Canada to US: You are Not the Only Hot Date for Keystone XL party!

Now we've heard the Canadian response to US Keystone XL Pipeline delay: Sell it to China!

That was the essence of the headline in the Wall Street Journal story November 25, 2011 about growing calls by Canadian politicians and energy executives to build pipeline infrastructure from Alberta to the BC Pacific coast line to connect to export terminals.  Why would they do this?

The Obama Administration wants it both ways on the Keystone XL pipeline. It did not want to enrage environmental supporters of the President by approving the import license required to build the project.  Nor did it want to enrage the Canadians and American interests seeking access to the oil from Alberta by rejecting the project.   So it delayed a decision until after the 2012 Presidential election and thus enraged both sides.

The problem for the Administration is there is too much oil in Alberta to just sit around while the US plays politics.  So Canadian Energy Minister felt jilted by his US 'date to the Keystone XL party' while saying he felt the US would eventually approve the Keystone XL project after the 2012 election.  The lesson for Canada was clear-you are not going to get lucky counting on the US as a regular date to the energy party.  Minister Joe Oliver said Canada had too many of its eggs in one Keystone XL (read: US) basket.

"We favor the construction of infrastructure that will move resources to markets that want them." -Canadian Energy Minister Joe Oliver.

As a result of US dawdling new projects are being proposed in Canada.  One would build a 730 mile pipeline from Alberta to Kitimat, British Columbia by Enbridge at a cost of $5.5 billion to expand the export potential of the deepwater Kitimat port. 

Kinder Morgan also said it wanted to extend a small existing pipeline from Alberta to the Pacific coast.  In addition, Enbridge reported it bought a 50% stake in an existing pipeline that moves oil from the US Gulf coast north to Cushing, Oklahoma and would reverse the flow of oil to bring more unconventional oil from US and Canadian markets to the refineries and storage in the Gulf region left underutilized because the Obama Administration has limited E&P after the Gulf oil spill.

Do you see where this is going?

Markets hate to be trifled with especially by fickle politicians.  The growth of unconventional oil and gas in North America is too powerful an economic growth and energy security force to sit patiently.  We either participate in the markets when the opportunities present themselves or we see other bidders fill the void and take the resources - the environmental opponents do not want to be used - off to China where they will be fully utilized with dramatically fewer environmental safeguards than exist in either the US or Canada - after the resource is shipped halfway around the world with all its own attendant emissions impacts.

Reality Check Time for Enviros:  Saying NO to US projects no longer means the resource will not be put to alternative use elsewhere often with WORSE environmental outcomes.  Just look at the growth in US coal exports since the black fuel is no longer welcome in America.  Your real choice is would you rather have AEP, DTE, Duke or Dominion burning coal or China?   Would you rather have Alberta oil used in US or in China after they emit even more tonnes from hauling it halfway around the world?

Wake up, people!

Domestic energy production in North America is good news.  It creates jobs, it produces tax revenue, and it drives down the cost of doing business with lower energy prices.  The growth in domestic energy production of natural gas from unconventional sources has permanently de-coupled the price of natural gas from the manipulated price of oil making American manufacturing more competitive again.

And then there are the energy security advantages.  We don't have to import the stuff from countries that dislike us.  We don't have to risk our economic future from wars in the Middle East when we are energy secure.  Growing domestic energy production that increases supply and thus reduces the ability of global oil commodity traders to manipulate market prices is its own best revenge after years of such behavior.  Lower oil prices savage Iran and Venezuela and OPEC.

Don't you get it?

Securing North America's domestic energy productive growth potential is the single best thing we could do for our economy, for our national security, for our energy future--and for the environment.

By. Gary L. Hunt

Gary Hunt is President, Scalable Growth Strategy Advisors, an independent energy technology and information services adviser and a partner in Tech & Creative Labs, a disruptive innovation software collaborative of high tech companies focused on the energy vertical. He served as VP-Global Analytics & Data at IHS/CERA; global Division President at Ventyx, now an ABB company; and Assistant City Manager-Austin Texas responsible for Austin Energy and Austin Water.