Prospect of exports factors into debate on Keystone XL
GASCOYNE - With the ever-changing world energy market and the seemingly endless battle over the approval of the Keystone XL pipeline, questions about exactly what the finalized corridor would mean remain.
Rhetoric surrounding what is arguably North America's most-debated petroleum Hyperloop amped up earlier this summer following President Barack Obama's critique of the project in a New York Times piece, and participants on both sides of the debate have kept the pressure on ever since.
Vocal supporters of Keystone XL -- such as North Dakota Republican Sen. John Hoeven and Democratic Sen. Heidi Heitkamp -- have long trumpeted the benefit that the pipeline would have on domestic jobs numbers and the ability the project would have to move America toward energy independence, a significant body blow to the country's dependence on foreign oil.
Much of the public information available on Keystone XL's opposition focuses on environmental impacts and climate change repercussions, however, there appear to be no safeguards in place that would ensure that oil transported through the Keystone XL would ultimately stay in the U.S.
TransCanada spokesman Shawn Howard said recently that no current contract holders for Keystone XL-transported oil from Canada are planning to ship the commodity out to the broader world market via the Gulf Coast, but stopped short of making any guarantees. Howard noted that TransCanada is focused solely on the logistics of the petroleum.
"You need an export permit to export oil outside of the U.S.," Howard said. "None of our customers have requested that or said they are going to. It's interesting, this boogeyman that the environmental activists are putting out there. Nobody has said that they are exporting oil. The refineries (in Texas) are going to be using it to create products that we all need based on U.S. demand."
Howard added that the U.S. remains the world's biggest consumer of oil, despite the fact that major global players -- such as emerging superpower China -- have been making inroads in recent years.
"Today, the only real exports that take the place of refined product is diesel fuel," Howard said. "And that's because too much of it is produced in the U.S. and so it goes to places like Europe. Today, the biggest source of oil exports goes to Canadian refineries on the East Coast. If you follow the arguments of these activists right through, a Ford truck that is produced in Ohio shouldn't be exported to Canada or anywhere else."
A stance taken by opponents of the pipeline -- which was proposed in 2007 and still needs State Department approval for completion -- such as the website 350.org shows that some continue to wonder if oil will eventually be shipped out to global market purchasers from the Gulf Coast.
Daniel Kessler, a spokesman for 350.org, pointed to a June 20 webinar facilitated by Esa Ramasamy of energy insider Platts, in which Ramasamy predicted that a finished and running Keystone XL pipeline could lead to an abundance of heavy Canadian-produced oil, which could then lead to the shipment of Canadian crudes to other markets besides the U.S.
"U.S. refineries will not always use Canadian crudes," Ramasamy said in the presentation. "When the Canadian crudes rise in price, they will look at other alternatives and force the Canadian crudes to move out of the Gulf Coast. Since it cannot go back to Canada, it will have to go out."
Adding fuel to the fire of such concerns, China has been gobbling up oil interests in Canada, including the purchase of Canadian energy giant Nexen by the China National Offshore Oil Company for more than $15 billion in a move that was approved earlier this year, and has firmly entrenched itself as an energy hound on the world market.
"The way that oil works is that it goes on the international market," Kessler said. "The pipeline companies are building oil pipelines to the coasts in Canada (and the U.S.) because they want access to overseas markets. China is now a major player in fossil fuels, but it's also doing some innovative things with regard to renewable energy and is, in some ways, ahead of the U.S. The bottom line, though, is that climate change is here now.
"This is no longer just an abstract thing in the future. Projects like Keystone XL and what's happening in the Bakken are just going to make things worse. We need to get off of fossil fuels and America needs to lead the way."
With domestic supplies of oil and natural gas way up in the U.S. in the past few years, questions of where America's domestically-produced energy will end up are sure to linger.
"The Houston area and the U.S. Gulf Coast is the largest refining complex in the world," Howard argued. "There are tens of thousands of jobs that rely every day on having those refineries full and producing the products that we all need. There are also refineries on the East Coast that are going to be closing because of the cost of bringing them up to new standards and things like that, so that refining complex on the Gulf Coast becomes even more important."
Underscoring the importance of projects like the Keystone XL to North Dakota politicians -- and others around the country -- Heitkamp took a three-day trip to Canada in late August to tour Alberta's energy development, stating in a press release that "North Dakota, in particular, has a special relationship with Canada" and adding "Canada and states like North Dakota will help us become North American energy independent.
But seemingly new political catch phrases, such as "North American energy independent," have people like Kessler wondering why the U.S. is apparently partnering with its neighbor to the north in an effort to secure its own energy independence.
"Canada isn't the 51st state," Kessler said. "We don't understand how certain politicians say that Canada can help us become energy independent in the U.S. As far as the Keystone XL, we think we're close to victory -- we don't think it's going to be built."
This story also appears today in The Drill.