Posted on 01/12/2015 4:07:01 AM PST by thackney
It was 2008 when TransCanada initially filed an application with the U.S. government to construct the multibillion-dollar Keystone XL pipeline to carry up to 830,000 barrels of oil per day from Canada to Gulf Coast refineries. Illinois Senator Barack Obama had just secured the presidential nomination for the Democratic Party. Hurricane Ike made landfall, Usain Bolt set world records at the summer Olympics, and the Lehman Brothers filed for Chapter 11 bankruptcy protection.
More than six years and many significant historical events later, TransCanada still does not have approval to build an environmentally safe pipeline that would create jobs and increase oil supply. During that time, opponents of the pipeline have espoused myths and half-truths to encourage President Obama to delay and obstruct the project’s approval. Despite the White House’s veto threat, it is time for Congress to pass legislation to approve the permit for Keystone XL. If President Obama chooses to veto any Keystone XL bill, he will be vetoing job creation, energy production, and common sense.
Keystone XL: Jobs and Economic Value
Opponents will minimize the job numbers, saying that the pipeline will create only “a handful” of permanent jobs. While the permanent job tally will be small, that half-truth dismisses the tens of thousands of construction jobs that the pipeline project would create. In fact, the southern portion, which did not require President Obama’s approval and has been built, has already created nearly 5,000 construction jobs.[1] Furthermore, the fact that Keystone XL will only employ 35 to 50 permanent workers indicates how remarkably efficient the pipeline is. The high output of labor generates value and wealth and frees up Americans to be more productive elsewhere in the economy, in the same way that one man on a backhoe loader increases efficiency and frees up a group of men with shovels to do other work.
The construction of the southern leg created a boon for the Oklahoma and Texas economies, injecting $2.1 billion and $3.6 billion, respectively.[2] The states through which the northern leg runs will reap similar economic benefits. Building Keystone XL can be accomplished without the crutch of taxpayer dollars and will result in billions of dollars of tax revenue for the states through which it runs.
Environmentally Responsible, No impact on Climate Change When it comes to accidents, injuries, and fatalities, pipelines are the safest mode of transporting oil and gas.[3] After four exhaustive environmental reviews, the Department of State determined that Keystone XL poses minimal environmental risk to soil, wetlands, water resources, vegetation, fish, and wildlife.[4] One of the most particular concerns of environmentalists has been the point where the pipeline crosses the Ogallala Aquifer in Nebraska, despite the fact that thousands of miles of pipeline already cross the aquifer. Both the State Department and external geologists conclude that the aquifer is at extremely minimal risk of contamination because of the slope of the aquifer and the geologic makeup of the soil.[5]
Keystone opponents have also seemingly persuaded President Obama that climate concerns are a valid reason to reject the pipeline’s permit. At a speech at Georgetown University in June 2013, President Obama remarked, “The net effects of the pipeline’s impact on our climate will be absolutely critical to determining whether this project is allowed to go forward.”[6] The climate effects of Keystone XL, however, would be minimal: The State Department’s final environmental impact statement concludes that the Canadian oil is coming out of the ground whether Keystone XL is built or not, so the difference in greenhouse gas emissions is miniscule.[7]
Low Oil Prices No Reason to Delay
A recent argument against Keystone is that in the recent era of cheap oil, Keystone XL is not a worthwhile financial investment. If a restaurant owner wanted to take the chance of building a new eatery on the same block where cheap food was readily available, should the federal government step in and tell the owner the economics do not look good? The government’s current role is to make a national interest determination, but even that is too expansive. The only role the federal government should have in the process is to determine if the pipeline poses any national security threat. The fact of the matter is that the pipeline has been evaluated as environmentally safe, and provides a valuable resource from a friendly, secure, and reliable trading partner and ally. It should be a private-sector decision whether TransCanada builds it.
Furthermore, Keystone XL remains viable even with (temporarily) cheap oil. America still needs pipeline infrastructure to keep up with the rapidly expanding supply. Moreover, industry makes investment decisions looking decades into the future, not simply based on short-term projections. While it is certainly possible that low oil prices could postpone Canadian tar sands production and prohibit Keystone XL from reaching its peak volume in the near future, oil prices could rise as quickly as they fell. Businesses are much better equipped and flexible to deal with changing economic circumstances than short-sighted politicians in Washington.
Keystone XL and Free Trade
With a vote on Keystone XL likely coming in the near future, several Senators have floated amendment ideas to prohibit the exportation of refined petroleum products coming from crude oil that moves through Keystone XL. Another amendment that some Senators have proposed is to force TransCanada to use only American-made steel, iron, and other manufactured goods when constructing Keystone XL.[8]
Preventing the flow of resources into and out of the United States only serves to protect the connected few at the expense of the many who stand to benefit from freely traded materials and refined petroleum products. When markets are open, competition provides people with more choices and better products at lower prices. Protectionism is also detrimental to the long-term growth of the protected company because the government shields protected industries from lowering costs in order to remain competitive with other market participants. The end result is stagnant industries with little incentive to innovate and higher prices for consumers and businesses.
If opportunities exist for companies to export their goods to a foreign buyer, they should be permitted to do so. Politicians did not seem to mind when exports of finished petroleum products increased from 513,000 barrels per day (bpd) in 1985 to 1.6 million bpd in 2008 to 2.7 million bpd in 2013.[9] Products refined in Gulf Coast refineries with crude flowing from Keystone XL should be no different.
Stop Politicizing, Start Building
The White House has already threatened to veto any Keystone XL legislation that reaches President Obama’s desk, but the new Congress should send a strong signal to the Administration that it is serious about job creation, economic growth, and moving forward sensible policy. Congress should do what the Obama Administration has, unbelievably, failed to do and approve Keystone XL. —Nicolas D. Loris is Herbert and Joyce Morgan Fellow in the Thomas A. Roe Institute for Economic Policy Studies, of the Institute for Economic Freedom and Opportunity, at The Heritage Foundation.
[2] Institute for Energy Research, “States Already Benefiting from Southern Leg of Keystone,” July 8, 2014, http://instituteforenergyresearch.org/analysis/states-benefitting-southern-leg-keystone-bakken-gets-pipelines/ (accessed January 6, 2015).
[3] Diana Furchtgott-Roth, “Pipelines Are Safest for Transportation of Oil and Gas,” Manhattan Institute, June 23, 2013, http://www.manhattan-institute.org/html/ib_23.htm#.VKwRbHsYHaJ (accessed January 6, 2015).
[4] U.S. Department of State, Bureau of Oceans and International Environmental and Scientific Affairs, “Final Supplemental Environmental Impact Statement for the Keystone XL Project, Executive Summary,” January 2014, http://keystonepipeline-xl.state.gov/documents/organization/221135.pdf (accessed January 6, 2015).
[5] Shelby Fleg and Kyle Cummings, “UNL Expert: Ogallala Aquifer Has Little Risk of Keystone Pipeline Oil Spills,” The Daily Nebraskan, April 15, 2013, http://www.dailynebraskan.com/endowment/article_2b26fc40-a547-11e2-9605-001a4bcf6878.html (accessed January 6, 2015).
[6] The White House, Office of the Press Secretary, Remarks by the President on Climate Change, June 25, 2013, http://www.whitehouse.gov/the-press-office/2013/06/25/remarks-president-climate-change (accessed January 6, 2015).
[7] Department of State, Bureau of Oceans and International Environmental and Scientific Affairs, “Final Supplemental Environmental Impact Statement for the Keystone XL Project, Executive Summary.”
[8] Darren Goode, “Dems Push Keystone Bill Amendments in Early Senate Test,” Politico, January 4, 2015, http://www.politico.com/story/2015/01/keystone-pipeline-senate-democrats-113964.html#ixzz3O4KMQDi7 (accessed January 6, 2015).
[9] U.S. Energy Information Administration, “Petroleum & Other Liquids: U.S. Exports of Finished Petroleum Products,” December 30, 2014, http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MTPEXUS2&f=A (accessed January 6, 2015).
Halving The Price Of Oil Makes Keystone XL More Important, Not Less
http://www.forbes.com/sites/timworstall/2015/01/11/halving-the-price-of-oil-makes-keystone-xl-more-important-not-less/
1/11/2015
...The basic economic concept here is that the transport costs of that oil drive a wedge between the production at the wellhead (OK, tar pit, not wellhead) price and the market price. As the global price of oil falls that wedge becomes a larger portion of that total price.....
Let’s just invent some numbers here in order to illustrate the problem. Oil is at $100 a barrel when delivered to the refinery. It costs $40 to produce it in Alberta, $30 to ship it by rail and $5 if the pipeline were built. Yes, they are entirely made up numbers (although not a million miles from reality) just in order to illustrate the decision making process.
So, at that market price of $100 the oil will be produced with or without the pipeline. There’s a $30 profit in each barrel even after paying for rail transport. Now we halve the price to $50 at the refinery. All other costs stay the same. Well, if it costs $40 to produce and $30 to ship then obviously, after a winding down period, none will be produced and none will be shipped (we’ll ignore sunk costs and so on here)....
Now think of what happens if Keystone XL is built. The mining of the tar sands goes on because it’s now $45 in total to do so and deliver but $50 can be earned by doing it....
excerpted
As he owns the trains currently carrying this oil, Warren Buffett still doesn't think it's a good idea, and he's a major Obama campaign contributor, so Obama's veto will prevent it from ever happening.
I love to argue the Keystone issue with my liberal friends. (Both of them).
Inevitably their argument will come down to the “environment”, as it must. The issue then becomes one of how Canadian crude will come to our refineries, by rail, or by pipeline. If the environment were the issue, then all Canadian crude must be stopped from coming across the border. I ask them to name the Democrat sponsored legislation that would achieve this end. They of course cannot name one.
So the status quo is far worse for the environment than by agreeing to build the pipeline. Liberal hypocrisy exposed.
This can't be right, maybe per year?
Better yet, ask them to discuss the environmental protection that takes place in Venezuela, the imports that the Canadian Crude will replace.
That number is correct.
The Keystone XL Pipeline Project is a proposed 1,179-mile (1,897 km), 36-inch-diameter crude oil pipeline, beginning in Hardisty, Alta., and extending south to Steele City, Neb.
The pipeline will have capacity to transport up to 830,000 barrels of oil per day to Gulf Coast and Midwest refineries.
http://keystone-xl.com/about/the-keystone-xl-oil-pipeline-project/
It is a large pipeline, but not abnormally large. The Alaskan Pipeline moved 2.1 million barrels a day in 1988, but the North Slope oil production is way down today.
Here is the math to show you why that is a reasonable amount through a 36 inch pipe.
36 inch pipe size
1 inch wall thickness
34 inside diameter
17 radius
908 sq inches
6.31 sq ft = cross section of pipe
830,000 barrels per day
34,860,000 gallons per day
4,660,104 cu. ft per day
739,112 feet moved per day, length of the amount moved through that cross section.
140 miles moved per day
5.8 miles moved per hour
Exactly. The Sage is "all in" on rail, and he would take quite a hit if he lost tanker revenues.
After being in the oil business 30 years, I want to bring up 3 points.
(1)Anyone who says they know what the price of oils will be in 6 months does not know what they are talking about.
(2) Oil will be higher than it is right now at some point due to supply/demand/geopolitcal, and the economics will dictate so.
(3)When (2) takes place, it will very advantageous that the U.S. be fully energy dependent, and even an exporter. When that does happen, it will permanently transform OPEC from a Cartel to just another Trade Group, thus ending 40+ years of being a financial hostage .
If the dims were smart they would realize that torpedoing "win-win" legislation is a political hot potato. I hope the GOP exploits that fact to the fullest in 2016.
In any case, build the damn thing.
To also put in into perspective, that 830.000 b/d is enough feedstock for 2-3 large refineries.
BTTT
Anyone with a real ability to accurately predict the price of oil six months out should be able to hire Bill Gates as their pool boy.
Glad you did the math. :) I tossed my work calculator.
One of my pastimes in retirement is watching the blonde on CNBC in the morning. For levity, there are also talking heads who swear they can predict this market. They don't mention the brand of dartboard that they use though.
I'm guessing they don't discuss their accuracy either over the past 3 years....
Due to investments already committed, oil-sands production is poised to rise 36 percent to at least 2.6 million barrels a day by 2017, Peters & Co., a Calgary-based investment bank, said in a November forecast. Projects now under construction will require 1 million barrels a day of new pipeline space, said Chris Cox, an analyst at Raymond James Ltd. in Calgary.
“What you should expect this year is that all incremental heavy oil barrels are effectively going to be transported by rail,” Cox said.
Still wonder why GOP opponents don't seize upon the fact that transporting via rail and/or truck increases vehicular emissions.
Without presidential/dim leadership arm twisting, I'd bet in real life the pipeline would pass legislation with 80-90% HR/Sen. vote.
Just more proof that Obola is in the Sage's pocket.
Different grades of crude oil with different destinations.
First I was thinking these million barrels a day were actually the production per year. Then 830,000 barrels a day would be way out of line. XL is still a significant fraction of US/Canada oil production.
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