In a clear understatement, particularly with regard to the direction of energy policy, President Obama remarked: “Obviously, Republicans had a good night.” The GOP reclaimed control of the Senate and pushed their House majority to its largest margin since 1930 following Tuesday’s Midterm elections. A more unified Capitol Hill is now poised to address its long-suppressed energy agenda. Although touted as having long-term positive impact in the areas of energy independence and national economy among others, the GOP’s agenda falls short on its claims.
It’s no secret that Republicans will look to strike quickly on the Keystone XL Pipeline Project. Phases one through three are complete and the pipeline already stretches from Hardisty, Alberta to Port Arthur, Texas. The controversial fourth and final phase will nearly double the initial capacity and will connect the oil sands in Alberta with North Dakota’s own rich reserves en route to Steele City, Nebraska. Political will has largely misshapen the debate, however. Producers have long given up waiting and oil is finding its – more carbon intensive – way to American refiners via barge and train. Oil sands production in Canada appears ready to grow with or without President Obama’s approval, but simple math debunks claims that the pipeline is the path toward North American energy independence. Current combined oil production in Canada and the United States is 15.6 million barrels per day (mmbpd). Combined consumption is 20.8 mmbpd, leaving a deficit of roughly 5 mmbpd that must be sourced externally.
Related: Election Results Good News For Keystone XL Pipeline
Despite its prominence on the Republican agenda, the Keystone XL is little more than a stepping-stone to larger issues for the newly empowered GOP. Energy exports, coal, and EPA regulations will highlight the docket.
The case for energy exports will gain momentum as Alaskan Senator Lisa Murkowski assumes leadership of the Senate Energy and Natural Resources Committee. Murkowski brings to her new role vocal support for oil and gas exports in addition to onshore and offshore drilling in Alaska. Murkowski and the GOP argue that lifting the ban on oil exports will contribute to an increase in oil production, economic growth, and lower gasoline prices. Similar arguments are made for liquefied natural gas exports (LNG), which provide the added geopolitical bonus of easing European dependence on Russian piped gas. The net numbers do not change however, and our production to consumption deficit ensures that any exports must be compensated by corresponding imports. Regarding LNG, the math again doesn’t add up.
- Natural gas futures prices for the end of the year currently sit at $4.43 per 1,000 cubic feet. Liquefaction, regasification, and transportation (to Asia) bump the cost to ~$13.00 per 1,000 cubic feet. Last week, Asian spot LNG prices dropped to $13, down from $15 in late September. Moreover, looming market oversaturation won’t improve the razor thin margins.
Related: Why The Current “Oil Glut” Could Lead To A Price Spike
Natural gas exports make sense if the endgame is not the Asian market, but instead resuscitating an increasingly marginalized coal industry. Kentucky Senator – and soon to be Senate Majority leader – Mitch McConnell is fighting for just that. Coal has recently taken a back door to more competitive natural gas and renewables. Sustained low natural gas prices, an influx of gas-fired power plants, and a global coal supply glut threaten coal’s bottom line for the foreseeable future.
Coal and gas shares in power generation, Source: IEA & EIA
Finding the right balance in gas to coal competition is only half the battle and the GOP also has its sights set on the Environmental Protection Agency (EPA). In June, Obama and the EPA proposed a strict Clean Power Plan. The plan intends to cut carbon pollution from power plants by 30 percent from 2005 levels by 2030 – coal-fired power plants are the largest source of greenhouse gas emissions. Republican Representatives and Senators have been quick to mobilize and put forward their own legislation aimed at complicating the EPA’s regulatory regime. What’s more, adamant climate change denier Oklahoma Senator James Inhofe is set to become chair of the Environment and Public Works Committee. Inhofe and the GOP Senate will likely double up on their efforts to slash funding for the EPA and United Nations climate programs.
All things considered, big energy has to be grinning after the resounding GOP victory.
By Colin Chilcoat of Oilprice.com
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For example - some minor thing like windmills must be place in other peoples yards even though (see above graphs) they are minuscule in the energy picture. Democrats feel it fits into the narrative of at least we are doing something so we feel good.
Byway if we do 100% of Kyoto accord the impact on temperature is .02 deg using the democrat models which have been wrong for last 18 years.
Interesting that author takes the narrative of keystone XL only solve 10% of import defici so we should not vigorously pursue. Wonder If like democrats the author feels the idea of windmill is good but also feels keystone and many others(Anwar, long term import duties on oil cartel members that are hostile to usa, support for Mexico to develope oil reserves- another neighbor, support for low energy nuclear reactions which don't produce waste but do produce very dense form of energy, etc)
In another 10 years when the global warming models have continued to fail, wonder if the author will fix his sights more focused on the ideas of feel good. Perhaps when some one in his family gets to go overseas to fight the friends of the middle astern people that sell us the oil, then he will shift.
I'm not against the Keystone XL pipeline. My aim was to disprove the narrative that it will bring energy independence to our shores. Much of the oil from Alberta is bound for Asia and Europe along with millions of barrels of American oil. The notion that energy independence lies underground is simply not true.