It looks like the Keystone XL will most – likely be going ahead despite the fact that the topic remains highly contentious.
Canadian Prime Minister Stephen Harper recently declared that the pipeline, which will lead to the U.S. Gulf Coast, is quite essential, stating that oil will be transferred across the U.S. one way or another. The Keystone XL pipeline, if you recall, still needs President Obama to sign off on it (or deny it).
Clearly, Harper intended his remarks to exert some added pressure and possibly speed things up. ABC News reports that Harper’s recent talk in New York City were attended by numerous protest groups, who remain set against the environmental fallout should the Keystone be built.
The Keystone XL pipeline would transport some 800,000 barrels of oil per day from the tar sands of Alberta in Canada to the Gulf Coast along Texas, crossing six states. The initial proposal was famously turned down, and the present proposal remains in limbo as far as a presidential decision is concerned.
Nonetheless, it is widely expected that President Obama will issue a verdict on the topic sometime this summer.
Fighting for the Pipeline
While Republicans and pro-oil groups have, somewhat predictably, been urging the President to give the go-ahead, there has been powerful criticism based on environmental concerns.
For one, tar sands oil extraction is notably “dirtier” than more conventional processes – it’s quite a lot worse than shale fracking, even. And fracking is highly controversial in its own right.
For another, worries about the effects of an oil spill – rather a necessary problem considering the sheer length of the Keystone pipeline – remain unaddressed.
Meanwhile, Canada is itching to get the pipeline built. As it is, the President turned down the first proposal. Since then, Canada’s oil production has grown by leaps and bounds – Alberta presently boasts the world’s third-largest oil reserves – and the nation is fairly desperate to get oil exported. Alberta can claim as much as 170 billion barrels of proven reserves.
Should the Keystone project be denied again, it’s clear that the U.S.-Canada relationship will sour, at least in the short term. So there are heavy political consequences to the President’s moves.
One big reason why Canada is suddenly so eager to see the pipeline built is the surge of oil production throughout the American Midwest. Paired up with the existing lack of extensive pipeline networks, it means Canadian crude prices have fallen sharply. That, obviously, is costing Canadian producers dearly. The Alberta government has already lost many billions in potential revenue.
Bloomberg reports on some of the ominous-sounding comments made by the Canadian delegation:
“For the administration to say no to Keystone would seriously undermine the goodwill between the two governments,” said John Manley, a former Canadian finance minister who is now head of the Ottawa-based Canadian Council of Chief Executives. “This is one of the most important issues that’s out there — not just Keystone, but the whole question of how we get a fair world price for our product.”
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Canada Needs Pipelines
It appears that the Keystone not being built is, in fact, seriously denting Canada’s earnings. Alison Redford, Alberta’s Premier, recently suggested that the gap between U.S. crude prices and the Western Canada Select is a key factor in Alberta’s revenues this year being lower by as much as $5.9 billion.
And the Bank of Canada has stated that the Canadian oil surplus resulted in shaving off 0.4 percentage points from Canada’s annualized growth rate over the second half of 2012.
Meanwhile, Bloomberg’s own analyses suggest that Canadian energy stocks have consistently fared about 13 percent below those in the U.S., largely as a result of that price difference. On the global stage, Brazil, Russia, and India have steadily overtaken Canada for economic growth; Canada is now the world’s 11th largest, despite possessing the world’s 3rd largest oil reserves.
On the other hand, should the Keystone be built, Canada will gain in excess of $600 billion over the next 25 years, according to a report by the Canadian Energy Research Institute.
The environmental concerns remain. Extracting crude oil from tar sands requires far more energy input than conventional oil production or fracking. As a result, environmentally-concerned protesters claim that the Keystone project will represent a net step back as far as green power is concerned.
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