The Keystone XL pipeline bill failed on a vote count of 59-41 and failed to achieve a filibuster-proof U.S. Senate passage. With 40% of the pipeline already built and North American energy costs some of the lowest in the world, President Obama will be under huge pressure from America’s NATO allies in Europe and Canada to allow the State Department to rule the Keystone XL is in the “national interest.”
Two sections of the Keystone pipeline, equaling 40% of the 2,000 mile project from Alberta, Canada to the Texas Gulf Coast, have already been built and are transporting oil. These sections are a 298-mile segment from Steele City, Nebraska to Cushing, Oklahoma and a 485-mile segment between Cushing and Nederland, Texas.
TransCanada Corporation as the sponsor of the Keystone project has suffered from delayed approval for the project since November 2011. The Obama Administration and its environmentalist allies say the EPA approval has been delayed due to 2.5 million public comments. Critics complain that producing crude from oil sands emits 17% more greenhouse gasses than traditional oil drilling because of heating sands to release oil.
During the delay, Canada’s oil production rose from 3 to 3.7 million barrels per day. Canada by 2018 may only be behind the United States, Saudi Arabia, and Russia as the world’s fourth-largest oil producer.
Last month TransCanada filed an application to build a $12 billion Energy East pipeline project to send 1.1 million barrels of oil per day across Canada from Alberta to Saint John, New Brunswick, where a deep-water port will be built. But at a distance of 2,700 miles versus 1,200 for the Keystone Pipeline, the economics favor the U.S. route.
Although the Keystone XL sponsors state that Canadian oil sent to Texas will be for U.S. consumption, America just recorded its highest level oil exports in 57 years. With U.S. domestic production more than doubling in the past five years, America is now the world’s largest producer of oil and natural gas. But U.S. infrastructure has not kept pace with production. The Keystone pipeline will eventually be enlarged to serve as the backbone for a North American oil and gas distribution system.
The European Union’s lack of domestic oil and natural gas supplies has forced the 28-nation block to be reliant on expensive and politically problematic Russian energy supplies. Consequently, the EU’s “average” residential electricity rates are 119% higher than the U.S., according to the Energy Information Agency. The cost spread since 2006 has been widening as U.S. rates rose by 16% and EU rates on average jumped 42%.
Residential electrical rates in Germany are 214% higher than the U.S., with taxes and levies accounting for about half of retail electricity prices. German electrical transmission system operators charge residential consumers a “renewable energy levy” that is used to subsidize the expansion of certain renewable generation facilities.
Despite the massive taxes to support lavish subsidies, non-hydro renewables generation in the European Union only increased its share of electrical production from 6% in 2006 to 12% by 2013. During the same period, the U.S. renewables increased from 2.5% to 5%. But these high and increasing costs for electricity in the EU may explain why Goldman Sachs just predicted Europe will soon be in a triple dip recession.
Preventing large-scale exports of Canadian oil outside North America is in the United States’ vital interests, according to Stratfor Global Intelligence. Oil is the largest globally traded product in the world, and it forms the foundation for global economic activity. As the dominant military power in international waters and its largest consumer, the United States has a keen interest in the global oil market and the places where oil is produced.
The loss of the Keystone XL approval vote in the U.S. Senate spares a very unpopular President Obama from having to veto the pipeline for political reasons. But after the new Congress is seated in January, President Obama will bow to America’s European and Canadian allies in NATO and quietly direct the State Department to rule the Keystone XL is in the “national interest.”