Wouldn't it be great if there was a way for President Obama to create jobs, reduce American dependency on energy from unsavory foreign regimes, and strengthen one of America's closest alliances with one single act? Unfortunately, he's already decided to postpone approving the Keystone XL pipeline for purely political reasons. While American workers and energy consumers will have to wait at least another year before realizing any benefits that would come from green lighting the pipeline, the folks at the other end are already starting to explore other options.
Delay Hits Canada Oil Goals (WSJ-sub req):
Keystone XL was intended to bring oil to Gulf Coast refiners, bypassing a growing refining bottleneck in the U.S. Midwest. While essentially all the oil shipped via the pipeline would be consumed in the U.S., Canadian crude reaching the Gulf would displace crude shipped in from elsewhere, which in turn would affect global pricing. The delay could further depress already-discounted prices for Canadian crude, threatening to slow new investment in oil-sands projects.
"By 2015, without new pipeline solutions to bring oil sands barrels to markets outside the Midwest (such as the US Gulf Coast), oil-sands production growth could stall for lack of new demand," Jackie Forrest, and IHS CERA analyst, wrote Friday. Even if Keystone XL is approved early in 2013, the very soonest it could be operational would be late 2014.
Pius Rolheiser, a spokesman for Imperial Oil Ltd., majority-owned by Exxon Mobil Corp., said the company had been relying on Keystone XL to transport supply from its Kearl oil-sands project, expected to come online next year, to the Gulf Coast. He called the line part of Canada's "critical infrastructure."
Industry executives and analysts say the delay could accelerate current plans for new pipelines, eventually easing any bottleneck. Shippers may also turn increasingly to more expensive rail exports.
The Harper government has lobbied hard for prompt approval, and has recently signaled it would look for other markets—notably China—for its crude. Another Canadian pipeline company is pushing for regulatory approval for a separate line, from Alberta westward to British Colombia and the Pacific coast, where oil could be loaded onto ships.
Postponing the creation of much needed construction jobs, possibly retarding further development of one of the most secure and reliable sources to meet America's energy needs, and pushing our friendly neighbors to the north into the arms of China? Well played Mr. President, well played.