What You Don’t Know About the Keystone Pipeline

The debate over the Keystone XL pipeline has largely centered on jobs that would be created, oil security that would be provided and suggested environmental concerns. Here are some other facts about the project (rejected earlier this year by the Obama administration):

  • Before this debate, few knew the State Department was in charge of the siting process for oil pipelines that cross international borders. That emanates from a 2004 executive order.
  • The Canadian oil sands, from which the pipeline would originate, are a mixture of sands, clay, water and bitumen, which is heavy, thick oil that must be heated or diluted before being pumped into a pipeline. Canada has 174 billion barrels in reserves, second only to Saudi Arabia, and 97% of those reserves are oil sands.
  • Canada is the largest supplier of imported oil to U.S. markets. According to a study commissioned by the U.S. Department of Energy, the Keystone project could reduce imports from the Middle East and Venezuela by 40%.
  • The 1,700-mile project will bring 830,000 barrels per day of Canadian oil to Gulf Coast refineries and help alleviate the current bottleneck of oil supplies at Cushing, Oklahoma.
  • Project owner TransCanada has resubmitted its application for the segment crossing the international border and recently announced it plans to construct a 435-mile leg from Oklahoma to the Gulf Coast, which requires no federal permit.

As expressed earlier here and in many other quarters, what was the administration thinking? Let’s get the ball rolling on this critical project. The benefits are too numerous.

Canada Moving Forward After Pipeline Rejection

The January decision by the Obama administration to reject the Keystone XL pipeline drew plenty of criticism in the United States. Canadian officials, while accepting the explanation offered, are concerned, and they are not sitting back and waiting for a potential change of course from their southern neighbors.

Roy Norton, Consul General of Canada, spent last week at meetings and events in Indiana. Norton is responsible for Canadian interests in trade, investment, the environment and more in Indiana, Michigan, Ohio and Kentucky. Norton provided his analysis of the Washington rejection of the pipeline that would transport oil resources from the tar sands of Alberta province to the U.S. gulf coast.

Norton says Canadians are “disposed to take at face value the assurances that President Obama offered Prime Minister (Stephen) Harper that this was a process-related issue, not a substantive decision.” In other words, Obama cited additional environmental review due to Nebraska seeking a rerouting of the pipeline and a deadline set by Congress as the reasons for the rejection at this time.

Although TransCanada, the energy infrastructure company behind the pipeline, has indicated it will reapply for a U.S permit, Norton described the significance of the relationship between the two countries and the next steps for Canada that are already in progress.

“There is concern. Ever since NAFTA (the North American Free Trade Agreement), our resources have been predicated on the notion that we would develop them to export them to you (the U.S.), and 99% of Canadian oil exports have come to the United States. The entire industry has been organized on a principle that suddenly may seem in question: Does the United States continue to want that oil? And if you don’t, we’re not going to just stop developing it.

“The prime minister made clear, in a little jocular way, that we’re not a northern national park for the United States.” Norton continues. “We’re a G7 country with an industrial economy. We happen to sit on the third largest reserve of oil after Saudi Arabia and Venezuela. Ours, other than the U.S., is the only one (oil supply) not government controlled; it’s total private sector investment.”

Harper traveled to Asia earlier this month and entered into an agreement on energy cooperation with the Chinese.

“Our objective, very much,” Norton adds, “is to build a pipeline to (our) West Coast and to be able to sell oil to China, Japan, whoever. Two or three years ago, the prime minister said Canada is an emerging energy superpower. Somebody challenged that and said you can’t be a superpower if you have only one market. So, in business terms, it’s probably true that it’s prudent for us to have more than one market. So we will seek to diversify.”

Norton closes with some of the numbers related to Canadian oil production and potential benefits for the U.S. and Indiana from the proposed pipeline:

  • Sixty cents of every dollar invested in the Alberta oil sands come back to the United States in consumption. “You benefit more from Canadian resource development than you benefit as a country from resource development (anywhere else).”
  • Currently, $160 billion in private sector investment is underway to take production of the oil sands from two billion barrels a day to three and a half billion barrels a day.
  • That increase, with the pipeline, could create “in the order of 343,000 jobs in the United States, 7,500 of those in Indiana” – citing Caterpillar and dozens of other Indiana operations that currently or would supply the oil production and the pipeline.

The Chamber’s May-June BizVoice® magazine will have more from Norton on issues important to Indiana and his country.

Insiders Say Pipeline Not Dead Yet

We’ve told you more than a few times in recent months that the proposed Keystone XL pipeline is an important project for Indiana and our country. Check out this two-minute video. After all, the $7 billion project will bring 700,000 barrels of oil a day from Canada to the U.S.

When the Obama administration recently delayed a final ruling (citing the need to reroute in Nebraska, but realistically putting off a politically tricky decision until after the 2012 election), many considered it a death knell for the proposal. But a group of energy and environmental insiders put together by the National Journal team in Washington differs with that assumption. Check out the latest.

“As long as there is substantial money to be made from developing the tar sands, they will be developed,” one Insider said.

Insiders predict (64% to 36%) that the economic and political reasons for the pipeline will eventually win out, arguing that the oil industry may hold out hope for a future Republican administration and GOP majorities in both chambers of Congress—under which the project would likely win swift approval.

Canadian pipeline developer TransCanada said that it will move the route out of Nebraska’s environmentally sensitive Sandhills area. The State Department last week proposed the rerouting to protect a massive aquifer there. Company officials, who had claimed that such a reroute wasn’t possible, said that the move will likely require adding 30 to 40 more miles of pipe to its 1,700-mile proposal.

President Obama was accused last week for making a political play with the pipeline, because the reroute would delay the decision past the 2012 election. For that same reason, though, most Energy Insiders believe the project will ultimately be approved. “Eventually, politics will be set aside,” said one.

In terms of politics, Insiders were split on whether the reroute decision and the consequent delay would benefit Obama. Just over half – 51 percent – said that the delay would help the president; 49 percent said it would not.

The delay until after the 2012 election “is a significant indicator of just how bad the Obama insiders think their election prospects are right now,“ one Insider said. In appeasing environmentalists but sacrificing some independent votes, the administration wanted to ensure it held onto its political base and contributions, Insiders said.