Pipelines must be part of the world’s energy transition

Pipelines must be part of the world’s energy transition
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Cancelling Keystone XL and Energy East were political blunders

The United States is divided on issues stretching from racial discrimination to the environment and energy.

With global crude oil supplies under pressure and prices about to touch the three-digit mark per barrel, an interesting debate has begun: Has the Biden administration, with its commitment to climate change issues, undermined the health of that country’s oil and gas industry?

The focus is again on the cancelled Keystone XL pipeline. The proposed 1,930-km pipeline could have carried 830,000 barrels a day of oil from Alberta and North Dakota to Nebraska and from there to the Gulf of Mexico.

As he promised during his election campaign, U.S. President Joe Biden cancelled Keystone on his first day in the White House, Jan. 20, 2021.

Now Biden faces claims that by killing the pipeline, he undermined the energy independence of the United States, leaving it at the mercy of the Organization of Petroleum Exporting Countries and its allies in OPEC+, including Russia. The argument goes that not only has he sabotaged U.S. energy independence, he’s also tightened supplies and created the very real prospect of $4-a-gallon gasoline prices in the U.S.

Keystone XL was killed because of its perceived adverse impact on climate. However, energy expert Phil Flynn argued on Fox Business that studies found the pipeline wouldn’t add to greenhouse gas emissions. And the cancellation may actually add to emissions, he wrote.

The cancellation won’t prevent Canadian oil from reaching its destination in the United States. The only difference would be to move that oil by rail and truck instead of by pipeline. And those methods aren’t as safe as pipeline transportation, Flynn emphasized.

There’s another aspect to consider as well. When the shale oil revolution overtook the world a few years ago, American energy independence was very much an issue. However, the issue was really energy independence for all of the Americas, not just the United States. Supplies from Canada were a crucial part of the calculations.

Restraining supplies from Canada means a growing U.S. dependence on OPEC+ producers, including Russia, Saudi Arabia and the like. So American energy independence is under threat – again.

In a Boston Herald piece headlined Biden’s Keystone blunder still being felt a year later, Chris Woodward argues that killing Keystone hasn’t strengthened America’s hand with its adversaries. Biden has been left in the awkward position of lobbying Congress to keep the Nord Stream 2 pipeline open to carry Russian gas to Germany – despite the Russia-Ukraine dispute.

And less oil from Canada and the U.S. on the global market means more demand for products from Russia, Libya and Venezuela, Woodward wrote.

Alberta Premier Jason Kenney has also been critical of the decision to cancel Keystone. In an interview with Fox News Digital, he said he “would prefer that the (Biden) administration looks to Canada, rather than OPEC, to be a greater source of energy for the American economy.”

Kenney noted that Canada is the largest source of imported U.S. energy, and it benefits Americans to have energy coming from an ally rather than OPEC or Russia.

“If [Biden] was really concerned about America’s energy security, he would not have cancelled Keystone XL and new leases on public lands and offshore and put new restrictions (on things),” H. Sterling Burnett of the American think-tank Heartland Institute said.

Due to a lack of export facilities, Canada is missing out on a “$1.2-trillion European Union natural gas market,” wrote the Canada Energy Centre’s Mark Milke and Lennie Kaplan for Troy Media. They argue that Canada can help lessen EU dependence on Russia for natural gas supplies.

Natural Resources Canada reports that, at the end of 2018, Canada had 73 trillion cubic feet (tcf) of proven natural gas reserves. To extract that and move it offshore (be it to Europe or Asia), a more predictable regulatory regime for investors on natural gas infrastructure, including pipelines and liquefied natural gas (LNG) terminals, could help secure new markets for Canada’s natural gas.

This natural gas was mostly uncompetitive before, given the distance between gas-rich Quebec, the East Coast provinces (gas deposits exist there, too) and Europe. But the circumstances have changed, given the rise in prices facing Europeans and the likelihood those prices will endure. Diversified gas import sources would reduce European dependence on Russia.

The now-cancelled Energy East pipeline would have helped Canada meet European needs. It would have delivered diluted bitumen from Western Canada and the northwestern United States to Eastern Canada, to refineries and terminals in New Brunswick and possibly Quebec.

The project would have converted about 3,000 km of pipeline, which now carries natural gas from Alberta to the Ontario-Quebec border, to diluted bitumen transportation. Along the pipeline, pump stations and tank facilities also would have been constructed.

But immense opposition to the TransCanada project finally led to its cancellation in October 2017.

The energy world is at a crossroads. Environment and climate change issues are real and the world must deal with them. But we can’t realistically get rid of fossil fuels overnight.

Rather than making irrational decisions, we need to strike a balance between the two divergent objectives. Resource-rich Canada has a role to play in the global energy balance – and that includes pipelines.

By Rashid Husain Syed
Columnist
Troy Media

Toronto-based Rashid Husain Syed is a respected energy and political analyst. The Middle East is his area of focus. As well as writing for major local and global newspapers, Rashid is also a regular speaker at major international conferences. He has provided his perspective on global energy issues to the Department of Energy in Washington and the International Energy Agency in Paris.

Courtesy of Troy Media.

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