volume of oil they ship  -- but until then, Western Canadian oil producers may continue to rely on rail to reach eastern ports.

Canada's Energy East Pipeline Project

A subsidiary of Canadian energy company TransCanada has proposed a crude oil pipeline running 4,600 kilometers from Alberta and Saskatchewan to Saint John, New Brunswick.  The proposed Energy East Pipeline Project would enable Western Canadian crude oil to be shipped east across six Canadian provinces, expanding economic opportunities for refining and export -- but like other major pipeline projects, the Energy East project faces regulatory hurdles.

On March 4, 2014, Energy East Pipeline Ltd., a wholly owned subsidiary of TransCanada Oil Pipelines (Canada) Ltd., proposed the project which entails the conversion of about 3,000 kilometers of existing natural gas pipeline to an oil transportation pipeline, new pipelines in Alberta, Saskatchewan, Manitoba, Ontario, Québec and New Brunswick, and marine facilities that enable access to other markets by ship.  If built, the $12 billion project could carry up to 1.1 million barrels of crude oil per day.

The major motivation behind the line is the relative surplus of Western Canadian crude oil, including fuel produced from the Alberta oil sands.  While Alberta and Saskatchewan produce substantial oil, relatively little capacity to ship that crude to refineries means relatively low prices for producers.  Meanwhile, refineries in Quebec and Atlantic Canada currently receive 86% of their crude oil from foreign sources.  TransCanada pitches the Energy East project as giving these Eastern Canadian refiners access to "reliable, low-cost Western Canadian crude."  The developer also points to positive economic development impacts, including about 10,000 jobs and an estimated $35 billion added to Canada’s gross domestic product over 40 years, as well as the relative safety of shipping oil by pipeline as opposed to by rail or truck.  Notably, the project also allows TransCanada to make better use of its existing natural gas pipeline system, which has excess unused capacity.

Like the Keystone XL pipeline in the U.S., the Energy East project faces opposition from both local siting concerns and global worries about the environmental impacts of "tar sands" crude production.  Some have also expressed concerns that the project would disrupt natural gas flows to Canadian consumers, although TransCanada has said that it has plans to build more lines to meet any increased demand.

Under Canadian law, interprovincial pipelines are federally regulated by Canada's National Energy Board (NEB).  According to its website, TransCanada expects final regulatory approval in the fourth quarter of 2015, with the project commissioned and placed in service in 2018.  How the regulatory process plays out will affect when -- and whether -- the Energy East pipeline project moves forward.

Keystone XL pipeline supplemental Environmental Impact Statement

The proposed Keystone XL pipeline took a step forward this month, as the U.S. State Department released its evaluation of the project's potential environmental impacts.  The draft Supplemental Environmental Impact Statement (EIS) released on March 1, 2013 documents the State Department's analysis of the pipeline's impacts to environmental resources based on the currently proposed route.  The EIS is still preliminary, and is now subject to public comment.  Moreover, even a final EIS would not reach any conclusion as to whether the pipeline serves the national public interest, and the project would still need a presidential permit to ship oil across the US-Canadian border.  Nevertheless the draft EIS does suggest that any environmental impacts from the pipeline would be relatively minor.

The Keystone XL project is a proposed extension of an existing crude oil pipeline.  The $7 billion project would run from the Canadian province of Alberta to Texas, delivering Canadian crude to refineries on the U.S. Gulf Coast.  The oil shipped on the pipeline would likely include so-called synthetic crude derived from Canada's oil sands or "tar sands" resources.

The draft EIS (available from the State Department's website) makes a series of findings about the project's potential environmental impacts, ranging from direct impacts along the pipeline's route to indirect impacts like further development of the Alberta oil sands.  As the State Department found in its earlier environmental review, the supplemental EIS found that the pipeline would not have significant impacts to any resources along the proposed project route.

Notably, the draft EIS found that Keystone XL would not be likely to substantially increase the rate of development of the oil sands, nor would it likely increase the volume of crude oil refined in the Gulf Coast.  For example, the draft found that denial of the pipeline's presidential permit would not mean a reduction in oil production in Western Canada or from the Bakken formation; rather, oil producers would resort to other transportation modes such as pipelines to British Columbia or even rail shipment of crude.  For similar reasons, the draft EIS found that the Keystone XL pipeline would not substantively change global greenhouse gas emissions.

Next steps for the Keystone XL project include a 45-day public comment period, after which the State Department will issue a final EIS.  Later this year, the State Department is expected to issue a so-called national interest determination, considering factors including foreign policy, economics, environmental concerns, and national security. This determination will involve consultation with other agencies, including the U.S. Departments of Defense, Justice, Interior, Commerce, Transportation, Energy, Homeland Security and the Environmental Protection Agency.  The final decision whether to allow the pipeline falls to President Obama.

Oil sands: an "unconventional" oil resource

New technologies enable the production of petroleum from unconventional oil resources such as "tar sands" and oil shale.  While traditional oil wells have been drilled for over 2,000 years, unconventional resources offer the opportunity to develop new petroleum sources - and by extension, to shift the balance of power and economics away from traditional sources.  At the same time, producing oil from oil sands may have environmental impacts that are different from traditional wells.  What are tar sands or oil sands?

Oil sands, also known as bituminous sands, are loose sand or partially consolidated sandstone saturated with a dense and viscous form of petroleum technically referred to as bitumen.  Oil sands are often called "tar sands" due to bitumen's sticky, dark nature.  ("Tar" technically refers to a product made by distilling pitch from the wood and roots of pine trees, and was historically used to describe the sticky black residue left behind when distilling coal gas.) 

Bitumen is so viscous that it cannot be pumped directly from the ground through traditional wells.  Oil sand deposits are typically mined using open pits or strip mining.  The mined material is mixed with water at an extraction plant, where the bitumen can be separated from the remaining minerals, sand, and water.  The bitumen can then be transported for upgrading or conversion into synthetic crude oil.

Alternatively, bitumen can be extracted by heating the raw sands in place.  In-situ production methods include injecting steam or solvents, or piping in oxygen and igniting some of the bitumen.  These methods rely on the use of large amounts of water and energy.

According to the U.S. government's 2012 oil shale and tar sands programmatic environmental impact statement, about two tons of tar sands can produce one barrel of oil.  Extraction and processing typically require several barrels of water for each barrel of oil produced.  Some of this water can be recycled.
About three-quarters of the bitumen can be extracted from the raw material.  Spent sand and other materials are typically returned to the mine after processing.

Producing oil from bitumen derived from tar sands can have significant environmental impacts.  The mining and upgrading processes are energy-intensive and result in emissions of greenhouse gases and air pollutants.  Mine sites are typically significantly disturbed, and impacts to water may be both local and throughout the downriver watershed.  The association between the proposed Keystone XL pipeline and oil sand resources in Alberta, Canada led to environmental opposition to that pipeline.

Producing oil from oil sands may be controversial, but Canada possesses the world's largest known resources and is developing them rapidly.  Canada points to environmental regulations and controls, as well as economic development benefits.  Developing oil sand resources creates jobs and economic growth, and mine sites are typically in rural areas eager for opportunity.  If the U.S. does not approve the Keystone XL pipeline, Canadian producers may push for an alternative route to refineries or export terminals in British Columbia, obviating the need for U.S. approval.

Economically, synthetic crude oil produced from oil sands bitumen can be cost-effective if the price of oil produced from traditional wells is high.  On the other hand, if oil from wells or other unconventional resources like oil shales can be produced cheaply, oil sands may not be economically competitive.  The significant capital investment required to produce bitumen from oil sands means that producers must often make long-term investments that risk losing money in some years.  Producers may also face the risk of tighter environmental standards, the cost of compliance, and any penalties for noncompliance.

Keystone XL pipeline explained

The proposed Keystone XL oil pipeline is drawing significant public attention.  What is the Keystone XL project, and why is it controversial?

What is Keystone XL?
The Keystone XL project is a proposed extension of an existing crude oil pipeline.  The $7 billion project would run from the Canadian province of Alberta to Texas, cutting across Saskatchewan, Montana, South Dakota, Nebraska, Kansas, and Oklahoma along the way.  TransCanada Corporation proposes Keystone XL to expand its existing Keystone pipeline network, a former natural gas pipeline repurposed to ship crude oil south to meet U.S. demand.

What is the controversy?
The U.S. is a major consumer of oil and petroleum-derived products.  

All major linear infrastructure projects tend to draw interest.  Significant projects, whether a pipeline for natural gas or oil, electric transmission line, or highway, often affect interests across a wide geographic range.  Relatively local siting concerns, like finding the best route for a given project and minimizing its direct environmental impacts, are common when planning any major infrastructure development.

In Keystone XL's case, project opponents point to additional concerns about the project's broader environmental impacts.  Some decry the proposal as increasing dependence on foreign oil, and believe the U.S. already has sufficient Canadian oil import capacity.  Others note that the oil to be shipped south over Keystone XL will be largely derived from Alberta's "tar sands" or "oil sands", and that extraction and production of crude oil from these sources involves greater greenhouse gas emissions or other environmental impacts.

What is happening now?
Concerns over the Keystone XL project are manifesting in multiple forms.  Protests have led to more than 1,000 arrests, including high-profile protestors like actress Darryl Hannah and NASA scientist James Hansen.  States affected by the pipeline proposal are moving cautiously; next week the Nebraska Legislature will meet at the request of Governor Dave Heineman to address concerns over Keystone XL.

To develop the project, TransCanada must secure a presidential permit to import oil across the national border.  While that permitting process initially appeared to be on track, 14 members of Congress have asked for a delay to allow an investigation into how the State Department performed its environmental review of the project.

The fate of the Keystone XL project depends on a number of factors, including whether it can secure a  presidential permit as well as how states react.  Part of the project's financing hinges on contracts to deliver crude oil as soon as 2014, and TransCanada is reportedly concerned that delay would jeopardize that financing structure.

June 28, 2010 - federal grant money for ethanol R&D; Syncrude found guilty in oil sands duck kill

Here's a "do you know..." for you: do you know anyone doing biomass R&D, especially working with cellulosic ethanol? There's a round of federal grants for research and development of handling processes and feedstock logistics. Grants are expected to average $5.5 million each.

DOE, USDA issue funding opportunity for biomass R&D

Up to $33 million is available for biomass research and development projects through a joint funding opportunity from DOE and the U.S. Department of Agriculture (USDA). The funding opportunity aims to develop new technologies in biofuels, bioenergy and high-value bio-based products.

Pre-applications are due July 13. 
DOE is interested in developing systems to handle large amounts of biomass feedstocks, such as wood chips and wood wastes.

One goal of this funding opportunity is to develop logistics systems that can handle and deliver large amounts of feedstock year-round for cellulosic biofuels production.  DOE’s Biomass Program is focusing its R&D efforts on ensuring that cellulosic ethanol is cost competitive by 2012. For more information on the agencies’ biomass goals, see DOE’s multi-year program plan and the USDA’s Bio-preferred Program, which aims to create a market pull for new products and technologies.

In the news: a Canadian judge has found oil sands developer Syncrude Inc. guilty of quasi-criminal charges related to the death of 1,600 ducks that became mired in oily settling ponds.  Allegedly, Syncrude knew or should have known that a large flight of ducks was inbound (one source says Syncrude had 48 hours notice based on radar) at a time when most natural ponds were frozen.  Syncrude was found guilty of depositing materials hazardous to ducks without deploying its "duck protection systems" in time to prevent these ducks from landing on the settling ponds.  The federal charges could be as high as $300,000 per bird.

Tide power: Irving has walked away from its exclusive rights to evaluate tidal power at 11 Crown-owned sites in the Bay of Fundy.  With Irving's relinquishment, the government will likely issue another RFP for the sites.