Archive for the ‘oil sands’ Category

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Canada to sell Alberta oil to Asia

January 20, 2012

In the wake of the Obama administration’s decision to kill the Keystone XL pipeline, Canadian officials have responded by announcing their determination to sell the products of the oil sands to Asia and, in particular, to China.  It was easy to see this one coming – the alternate (and more environmentally risky) route has already been mapped out.

In the past, I wrote that Obama would be able to campaign in 2012 on his foreign policy successes, but this one decision undercuts that entire theme.  His GOP opponent, whomever that turns out to be, can easily cast the Keystone XL decision as one that hurts the US and aids our greatest challenger (China) in one fell swoop.

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US incoherence on energy policy

January 18, 2012

It is very hard to call these two reports anything but incoherent.  First, the President’s jobs council recommends an “all-in” policy on energy to include expanded drilling, development of unconventional resources, and new pipelines and refineries (although it does not specifically mention Keystone XL).

Next, early reports indicate that the State Department is going to reject the Keystone pipeline.  This is a foolish policy decision for many reasons which we have detailed before, but it is utterly incoherent when juxtaposed with the pronouncement from the jobs council the day before.  To paraphrase a favorite line of US liberals, it appears that the left hand doesn’t know what the far left hand is doing.

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New Keystone pipeline route gets support from Nebraska legislators

November 18, 2011

When President Obama punted the final decision on Keystone XL until after the 2012 election, he put forward the idea that the threat of groundwater contamination required further review.  Specifically, environmental groups have warned of a threat to Nebraska’s Ogallala aquifer.  Responding quickly to Obama’s objections, TransCanada, the company behind the pipeline project, has already proposed a re-routing scheme that has support from key members, both Democrat and Republican, in Nebraska’s legislature:

On Nov. 14, TransCanada announced it supports proposed legislation within the State of Nebraska to move the Keystone XL pipeline project forward. If passed, this legislation, introduced the same day in the State legislature, will ensure a pipeline route will be developed in Nebraska that avoids the Sandhills.
TransCanada is pleased with the positive conversations it is having with Nebraska leaders, which have resulted in legislation that respects the concerns of Nebraskans and supports the development of the Keystone XL pipeline. TransCanada at the same time confirmed to state leaders that the route for Keystone XL will be changed and reaffirmed that Nebraskans will play an important role in determining the final route.

These developments in Nebraska follow the Nov. 10 announcement by the U.S. Department of State (DOS) that further assessment of alternative routes for Keystone XL was needed in Nebraska to move forward with the National Interest Determination. The proposed state legislation in Nebraska is a critical first step in that process.

Working together with the State Department, Nebraska’s Department of Environmental Quality will conduct an environmental assessment to define the best location for Keystone XL in Nebraska. TransCanada will work closely with these agencies and provide them with the information they need to complete a thorough review that addresses concerns regarding the Sandhills region.

In short, there is no longer any need to defer the decision, at least not for 15 months.  The State Department can expedite consideration and have a decision by early next year.  The ball is back in the administration’s court.

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Obama administration poised to kill Keystone XL

November 10, 2011

The US State Department has demanded changes to the route of the Keystone XL pipeline that will delay the pipeline for at least another year:

The State Department is ordering the developer of a pipeline that would carry oil from western Canada to Texas to reroute the project away from environmentally sensitive areas of Nebraska.

That decision could delay a final U.S. decision on the project until after the 2012 election.

The decision will require an environmental review — and that could take at least a year.

TransCanada Corp. is seeking to build the $7 billion pipeline. Part of the 1,700-mile pipeline would pass through Nebraska’s Sandhills region and an aquifer that supplies water to eight states

Two senior State Department officials who are familiar with the project described the decision to The Associated Press. The officials spoke on condition of anonymity because they weren’t authorized to discuss the decision before an official announcement.

Petroleum Economist states that this is more than a mere delay – that the pipeline is now “all but dead.”  This means that the oil from the Alberta tar sands will instead flow west, through a vastly more sensitive ecosystem, and be shipped via tanker to Chinese markets rather than to US markets.  I wrote yesterday that Obama is poised to run as a Warrior President; however, for all those victories, it is difficult to paint any of them as beneficial to US energy security, which I believe is our most vital foreign policy concern for the next half century.  This decision further weakens the president on that front ahead of the election campaign, even as he tries to defer a formal decision until after the election.

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Alberta tries to co-opt environmentalist opposition

November 3, 2011

In an approach that I have long advocated, the Alberta Energy Ministry is playing up its environmental efforts (Petroleum Economist subscription required for full article) in an attempt to mute the demonstrations against oil sand development.  Alberta is touting not only its very considerable CCS efforts, but also wind power development.  Give something to get something.  You aren’t going to get all of them, or even most of them, but you can get enough to de-fang the movement.

 

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The environmental argument in favor of the Keystone XL pipeline

October 17, 2011

The Canadian province of Alberta has immense reserves of unconventional oil called tar sands or oil sands.  A combination of technological advances and the rising cost of conventional oil has suddenly made the Alberta oil sands a very valuable commodity.  Multinational corporations and state owned companies from China are competing over the rights to develop this resource.  Meanwhile, the issue of how to get the oil from its remote location to refineries or shipping ports has become divisive.  Environmentalists correctly point out that oil sands require particularly carbon-intensive production techniques.  There are efforts under way to mitigate this, but they are not fully on line yet. Additionally, a key component of the environmental movement is dedicated to the fairly rapid elimination of the oil economy, and the commercialization and widespread use of unconventional oil would wreck those plans – there is more unconventional oil than conventional oil, and incorporating unconventionals into the economy on a large scale basis would usher in a Second Age of Oil  that would probably last well into the next century.  Although carbon mitigation programs would probably appear and grow alongside this exploitation of unconventional resources, the most ardent anti-oil environmentalists are not willing to take a chance on a mere probability.  This is their moment to end the use of oil, and they will not give up that goal.  To that end, they have organized a series of protests and political activities with the goal of killing the proposed Keystone XL pipeline, which planners envision running through the Canadian and American plains states to terminals in Port Arthur, LA and Houston, TX.

Online, I have come across many supporters of Keystone who believe that these environmentalists are irrational obstructionists, and that they should simply be steamrolled and the pipeline forced upon them despite their objections.   The “steamroll” strategy is becoming increasingly appealing to parties across the political spectrum, and it is as sophomoric as it is ineffectual.   Politics is an art, and there are a few basic ways to get what you want, and to get it in such a way that the other side doesn’t seek to undo it once they regain power.  One is old fashioned horse trading – wherein you give the other side something that they value in return for something that you value.    Another is to co-opt members of the other side to your own position, to convince enough of them to “switch sides” that the core opposition is small enough that it is made politically ineffective.  It is this latter approach which is the best option for Keystone supporters.  Because, the fact of the matter is that the national government of Canada and the provincial government of Alberta are both committed to fully developing this resource and sending their oil to market.  The question is in which direction will it head – south to the US, or west, to the Pacific coast and from there, largely, to China?

In the August 2011 issue, National Geographic magazine spotlighted what it called “the wildest place in North America,” British Columbia’s Great Bear Rainforest.  The feature story exalts the stunning beauty and the environmental diversity of this ecological treasure.   But, there is another article in the issue.  That article highlights a threat to this region . . . the alternative to Keystone, “the pipeline through paradise,” across the Rockies to the Pacific.   The dangers of this pipeline are greater than from the Keystone pipeline because it is more remote, more difficult to get to should something go wrong, and perhaps most important, because it would terminate at a waterway that is difficult for large vessels to navigate.  Indeed, the various channels through which oil laden tankers would have to traverse are currently designated a “tanker free zone.”

Keystone supporters should seize for themselves the mantle of environmental protectors.   Although the regions through which Keystone would be built are also ecologically rich and beautiful, they are also more developed than the Great Bear Rain Forest.  The latter is an unspoiled treasure in greater need of protection.  The oil is going to flow, the argument should state, and it is far better that it flow south, where we can respond more quickly and adeptly should a problem arise, than that we should risk disaster in one of the very few wild and remote places left on our continent. One of these pipelines is going to be built; the opponents of Keystone are willingly putting the irreplaceable treasure of Great Bear Rain Forest at risk.

Make the environmentalists choose.  You won’t win them all over, but you will certainly sap their strength.

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Sinopec acquires vast Canadian oil sands reserves

October 11, 2011

China’s largest petrochemical firm has purchased a Canadian company that holds 300,000 acres in the midst of the Alberta oil sands.    Sinopec overpaid for control of the company – offering 70% more than the average price of the stock over the last 20 weeks, more than double the typical premium.  The latest deal brings the total value of Chinese investment in Canadian energy reserves to over $30 billion.

Time is of the essence for US customers hoping to get a piece of the Alberta oil bonanza.  By the time the Keystone XL pipeline gets approved, all the oil will be headed to China, anyway.

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Essential reading for the Keystone XL pipeline fight

September 1, 2011

Michael Levi at the Council on Foreign Relations’ Energy, Security and Climate blog takes a close look at the protestors’ claims against the pipeline.

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The pro-Alberta oil sands argument

August 29, 2011

is laid out succinctly by Robert Samuelson.  His conclusion:

The United States and Canada are each other’s largest trading partners and closest allies. Oil markets are subtly changing, as more countries — led by China — seek preferential access to scarce global supplies. In the future, security of supply may matter as much as price. The more we can reduce oil demand and increase supply stability, the better off we’ll be. On oil sands, we should just say “yes.”

hat tip to Instapundit for the original link.

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Alberta’s oil sand bounty headed to Asia

August 24, 2011

Alberta’s oil sands are another massive unconventional petroleum resource that is already under development.  As noted here last week, if the US will not approve the Keystone pipeline, then that oil will head elsewhere.  A rival pipeline that would wind through the Canadian Rockies to a port in British Columbia has found eager commercial support from Asian interests.

We cannot say this often enough:  North America could supply 90% or more of its domestic energy needs if the nations’ find the will to access the Fortune Beneath Our Feet.   Hundreds of thousands of jobs will be created, and over a trillion dollars in leases, royalties and additional taxes would flow into cash strapped government treasuries.    This can all be done with an eye toward environmental and climate concerns.  All it takes is political imagination  . . . and will.

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Three Trenchant Energy Questions

August 18, 2011

Peter Kirsanow has three questions for President Obama (and, really, for all of the GOP candidates, as well.

During your bus tour of the Midwest, you blamed the poor economy on, among other things, Arab Spring uprisings and oil prices.

We import approximately 65 percent of our oil. It’s estimated that the U.S. has up to 2 trillion barrels of oil-equivalent in shale rock deposits — nearly five times the stated oil reserves of Saudi Arabia. Yet your administration has stymied or canceled the development of oil shale leases.

China imports approximately 50 percent of its oil. It’s estimated that Canada has up to 2.2 trillion barrels of oil-equivalent in oil sand deposits. China has invested billions in Canada to access that oil.

Why is China more aggressive in developing North American oil resources than your administration?

What, if any, national-security implications has your administration identified related to China’s investment in Canadian oil sands?

How many windmills need to be built to equal the energy produced by 2 trillion barrels of oil?

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North America, the new global energy giant

August 17, 2011

The Baker Institute’s Amy Myers Jaffe makes the point in an article at Foreign Policy:

For half a century, the global energy supply’s center of gravity has been the Middle East. This fact has had self-evidently enormous implications for the world we live in — and it’s about to change.

By the 2020s, the capital of energy will likely have shifted back to the Western Hemisphere, where it was prior to the ascendancy of Middle Eastern megasuppliers such as Saudi Arabia and Kuwait in the 1960s. The reasons for this shift are partly technological and partly political. Geologists have long known that the Americas are home to plentiful hydrocarbons trapped in hard-to-reach offshore deposits, on-land shale rock, oil sands, and heavy oil formations. The U.S. endowment of unconventional oil is more than 2 trillion barrels, with another 2.4 trillion in Canada and 2 trillion-plus in South America — compared with conventional Middle Eastern and North African oil resources of 1.2 trillion. The problem was always how to unlock them economically.

But since the early 2000s, the energy industry has largely solved that problem. With the help of horizontal drilling and other innovations, shale gas production in the United States has skyrocketed from virtually nothing to 15 to 20 percent of the U.S. natural gas supply in less than a decade. By 2040, it could account for more than half of it. This tremendous change in volume has turned the conversation in the U.S. natural gas industry on its head; where Americans once fretted about meeting the country’s natural gas needs, they now worry about finding potential buyers for the country’s surplus.

And, shale gas is just the tip of the ice berg.  The same or similar technologies are about to make economic recovery of America’s vast reserves of shale oil possible – and our shale oil reserves areou about three times the reserves of Saudi Arabia.  Finally, eventually and inexorably, clean coal-to-liquid processes that capture and sequester carbon will make the massive coal reserves of the US yet another strategic economic resource.

Of course, readers of EGP know that for years we have been predicting that (given the political will), the United States could become the worlds largest user, producer, and exporter of fossil fuels all at the same time.

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China set to grab Canada oilsands if US declines

August 11, 2011

Forbes:

A rancorous debate over TransCanada Corp.’s (T.TRP) proposed Keystone XL Pipeline has given rise to two uncomfortable prospects: If the US$7 billion project is not built, Alberta’s oil sands will become landlocked, at least for a while, and the United States will lose access to one of its few reliable, friendly sources of oil.

Keystone XL is a proposed pipeline that would run from Edmonton—the hub of Canada’s massive oil sands—through Montana, South Dakota, Nebraska, Kansas, Oklahoma, and Texas, to Houston. The line is critical to ensure a continued, smooth ramp-up in oil sands production, because producers need to send the heavy bitumen extracted from the sands to refineries able to handle that kind of crude. Since refineries in the Midwest are reaching their heavy-oil capacity, it needs to go to the Gulf Coast.

. . .

The decision lies with the State Department, because the pipeline crosses international borders. Secretary of State Hillary Clinton is expected to announce her decision before the end of the year. The department already issued a preliminary environmental impact assessment, which seems generally supportive of the project. For example, the State Department concluded that if Keystone XL is not built, oil sands production will be diverted to other markets (such as China), and the refineries in Texas will continue to process bitumen apace from offshore platforms. As such, the pipeline would not increase production of greenhouse gases.

The U.S. Environmental Protection Agency (EPA) does not agree. In a letter to the State Department this week, the EPA argued that the project poses serious environmental risks and that the State Department’s environmental review process was seriously flawed.

. . .

Environmentalists are openly using the project as a proxy for their general opposition to oil sands development. Since environmentalists have framed the debate in that sense, Clinton’s decision will have ramifications far beyond the pipeline: It will set the tone for the U.S.’s perspective on the oil sands. But even though environmentalists would celebrate a Keystone denial, their method may be moot, because denying TransCanada approval for Keystone XL would only hinder oil sands development for a few years.

The thing is, if there is no Keystone XL, Canada will find other ways to export oil from its vast oil sands. And if the United States doesn’t want the oil, other markets will.

. . . The oil sands hold 171.3 billion barrels of oil in reserve. For context, Saudi Arabia’s reserves stand at 264.2 billion barrels. The enormity of the oil sands resource has raised the stakes for both sides in the pipeline debate and placed undue importance on the outcome.

Read the whole thing.

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