The Keystone Pipeline Fallout: Canada Makes Over a Billion New Friends

Obama administration rejected Keystone XL pipeline

Πηγή: The Money Morning
By James Baldwin
April 11 2012

"If you do not change direction, you may end up where you are heading." Lao Tzu

You can forget about energy independence for now.

Without Canadian oil it is nothing but the latest American pipe dream.

In the wake of the Keystone Pipeline decision, Canada has decided to play ball with China instead.

According to Canadian Prime Minister Stephen Harper, the U.S. reluctance to build the Keystone Pipeline has caused his nation to increase the flow of oil headed west.

Instead of flowing south into the U.S., the same oil is now going to be headed to China.

"Look, the very fact that a 'no' could even be said underscores to our country that we must diversify our energy export markets," Harper said last week, referring to the Keystone Pipeline decision.

"We cannot be, as a country, in a situation where our one, and in many cases, only energy partner could say no to our energy products. We just cannot be in that position," Harper said.

Considering that Canada is our No. 1 source of oil, Harper's decision could place a serious dent in the idea that the United States can become energy independent in the next two decades.

Energy Independence: Forty Years of Broken Promises

Of course, energy independence has been the goal for some time now.

Every U.S. president dating back to Richard Nixon has proposed his own "silver bullet" to get us there.

But once elected, few leaders seem willing to explain to Americans how this will happen, the costs that are required and the sacrifices that must be made.

However, as supply concerns become greater and conventional sources of crude grow increasingly scarce, Washington can't seem to get it right.

The larger truth is that the United States and its North American trading partners stand to benefit from the drilling breakthroughs we have put into the field in recent years.

With these new technologies, the United States actually has enough recoverable oil for the next 200 years, according to the Institute for Energy Research.

Shifting forward, the United States can drill its shale fields and obtain a greater share of resources from the oil sands of Canada. But we need to make these sources a priority over the medium to long term.

And Washington doesn't seem to be doing that. In fact, they're doing the opposite.

The current administration continues to tout alternative energy projects that won't become economically viable for many years. They also have pushed policy and stimulus measures that rely too heavily on shaky assumptions of economic growth and human behavior.

Oil and natural gas (and even coal) will be necessary tools to maintain and stimulate future growth. Like it or not, they will remain the cornerstone of current and future energy policy.

Yet today, China seems poised to benefit from the U.S. idea of oil as the energy source of the past.

The Keystone Pipeline: How to Profit on China's Good Fortune

Ironically, China adopted a similar energy policy to ours in the past.

It centers on securing as much oil as possible, from whatever source possible. But that has significant drawbacks, too. The Chinese exposed themselves to the perils of international diplomacy in unstable parts of the world, particularly Africa.

What raises the stakes in Canada is that our neighbor to the north offers one of the most important characteristics one could seek from a trading partner: long-term political and economic stability.

Canada's business-friendly climate, resource-rich environment, and willingness to build infrastructure for its export markets are vital socioeconomic indicators of future success.

That may be why Chinese companies have already invested heavily in Canada's energy sector.

China's Sinopec made headlines in October when it agreed to buy Canadian oil and gas company Daylight Energy for a little more than $2 billion. Other companies, like EnCana (NYSE: ECA) and Progress Energy (NYSE: PGN), are considered potential buyout targets in the near term.

But speculation on potential M&A activity isn't the best bang for your buck as an investor.

We have to examine the companies poised for long-term growth that have increased cash flows and rising demand for the services.

This takes us back to our favorite part of the energy value chain: the midstream.

Midstream companies are the ones that connect the upstream companies (exploration and production) to the downstream markets (retail, refining and marketing).

Companies that own the pipelines that need to transport oil from the Canadian oil sands to new export terminals in British Columbia, or down to the United States, will see a steady increase in service demand over the long term.

We are still just entering the most profitable time in history for the energy sector, and investors who pay attention to these growing shifts in policy, technology, and supply constraints are well positioned to enjoy very happy returns.

After all, oil always seems to find an eager buyer. But you don't need to tell that to the Canadians.

Over a billion people on the other side of the Pacific are their new best friends. 

U.S. Awash in Oil and Lies, Report Charges

Πηγή: The World News
By Stephen Leahy
Saturday, 03 September 2011

UXBRIDGE, Canada, Sep 2 (IPS) - With four times as many oil rigs pumping domestic oil today than eight years ago and declining domestic demand, the United States is awash in oil. In fact, the U.S. exports more oil
than it imports, according to the U.S. Energy Information Administration - and has done so for nearly two decades.

The country's oil industry is primarily interested in who will pay the most on the global marketplace. They call that "energy security" when it suits, but in reality it is "oil company security" through maximising profits, say energy experts like Steve Kretzman of Oil Change International, an NGO that researches the links between oil, gas and coal companies and governments.

The only reason U.S. citizens may be forced to endure a risky, Canadian-owned oil pipeline called Keystone XL is so oil companies with billion-dollar profits can get the dirty oil from Canada's tar sands down to the Gulf of Mexico to export to Europe, Latin America or Asia, according to a new report by Oil Change International released Wednesday.

"Keystone XL will not lessen U.S. dependence on foreign oil, but rather transport Canadian oil to American refineries for export to overseas markets," concludes the report, titled "Exporting Energy Security".

Little of the 700,000 to 800,000 barrels of tar sands oil pumped through the 2,400-kilometre, seven-billion-dollar Keystone XL will end up in U.S. gas tanks because the refineries on the Gulf Coast are all about expanding export markets. One huge refinery operator called Valero has been touting the potential export revenues of tar sands oil to investors, the report found.

Because Keystone XL crosses national borders, President Barack Obama has to issue a permit declaring the pipeline serves the "national interest" in order to be approved.

"The only way Keystone XL could be considered in the national interest is if you equate that with profits for the oil industry," said Kretzman, who wrote the report.

Canada's huge tar sands deposits, located mainly in the far north of the province of Alberta, are the world's second largest oil reserves, but they are landlocked. It's the industry's biggest worry and also Alberta Energy Minister Ron Lieper's biggest concern.

Lieper recently said that without new pipelines "our greatest risk in Alberta is that by 2020 we will be andlocked in bitumen". Bitumen is thick tarry oil from the tar sands that needs lots of high-energy and chemical processing to be useable - one reason it's widely considered the world's dirtiest oil.

The shortest route to the big Asian markets is through the Rocky Mountains to Canada's west coast via the proposed Northern Gateway pipeline. However, Canadian native people live on some of the land and
are staunchly opposed, so the industry thought it would be easier to put an export pipeline right through the U.S. heartland, said Kretzman.

"The oil industry would have done the Northern Gateway first but gambled that resistance to the pipeline would be far weaker in the mid-west," he told IPS.

They were wrong.

Thousands of people, including landowners and religious leaders, have gone to Washington DC in the past two weeks to tell President Obama to reject Keystone. Nearly 850 people have been arrested for standing on the sidewalk in front of the White House in what protesters call the largest civil disobedience in the history of the U.S. climate movement.

"It's remarkable, a very dignified and moving protest much like the civil rights demonstrations in the 1960s," said Maude Barlow, chairperson of the Council of Canadians, a large environmental NGO.

"This is about the rights of the environment and future generations. It is the blossoming of a new movement," Barlow told IPS from Washington.

Other massive pipelines are being planned, including ones bringing tar sands crude to New England and the Great Lakes, she said. "Keystone is just the beginning. Once these are built they will have to put something in them."

Infrastructure dictates policy, she stressed. Once pipelines, refineries or power plants are built, it is nearly impossible for governments to shut them down.

Last year, scientists writing in the journal Science concluded there is already enough fossil fuel burning capacity to raise global temperatures by 1.5 degrees C by 2060. Any additional power plants, vehicles, or other fossil fuel burning equipment built from 2011 onward puts humanity at ever greater risk of catastrophic climate change.

"We conclude that sources of the most threatening emissions have yet to built," the scientists wrote. The Obama administration knows this but the powerful oil lobby can use its unlimited funds to attack Democratic officials during the next election cycle if they don't approve the pipeline, says Kretzman.

Changes to U.S. law in 2010 allow corporations to spend as much as they want on elections, and there is no sector with more money than the oil industry.

"That scares the hell out of the Obama administration," he said.

It's never been clearer that corporations wield the real power in the United States and Canada, activists say.

"This is the beginning of a very big fight for the future," Barlow told IPS.