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Sean Hackbarth Alberta's Premier Jim Prentice speaks at the U.S. Chamber of Commerce.Alberta's Premier Jim Prentice speaks at the U.S. Chamber of Commerce. Photo credit: Ian Wagreich / © 2015 U.S. Chamber of Commerce.

You may not be aware, but Alberta, Canada is America’s number one oil supplier.  In a speech at the U.S. Chamber, Jim Prentice, Alberta’s Premier, said:

Alberta ships 2.5 million barrels of oil a day to the US. We are the largest supplier of crude oil to the United States of America. We contribute 26 percent of all American imports.

In comparison, oil imports from Saudi Arabia were slightly more than 1 million barrels a day in November 2015.

top-u-s-oil-suppliers-oil-supplied_chartbuilder_800px.png Top U.S. oil suppliers Top U.S. oil suppliers

Nearly all Alberta’s oil comes from its oil sands with much it coming into the U.S. by pipelines.

So it’s no surprise that the long-delayed Keystone XL pipeline is at the top of Premier Prentice’s mind.

“This project is in the national interest of our two countries,” Prentice said and explained:

The oil it would carry is produced in my province under environmental standards that are at least as high as those that apply to oil produced in the United States —and much, much higher than those that apply in other countries that are allowed to land their oil in the US market without interference.

The US has historically addressed its energy security issues via a policy of diversity of supply — facilitating and supporting open markets for energy trade and the construction of infrastructure to facilitate the import of oil from multiple suppliers.

Canada has been one of those suppliers. Proudly so.

This is what has made the Keystone delay and uncertainty so confusing to Canadians.

Prentice emphasized, “the energy relationship shared by our two nations is much bigger than Keystone.”

Nevertheless, “We need to enhance and continue to invest in the network of pipelines and transmission lines that knit our energy economy together.”

Doing so will create jobs, Prentice explained:

Last month, for example, I attended the grand opening of Enbridge’s Flanagan South I Seaway pipeline.

That pipeline, which stretches nearly 600 miles from Illinois to Oklahoma, is a vital link in the web connecting Canadian producers with American consumers.

600,000 barrels a day of Canadian crude oil now flow through Flanagan South and on through the expanded Seaway pipeline to American refineries along the Gulf Coast.

This creates American jobs. Permanent jobs. Refinery jobs.

The State Department had concluded that the Keystone XL pipeline will create 42,000 jobs.

Sean Hackbarth Time to Stop Playing Games - Time To Build The Keystone XL

The Congressional debate over the Keystone XL pipeline is nearing the finish line. A bill approving it made it through the Senate on a bipartisan vote:

The Senate on Thursday voted 62-36 to build the Keystone XL oil sands pipeline, delivering Republicans the first legislative victory of their new majority.

Nine Democrats joined with Republicans in voting to approve the $8 billion project, five votes short of the two-thirds majority that would be needed to override a promised veto from President Obama.

The nine Democrats who voted to approve Keystone were Sens. Michael Bennet (Colo.), Tom Carper (Del.), Bob Casey Jr. (Pa.), Joe Donnelly (Ind.), Heidi Heitkamp (N.D.), Joe Manchin (W.Va.), Claire McCaskill (Mo.), Jon Tester (Mont.) and Mark Warner (Va.).

The bill goes to the House of Representatives where it’s expected to be approved quickly. Then it goes to President Obama, where he’s threatened to veto it. A recent Fox News poll found 65% want President Obama to sign the bill.

While the bill moves through Congress, federal agencies approach a February 2 State Department deadline “to provide their views on the national interest with regard to the Keystone XL Pipeline permit application.”

One of those agencies, EPA, is likely to weigh in on the national interest argument and will also comment on the State Department’s environmental review of the pipeline which concluded it will create 42,000 jobs, help communities along the pipeline’s route, and have minimal environmental impact, BloombergBusiness reports.

Soon after, the State Department could determine that the pipeline is in the national interest. However, if another agency objects—I’m again looking at EPA--then President Obama will make the final decision.

Karen Harbert, president and CEO of the U.S. Chamber of Commerce’s Institute for 21st Century Energy, applauded the Senate’s vote in a statement and urged the President to end this needless six-year delay:

The Senate’s passage of legislation approving the Keystone XL pipeline should be the latest signal to President Obama that his administration’s delays and political interference must end. Very few issues have brought together this kind of bipartisan majority in the House and Senate. Congress and the American people have clearly spoken. Today’s vote should send a very strong message to the president that the time to move forward with this project is now.

Laborers’ International Union of North America General President Terry O’Sullivan agreed:

We hope the President stops the politics when a bill reaches his desk and unlocks the good jobs and energy the pipeline will support.

Tell the President to support jobs and America’s energy security by approving the Keystone XL pipeline.

[H/T Mark Green at Energy Tomorrow for the video.]

Sean Hackbarth An oil platform off the coast of Port Fourchon, LA.An oil platform off the coast of Port Fourchon, LA. Photo credit: Derick E. Hingle/Bloomberg.

The Obama administration announced that it would open parts of the Atlantic coast to oil and natural gas development.

2017-2022-dpp-lower-48-states-program-areas_800px.jpg 2017-2022 offshore oil and gas leasing draft proposed program for lower 48 states program areas. 2017-2022 offshore oil and gas leasing draft proposed program for lower 48 states program areas.Source: Bureau of Ocean Energy Management.

At the same time, the administration closed off chunks of Alaska’s Arctic coast.

2017-2022-dpp-alaska-program-areas_800px.jpg 2017-2022 offshore oil and gas leasing draft proposed for Alaska region. 2017-2022 offshore oil and gas leasing draft proposed for Alaska region.Source: Bureau of Ocean Energy Management.

And the Pacific coast and the Eastern Gulf of Mexico remain off limits to new leases.

What’s more, this is the most the administration is willing to offer according to Amy Harder, a Wall Street Journal energy reporter [emphasis mine]:

Secretary Sally Jewell of the Interior Department stressed that this is the broadest plan that they’re going to consider. When it goes final in the next couple of years, they may whittle it down to something smaller than what they proposed today…. So I think the plan can only get narrower and given the president’s commitment to climate change, I wouldn’t be surprised if they ultimately took it out of the final plan, though at this point it’s far to early too say.

A lease sale of the Atlantic coast could easily be cancelled. The administration did it in 2010.

Combine the offshore leasing program with the President’s announcement to lock up vast areas of Alaska from energy development and you have an energy plan that “highlights the disconnect between our economy’s energy needs and the administration’s misguided attempts to meet those needs,” said Karen Harbert, president and CEO of the U.S. Chamber’s Institute for 21st Century Energy.

By 2040 nearly two-thirds of all energy consumed in the United States will be oil and natural gas. That demand will have to be met from somewhere.

“Continuing to keep billions of barrels of oil and trillions of cubic feet of gas under lock and key as the administration is proposing are not what we need to secure our energy future and release America’s energy potential,” added Harbert.

Why open Atlantic offshore drilling now?
Sean Hackbarth A section of the Trans-Alaska Pipeline near Delta Junction, AK.A section of the Trans-Alaska Pipeline near Delta Junction, AK. Photo credit: Daniel Acker/Bloomberg.

Alaska’s Congressional delegation went ballistic over President Obama’s decision to close off the Arctic National Wildlife Refuge (ANWR) to energy development.

This chart explains why Senator Lisa Murkowski (R-AK) and other Alaska leaders are upset.

oil-transported-by-the-trans-alaska-pipeline-barrels-per-day_800px.png  Oil transported by the Trans-Alaska Pipeline Chart: Oil transported by the Trans-Alaska Pipeline

Since its peak in the late 1980’s there’s been a steady decline in the volume of oil transported from Alaska’s North Slope through the Trans-Alaska Pipeline.

Today, there’s less oil moving through the pipeline than when it first went into operation in 1977.

During President Obama’s time in office, the volume of oil going through the pipeline has decreased by 20%.

The Wall Street Journal editorial board notes that the Obama administration has blocked efforts to increase Alaskan oil production [subscription required]:

The ANWR blockade also seems to be part of a larger strategy to starve the existing Trans-Alaska pipeline, the 800-mile system that carries oil south from state lands in Prudhoe Bay. ANWR occupies the land east of that pipeline. The Interior Department this week will release a five-year offshore drilling plan that puts vast parts of the Chukchi and Beaufort Seas—the area to the north of the pipeline—out of bounds for drilling. This follows an Administration move in 2010 to close down nearly half of the 23.5 million acre National Petroleum Reserve-Alaska (NPRA)—the area west of the pipeline.

Federal agencies have also been playing rope-a-dope with companies attempting to drill on the few lands that are still available. ConocoPhillips has been waiting years for permits to access a lease it purchased in NPRA—and the Administration is this week expected to make that process even harder. Shell has spent $6 billion on plans to drill in the Chukchi and Beaufort, only to be stymied by regulators.

The Arctic Outer Continental Shelf is estimated to hold at least 27 billion barrels of oil. ANWR is thought to have at least 10 billion more, while NPRA—designated in 1976 as a strategic petroleum stockpile—is considered equally rich. Yet not one drop of oil is flowing from these areas, and Mr. Obama seems intent on ensuring that none does.

By law if the pipeline shuts down because there’s no more oil available to be transported then it must be dismantled. And as we’ve seen with the political fight over the Keystone XL pipeline, approving another pipeline would be tenuous to say the least. If President Obama's ANWR decision were reversed by a future administration, high transportation costs would hinder North Slope energy development.

The editorial continues:

This is what environmentalists want because they know that if the pipeline shuts down, it must by law be dismantled. Since the pipeline is the only way to get large quantities of Alaskan oil south, shutting it down means closing to exploration one of the world’s greatest repositories of hydrocarbons.

Turning off the spigot to an energy infrastructure asset like the Trans-Alaska Pipeline isn’t wise strategically when future U.S. economic growth depends on access to abundant energy.

Sean Hackbarth Arctic National Wildlife Refuge map.

Pultizer Prize-winning author Daniel Yergin, wrote in the New York Times that global energy markets are at an inflection point. The role of the world’s “swing producer” has swung to the United States:

By leaving oil prices to the market, Saudi Arabia and the emirates also passed the responsibility as de facto swing producer to a country that hardly expected it — the United States. This approach is expected to continue with the accession of the new Saudi king, Salman, following the death on Friday of King Abdullah. And it means that changes in American production will now, along with that of Persian Gulf producers, also have a major influence on global oil prices.

Even though hydraulic fracturing had led this shale boom, conventional oil production is still important.

This makes the Obama administration’s request to close off a big portion of Alaska’s energy reserves to development especially disappointing:

President Barack Obama is proposing to designate the vast majority of Alaska’s Arctic National Wildlife Refuge as a wilderness area, including its potentially oil-rich coastal plain, drawing an angry response from top state elected officials who see it as a land grab by the federal government.

“They’ve decided that today was the day that they were going to declare war on Alaska. Well, we are ready to engage,” said U.S. Sen. Lisa Murkowski, R-Alaska, and chair of the Senate energy committee.

The designation would set aside an additional nearly 12.3 million acres as wilderness, including the coastal plain near Alaska’s northeast corner, giving it the highest degree of federal protection available to public lands. More than 7 million acres of the refuge currently are managed as wilderness.

The U.S. Geological Survey estimates that the area has over 10 billion barrels of recoverable oil.

The wilderness designation will require Congressional approval—not likely with this Congress. However, the Washington Post reports that the Interior Department will take action to limit energy development there [H/t Noah Rothman]:

While Congress would have to approve any new wilderness designation, Interior will immediately begin managing the iconic area under the highest level of protection the federal government can offer.

President Obama, who has not been to ANWR and ironically filmed his announcement on the fuel-guzzling Air Force One said, we must ensure “that this amazing wonder is preserved for future generations.”

In contrast Jonah Goldberg, someone who has visited ANWR, had a different description of the area where oil development would take place:

The oil is on the coastal plain at the very top of ANWR on the coast of the Arctic Ocean. And that ain't beautiful. Believe me. Winter on the coastal plain lasts for nine months. Total darkness reigns for 58 straight days. The temperatures drop to 70 degrees below zero without wind chill. This is the time of year when the oil companies would do almost all of their work; when nary a caribou nor any other creature would be dumb enough to venture out on to the frozen tundra for long. Regardless, ANWR's summer is no picnic either. The coastal plain is covered in a thick brick of ice for much of the year. When it melts, it creates, well, puddles. Lots and lots of puddles - and mud. This provides the lebensraum that mosquitoes and other flying critters need to stretch their wings.

But back to the President. In last week’s State of the Union Address he took credit for the oil and natural gas boom, but the facts tell a different story. Under his watch, oil and natural gas development has decreased on federal lands while increased on private and state lands. In fact, his administration has put up barriers to energy development. The ANWR proposal is the latest.

The administration is expected to release a draft of its offshore lease plan. That may include allowing energy development off the Atlantic coast. Such a decision will be welcome for its economic and job growth and bipartisan support, but it will further confirm how incoherent the President’s energy policy is.