Can America afford not to approve Keystone XL pipeline?

A recently announced order for Alberta oil-sands related refinery equipment from an American engineering company (Graham Corporation) is more evidence that downstream capital investments have resumed in the expectation of expanded oil sands output. Graham will build an ejector system for use in refining Alberta crude oil. The announcement underscores, in a relatively small but significant way, the growing importance of Alberta oil to the Americans.

James R. Lines, Graham’s President and Chief Executive Officer, commented, “It is encouraging to see a major U.S. refiner preparing its facility to process synthetic crude oil from the Alberta oil sands. Although measurable industry-wide investment had been made prior to the recession to prepare some existing facilities for the processing of Alberta synthetic crude, there has been minimal investment during the last few years. The Alberta oil sands represent the second largest proven concentration of oil in the world after Saudi Arabia. And, with 170 billion barrels of proven recoverable reserves, it is still at a very early stage of development with only about 7 billion barrels of oil recovered to date.”

At the heart of the discussion of oil in America these days is one massively important reality: Canada, America's friendly neighbour, is now the number 1 supplier of crude oil to the US, delivering 21 percent of America's imported oil at present, while America's other suppliers (Mexico is number 2, at 11 percent, but their output is expected to drop) are likely to decline in importance. Venezuela's oil industry, according to reports, is also in trouble; as well, China has been investing huge sums in that country's oil field for its own needs.  

That leaves Canada securely in the number 1 position. The proposed Keystone XL pipeline will carry as much as 1.1 million barrels of this "friendly" crude into the US each day, with that number rising to 5 million by 2020. The Athabasca oil sands hold about 1.7 trillion barrels of oil, enough to satisfy America's thirst for many years to come.

Approval for Keystone is expected early this year. US companies have already invested $20 billion in heavy crude refining and TransCanada's Washington lobby (the owner of Keystone) is headed by a Clinton aid, Paul Elliot.