Is Keystone Superfluous? Not So Fast.

The first visible chink in the oil and gas sector’s stance on the Keystone XL pipeline project’s inevitability turned up this week in that house journal of capitalism, the Wall Street Journal.

In his provocatively titled article, “U.S. Refiners Don’t Care if Keystone Gets Built,” Ben Lefebvre lists the host of ways that the sector has worked around the lack of access that the unbuilt but planned-for new pipeline from the Alberta oil sands to the Gulf Coast entails. At Breaking Energy, we’ve covered extensively the remarkable resurgence of oil moves by rail in the US as well as tinkering with existing pipeline capacity to allow for increased crude flows to affected refineries.

With the focus of protestors and other pipeline opponents usually focused on the push factor of the resource in Canada and its environmental footprint, it is easy to forget the pull factor of the jobs-creating, investment-making refineries that made significant and expensive adjustments in preparation for Keystone’s clearance. While to some degree that is because a perceived attack on American jobs is a losing proposition, it is also partially because the oil sector’s public affairs response to the opaque and insufficiently explained delays to the pipeline’s permitting at the federal level has been to simply ignore the idea that Keystone might not get built.

The oil and gas business is ingenious at workarounds. Sustained technological innovation and operational adaptability that is praiseworthy in any business is doubly so in an industry under the kind of sustained regulatory scrutiny that would hamstring other sectors, like tech, that are often singled out for their innovation and job-creating drive.

But the same capacity to put in effective workarounds that now may make the Keystone pipeline arguably superfluous is a risk for the industry. The most striking quote in Lefebvre’s piece is telling: “If we just sat around and waited for Washington, we’d never get anything done,” Valero spokesman Bill Day told him.

Fair enough, but the temptation to think that the oil and gas business can go it alone is a dangerous one. It is a presumption that leaves the field of debate to others, and ignores the sector’s long-term interests. At some point, you’ve wrung all you can out of existing infrastructure and ways of doing business, and the new realities that the Keystone project’s fate has thrown into relief must be contended with by companies.

Keystone XL’s builders and backers thought they could play by a rulebook that proved outdated. They filed every piece of paperwork, they did every study, they built inside-DC backing and thought that the merits of the project would guarantee approval. Even now, the federal government cannot find a credible reason to simply deny the project, so it gets delayed in the seeming hope that eventually it will just go away.

The energy sector itself, rather than engaging its critics in meaningful ways, presumed the best way to proceed was a mix of outraged disbelief and unrelatable data releases. They let their opponents set the tone and form of the debate, convinced of their own rightness. Whether they were right turned out to be the wrong question.

Ignoring political realities is not a workable solution for an industry that will need new pipelines, new gas wells, new oil wells, new transport routes as well as money to reinvest in its existing aging infrastructure. Playing by the old rules of influence and paperwork is no longer enough, and the sooner the industry starts to engage with the stakeholder society they now have to convince in new and untested ways, the more likely everyone is not to have to suffer through another Keystone drama.

Transparency, community building, pre-emptive engagement are all parts of the emerging stakeholder multi-polar world with which energy projects and the companies that build them must contend. Energy is too important for the workarounds that have made Keystone less pressing to end up serving as a Pyrrhic victory for a sector all too often viewed as detached and opaque.

Peter Gardett is the founding editor of Breaking Energy. All opinions here are his own.