No matter what you think about maximizing American petroleum resources, the Keystone Pipeline System it isn’t about that. It would be expected to run from Canada down to the Gulf Coast where waiting tankers could ship that oil (yes, after U.S. refineries down there would make a few bucks), virtually all expensively-extracted shale-based petroleum, into the international marketplace. Lots of Keystone segments are already built; the XL portion is illustrated as Phase 4 in the above Wikipedia map (the green line) and what the current controversy is all about.
“The Keystone XL Pipeline Project (Phase IV) revised proposal in 2012 consists of a new 36-inch (910 mm) pipeline from Hardisty, Alberta, through Montana and South Dakota to Steele City, Nebraska, to ‘transport of up to 830,000 barrels per day (132,000 m3/d) of crude oil from the Western Canadian Sedimentary Basin in Alberta, Canada, and from the Williston Basin (Bakken) region in Montana and North Dakota, primarily to refineries in the Gulf Coast area.’ After the Keystone XL pipeline segments are completed, American crude oil would enter the XL pipelines at Baker, Montana, on their way to the storage and distribution facilities at Cushing, Oklahoma. Cushing is a major crude oil marketing/refining and pipeline hub.” Wikipedia.
While there are profits to be made building, maintaining and leasing that pipeline to Canadian oil producers, there is a very large segment of the voting public who don’t believe that’s what’s going on. Strange? Sure we could use that pipeline to transport American oil along the way, but currently, the United States is not exporting its indigenously-produced oil. So under current plans, U.S. oil would just be moved down the pipeline as indicated above.
There are a few harsh economic realities even if the pipeline were approved. First, squeezing the oil out of shale is hideously expensive. “According to a survey conducted by the RAND Corporation, the cost of producing a barrel of oil at a surface retorting complex in the United States (comprising a mine, retorting plant, upgrading plant, supporting utilities, and spent shale reclamation), would range between $70–95 ($440–600/m3, adjusted to 2005 values). This estimate considers varying levels of kerogen quality and extraction efficiency. In order for the operation to be profitable, the price of crude oil would need to remain above these levels.” Wikipedia. Oil is hovering around $50/barrel, and even out best experts don’t see oil going much above $80/barrel anytime in the immediate future.
Okay, we all know that oil is, sooner or later, going to soar (sore to many of us) like an eagle, so longer term, the economics make sense… eventually. Add expected environmental controls to the above costs (somewhere between $5-10/barrel), and until we have a steady price-per-barrel at or above inflation-corrected $100/barrel, building that pipeline makes no sense. And as much as Americans love Canada, why are we ripping ourselves apart over a pipeline that is not about American oil or bringing Canadian oil to the United States? We are now ourselves one of the top oil producing nations on earth, and we are not reliant on Canadian oil exports.
The battles over the pipeline in the United States were initially strictly between clearly defined partisan factions: Dems vs. the GOP. Environmentalists vs. GOP advocates railing against environmental regulations and believing that tons of new American jobs would result from the process and the expansion of U.S. refinery capacity. A few Dems crossed over the line, more as a provision was added to the bill stating that global climate change was not a “hoax” (but not stating man’s participation in the issue). The bill was passed by Congress but vetoed by the President on February 24th, and the 2/3 majority needed to override that veto just isn’t there.
The construction of XL is expected to cost between $7-10 billion, creating fairly immediate construction employment. The political process has been all about the approval. A couple of strategic leaks, a dash of sabotage in the wrong place, and groundwater and farmland get decimated for a very long time. But there are already so many pipes, even as part of the Keystone System, so what’s wrong with a little more. Another argument is that we should be encouraging alternative energy and not oil-burning power. The Administration wants more environmental review. So what’s Canada’s back-up plan?
“[T]he politics get sticky. In Nebraska, farmers don’t want the pipeline running through their fields or over their water source. U.S. environmentalists invoke global warming in protesting the project. President Barack Obama keeps siding with them, delaying and delaying approval. From the Canadian perspective, Keystone has become a tractor mired in an interminably muddy field.
“In this period of national gloom comes an idea -- a crazy-sounding notion, or maybe, actually, an epiphany. How about an all-Canadian route to liberate that oil sands crude from Alberta’s isolation and America’s fickleness? Canada’s own environmental and aboriginal politics are holding up a shorter and cheaper pipeline to the Pacific that would supply a shipping portal to oil-thirsty Asia… Instead, go east, all the way to the Atlantic.
“Thus was born Energy East, an improbable pipeline that its backers say has a high probability of being built. It will cost C$12 billion ($10.7 billion) and could be up and running by 2018. Its 4,600-kilometer (2,858-mile) path, taking advantage of a vast length of existing and underused natural gas pipeline, would wend through six provinces and four time zones. It would be Keystone on steroids, more than twice as long and carrying a third more crude…
“Its end point, a refinery in Saint John, New Brunswick, operated by a reclusive Canadian billionaire family, would give Canada’s oil-sands crude supertanker access to the same Louisiana and Texas refineries Keystone was meant to supply.” Bloomberg.com, October 8th. In the end, this appears to be little more than a partisan battle that isn’t going to be resolved in the next few years. Why does this issue matter to you… if it is?
I’m Peter Dekom, and the power politics seem to be looking for fights (this was the first bill proposed by the new GOP-dominated Congress) rather than for common ground, a big bad reality for the American public.
Posts
No comments:
Post a Comment