Tag: "pipeline"

Senate Energy Policy Leaves Out Oil and Highway Funding

The focus of the Energy Policy Modernization Act of 2015 includes energy efficiency and conservation, protecting the electric grid and speeding up the application process for liquid natural gas refineries. The bill includes:

  • The secretary of the Energy Department to issue a final decision on applications to export liquefied natural gas within 45 days after projects have won approval from the Federal Energy Regulatory Commission.
  • The Strategic Petroleum Reserve, a stockpile of nearly 700 million barrels of oil, should be used only in emergencies — while there are legislative efforts to sell off some of that oil to help pay for surface transportation funding.

The most recent senate energy bill failed to address some of the most important energy issues currently facing the nation. The bill avoided such issues as:

  • The ban on exporting crude oil.
  • Keystone XL pipeline.
  • Federal gas tax reform.
  • The failure to fund our highway system.
  • Renewable Fuel Standard reform.

U.S. energy policy that includes natural gas, but leaves out oil, is not real energy policy. Protecting the electric grid and leaving out critical funding for the highway system, addresses half of our most pressing infrastructure needs.

Political Versus Market Energy Economics

With news of a consensus on its financing structure, details of a proposed natural gas pipeline called the Turkish Stream are expected to be finalized as early as June 18th. The pipeline, which is estimated by internal sources to cost over $2 billion, will originate in Russia, pass through Turkey and end in Greece. The move seems very strategic of Russia — one of the largest exporters of gas in the world — which has shown interest in the financial backing of Greece’s new leadership under leftist hardliners. Ironically, amidst a very public distaste regarding the European Union’s stance on repayment of Greek debts, the ailing state has expedited approval of the project, which would bottleneck Russian gas through the country, forcing many European countries to pay them transit fees.

The U.S. Department of State (DOS) warned that expanding Europe’s dependence on Russian gas would only increase political instability in the region and could reduce price competitiveness of natural gas in Europe, however members of Greece’s ruling party, Syriza, quickly rebuked the observations and labeled them as attempted blackmail. The DOS also claimed that Russia did not build the pipeline out of benevolence or even a desire for financial gain, but purely to snub the Trans-Adriatic Pipeline, an alternative Western-backed project which was also forecasted to bring needed gas resources from Azerbaijan to Europe through Greece. Members of the DOS even went so far as to say that Turkish Stream in itself is not an economic investment, and there are perhaps a few reasons to believe so:

  • The offshore portion of Turkish Stream completely circumvents other European countries in almost a comical fashion given the alternative price of simply building land-based pipelines through Ukraine… this costly act of political angst immediately made the marine portion of the pipeline $600 million more expensive;
  • According to the Energy Information Administration (EIA) Russian gas has been losing market share with almost every passing year for over ten years, while European demand for gas has fallen and stagnated, no doubt due to Europe’s lethargic growth numbers:

Nat Gas Prod and Consumption

  • Perhaps in an effort to shift infrastructure costs onto the European Union (EU), Russia has announced a “build it yourself” policy for all potential client nations hoping to have pipelines connecting them to Greece… while such a proclamation may seem efficient for them and strategically savvy, consider that many European countries such as Sweden now acquire less than 48 percent of their energy consumption needs from fossil fuels. In the meantime, Italy, Romania, Germany, Estonia and Bulgaria among many others are in the process of phasing out much of their gas use, and are actually years ahead of their target schedules for implementation of nuclear and renewable energies.

At the aggregate level, natural gas is an extremely profitable energy resource which is seeing double-digit growth across many different countries, mainly in the developing world. However, mature economies such as those in Europe have not characterized themselves as extremely profitable or high-growth markets, meaning that they are among the least likely areas to see attractive returns on expensive fossil energy infrastructure projects like Turkish Stream.


U.S. Energy Infrastructure Still Lacking

Energy booms, whether from oil or gas, will continue as both technology develops and more resources are discovered. However, each energy boom puts a strain on our existing energy infrastructure. For instance, oil can be transported by truck, ship, rail and pipeline. Pipeline is the safest and most reliable way to transport oil. Even with 185,000 miles of liquid petroleum pipeline across the United States, there is just not enough to transport the huge volume in the current boom. The lack of pipeline has increased transportation by rail and rail accidents during this time.oil_by_rail

  • The recent increase in transportation of oil by rail has increased the number of rail accidents.
  • In 2014, 70 percent of petroleum products and crude oil were shipped by pipeline, while 3 percent was shipped by rail.
  • A recent study by Fraser affirms their safety by reporting transporting oil by pipeline is 30 times less harmful than by train.

More and more oil is extracted every day and our storage capacity is overflowing. Two things need to happen that will greatly alleviate this situation. First, more pipelines are needed to transport all of this new oil. Second, all of this oil needs a place to go. Building more storage capacity only temporarily alleviates the problem. The crude oil export ban needs to be lifted so that the oil can get out of the over capacity storage units and enter the energy market.

Natural Gas Supply and Demand — A Structural Problem in the Northeast

The cost of residential heating and cooling in the Northeast is comparatively high, with no clear end in sight. Fracking regulations and outright bans are pushing whole industries out of densely populated municipalities as well as entire states such as New York, where the extraction methodology has met strong opposition at each level of government. Even the importation of natural gas from other states such as Pennsylvania — which remains very active in tapping Marcellus shale deposits — is becoming difficult, with neighborhood groups and city governments opposing pipelines and other forms of infrastructure to support burgeoning energy demand.

Vocal adversaries of gas withdrawals and transport site two reasons for supporting gas restrictions:

  • the danger to the environment through the practice of fracking and the construction of gas pipes
  • falling property value due to aesthetic degradation from pipelines around residential areas

Unfortunately these opponents still pay a hefty premium on limiting the availability of gas through higher residential heating and cooling prices. Below, northeastern states are compared to Texas, Louisiana, Wyoming, Colorado and Oklahoma, some of the top natural gas producing states.

Natural Gas Prices

Even despite more temperate summers, colder winters contribute to the fluctuating above-average heating costs faced by many residents in the Northeast. Placing restrictions on sources of heating is therefore likely to have a negative synergistic effect — at least financially — on many locals.

In conclusion, crowded regions that pine for their power needs to be met are ironically, unable to make concessions for it with $700 million projects such as the Constitution Pipeline between Pennsylvania and New York being put on hold. With virtually incomparable levels of population density, Southern and Midwestern states do not suffer from the congestion which limits gas transfer. Logically, New Englanders were found to be overpaying for gas by $3.58 per thousand cubic feet of gas by the Energy Information Administration. This amount may seem trivial, but for long-term residents and businesses, it represents a huge cost.

The Effect of President Obama’s Keystone XL Veto

President Obama officially vetoed the Keystone XL pipeline project after bipartisan votes by both the House and Senate landed the bill on his desk. Without the Senate to block legislation from getting to his desk, the president is now planning to veto many bills that pass both houses. Veto-proof coalitions are now needed to pass legislation that provides benefits like the Keystone XL project.

The entire Keystone pipeline system is almost complete, the fourth and final phase of the system is known as Keystone XL. The Keystone XL Pipeline is a proposed 1,179-mile (1,897 km), 36-inch-diameter crude oil pipeline beginning in Hardisty, Alberta and extending south to Steele City, Nebraska. This pipeline is a critical infrastructure project for the energy security of the United States and for strengthening the American economy. The Keystone XL pipeline would have the capacity to transport 830,000 barrels of oil per day to Gulf Coast and Midwest refineries.

Approving the estimated $5.3 billion Keystone XL project would create approximately 9,000 construction jobs. When combined with the southern portion of the Keystone pipeline (the Gulf Coast Project), it is estimated that the total $7 billion pipeline could:

  • Create 13,000 construction and 7,000 manufacturing jobs.
  • Add $20 billion to U.S. GDP.
  • Add $5 billion in taxes revenue to local counties.
  • Generate as much as $5.2 billion in property tax revenue for Montana, South Dakota, Kansas, Oklahoma, Nebraska, and Texas collectively.
  • Over 2.6 million miles of pipeline in the United States that deliver both liquid petroleum products and natural gas, while the Keystone XL portion of the Keystone pipeline is less than 1,200 miles long.
  • The Canadian Energy Pipeline Association predicts that pipeline projects are worth $1.298 trillion dollars to the Canadian economy and $15.52 billion dollars in additional salaries to its citizens.
  • The U.S. State Department reported an increase of 42,000 jobs during the construction process, and roughly 118,000 jobs to maintain the pipeline and the refineries.
  • 70 percent of petroleum and crude oil are currently shipped by pipeline, which in recent years has proven to be safer than shipping oil by rail.

A recent study by the Fraser Institute affirms their safety by reporting pipeline accidents are a staggering 30 times less harmful than by train. According to a study by Southern Methodist University’s Maguire Energy Institute, there are substantial economic benefits with the TransCanada Keystone Pipeline System.

The United States’ State Department issued a multi-thousand page report which took years of research, compilation and coordination to produce which concluded definitively that the Keystone pipeline would be safe ― it would have “no significant impacts.”

Keep Oil Prices Down by Passing Keystone XL

The Tampa Bay Times conducted a fact check on some statements made by Senator John Thune of South Dakota on Sunday. The fact check covered two main points:

―President Barack Obama’s own administration has done five environmental impact assessments of the Keystone XL pipeline

According to the fact check, the U.S. State Department actually had one report on the pipeline that included several drafts and a major revised version that considered a more environmentally sound route change in the pipeline.

―All of which have said it would have a minimum impact on the environment

While the State Department study found that the pipeline would have minimal impact on the environment, the Environmental Protection Agency worries of a greater impact from the pipeline’s greenhouse gas emissions than the study found.

The new Republican leadership in the Senate plans to have a friendly, open amendment process with Democrats with a goal of passing the pipeline bill. The bill is expected to have enough votes to be filibuster proof, and if not enough to override a presidential veto, enough to force the president to wield his veto pen and take a position on this controversial issue. The claim that gas prices are too low for the new addition to Keystone to have a positive economic impact does not consider that the pipeline will take time to build (and time to get approved) and by then, prices could be up even to record high prices.

Fast-Track Keystone XL Plan Doomed to Fail

Coordination by the House and Senate to quickly pass the Keystone XL pipeline was doomed to fail last week. The coordination was awkward, to say the least, the House easily passed the approval of the pipeline, yet again, while the Senate had an entirely different situation.

The Senate never had the votes to pass the approval process. However, one senator’s seat was threatened in a runoff. Senator Mary Landrieu’s support of the pipeline and its approval in the Senate, could have been enough to help her win the runoff election. Harry Reid called for the vote and said that they had the 60 votes for approval. They miscounted. Now Landrieu’s seat is really in jeopardy. If the vote had been called months earlier, the votes could have been mustered to have more than enough for approval of the pipeline.

After a wasted effort due to a miscalculation, the pipeline will still have enough votes in the Senate next year from the election. If the opponents of the Keystone XL pipeline come to terms with the economic benefits of the pipeline, they may understand how much their fears were over exaggerated.

Power Politics: The Battle Over Keystone

The Keystone XL Pipeline got its vote, but not the results supporters were looking for. Supporters had renewed their hopes for passage of the pipeline after the resounding Republican victory in the midterm elections. Despite the President’s continued opposition to the project, the House of Representatives had remained staunchly pro-Keystone; Friday’s 252 to 161 passage of the pipeline marked the House’s ninth approval of the project.

Thou largely decried as an attempt to give embattled Democratic Senator Mary Landrieu a political bump ahead of her December 6th runoff election, the Senate went ahead with the vote on Keystone XL. It was close ― Keystone XL only failed by one vote.

What does this mean for the future of the pipeline? Is Keystone XL dead?

Not quite, says Senator John Cornyn of Texas.

Even before the vote, Cornyn was optimistic. “I have no real doubt that the president will veto it eventually,” Cornyn told MSNBC. “So we will come back at it next year and keep coming back until we get a solution.”

If Keystone XL comes up again in the next Congress, we could see different results. The House obviously already has ― and should maintain ― the majority needed to pass Keystone XL again. The Huffington Post predicts that the upcoming Senate should have at least 61 votes in favor of the pipeline. Given these results, it seems like the bill may finally make it past both chambers.

Just one question remains: With rumors still circulating that Obama will veto Keystone if it passes, can both houses wrangle the two-thirds support needed to override a presidential veto?

I guess we’ll have to wait and see.

Renewed Hope for Keystone XL Post Mid-Terms

The election results from last night changed control of the senate to the GOP again. For the first time since 2006, party control of the upper chamber has changed hands. Many bills that could get through the House but stalled in the Senate now have a second chance at passage. The Keystone XL pipeline did not have enough votes in the Senate to override a presidential veto until now. Before last night’s election, at least 57 senators could be counted on to support the pipeline. After last night, the new Senate chamber will have at least 61 votes in favor of the pipeline. This is a clear majority that was needed for the pipeline’s approval.

Keystone XL pipeline election results:

  • All 57 seats of those in support of the pipeline were held last night.
  • Anti-pipeline Senator Mark Udall of Colorado was defeated.
  • Anti-pipeline Senator Jay Rockefeller was defeated.
  • Anti-pipeline Senator Tom Harkin of Iowa retired and replaced by a supporter of the pipeline.
  • Senator Tim Johnson of South Dakota retired and replaced by a stronger supporter of Keystone XL.

Despite the State Department’s positive review of the proposed pipeline earlier this year, President Obama remained opposed. The House remains pro-pipeline and the Senate could have the votes to stop any presidential veto of the Keystone XL pipeline and any other proposed pipelines that would greatly benefit the United States as well as many other countries.

Keystone XL Meet Energy East

President Obama’s reluctance to approve the Keystone XL pipeline from Canada to the Gulf Coast, is forcing one of the largest energy rich countries to look at alternative ways to export its crude. The proposed TransCanada Energy East pipeline would be an all-Canada pipeline transporting the vast reserves of Alberta’s oil sands to the city of Saint John. The crude reserves could then have supertanker access to the Gulf Coast refineries that the Keystone XL planned to deliver.

  • Canada’s Alberta oil sands contain the third largest reserves in the world at 168 billion proven barrels.
  • The 2,858 mile Energy East pipeline will cost $10.7 billion and completed by 2018.
  • Energy East pipeline would transport 1.1 million barrels per day.

If a reality, the Energy East pipeline would be more than twice as long and carry a third more crude than the Keystone XL pipeline. The growing European demand for crude from other sources than Russia increases the need for large pipeline projects. Opponents to large energy pipelines are already lining up to halt any start to such a project. TransCanada Corp will find one way or another to start exporting Canada’s vast energy and natural resources. Time is running out for Keystone XL and the subsequent economic boost to the United States.