Canada, not the Middle East, is the No. 1 supplier of oil to the United States, a symbiotic relationship that has existed for decades. What’s more, the Canadian province of Alberta is home to the world’s third-largest petroleum reserves. Viewing America as the most logical market for its expanding production, the government of Alberta and the TransCanada Corp. are proposing a pipeline called Keystone XL to bring crude oil from Alberta to refineries along the Texas and Louisiana Gulf Coast.
Although the State Department concluded in August that there would be no significant negative environmental impacts from the pipeline, it has hosted a series of hearings in communities from Montana to Texas in recent weeks. A final hearing is scheduled for Washington on Oct. 7.
The economic benefits from constructing the pipeline have been well publicized: $20 billion in new investment, 13,000 new American jobs in construction and related manufacturing, and more than 100,000 spinoff jobs during the two-year construction period. But more important than the short-term stimulus, which certainly is needed in today’s moribund economy, the completed pipeline will help increase America’s energy and national security.
Today, most of the crude oil processed by Gulf Coast refineries comes from Mexico and Venezuela. Production in both countries has declined in recent years, and while U.S.-Mexico political relations are friendly, U.S.-Venezuela relations are anything but. By contrast, Canada is a strong and reliable American ally, as well as a key North American Free Trade Agreement partner.
The proposed Keystone XL pipeline certainly is not unique. TransCanada already operates a pipeline from Alberta to Cushing, Okla., and the XL would simply shorten the route while adding an extension from Oklahoma to the Gulf Coast. Lower transportation costs associated with the XL would save Gulf Coast refiners almost $500 million annually, which, in turn, could mean lower prices for consumers at the gas pump. What’s more, the planned route of the XL would link oil producers in the booming North Dakota Bakken region to the national pipeline network, providing efficiency gains of $36 million to $146 million annually, according to a recent study by the Energy Policy Research Foundation.
Despite the strong economic and energy security case for permitting the Keystone XL, opposition to the project has been growing. Last month, several hundred protesters were arrested in front of the White House, including a number of Hollywood celebrities. The Dalai Lama and Archbishop Desmond Tutu have expressed their opposition to Keystone XL (in full-page newspaper ads paid for by the Natural Resources Defense Council) as has New York Times food critic Mark Bittman. Both pro- and anti-pipeline advocates are back on the streets of Washington as the Oct. 7 hearing date approaches.
Although opponents argue the pipeline is inherently dangerous because of potential harm to farms, wildlife and water aquifers as it cuts across Montana, the Dakotas, Nebraska, Kansas, Oklahoma and Texas, in truth, the anti-XL campaign is aimed against expansion of the Alberta oil sands. Environmentalists claim production in the oil sands is contributing to greenhouse gas emissions, destroying the arboreal forests and killing migratory birds. On a recent visit, I saw no evidence of these claims. Indeed, relative to both the geographic and carbon footprints of most onshore and offshore oil production, the Alberta oil sands compare quite favorably.
If the Keystone XL project is blocked, the pace of oil sands development in Alberta won’t diminish. Recent investments by Chinese companies suggest a growing alternative market across the Pacific. But without the pipeline, America will be unable to benefit from cost-efficient Western Canadian oil while Gulf Coast refiners remain dependent upon unstable suppliers.
Bernard L. Weinstein is associate director of the Maguire Energy Institute and an adjunct professor of business economics at Southern Methodist University.
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