WASHINGTON – As Republicans officially took control of both chambers of the U.S. Congress on Tuesday, they quickly began laying the groundwork for approval of the contentious Keystone XL pipeline.
But U.S. President Barack Obama immediately moved to stifle Republican hopes by announcing through his press secretary Josh Earnest that he will veto the bill should it pass both houses.
“The president wouldn’t sign it,” Earnest flatly stated Tuesday at his daily press conference.
He said Obama believes that circumventing the State Department assessment of the Keystone project, which is in its sixth year, would be the wrong thing for Congress to do.
Republican Sen. John Thune of South Dakota, which is one of the states traversed by the proposed pipeline, called the White House announcement a “disappointment.”
“The president fails his first big test when it comes to whether or not he wants to work with Congress,” he told CNN. “All the analysis (of Keystone) that can be done has been done and I think he is listening to his left-wing base. A lot of folks in the extreme environmental community I think have his ear on this issue and it’s unfortunate because it’s going to stay in the way of getting something I think the majority of Americans want.”
Congress will begin debating the issue Wednesday and Republicans claim to have enough votes in both houses to approve the pipeline but not enough votes to override a presidential veto.
The U.S. has about 245,000 kilometres of oil pipelines but none have received the attention awarded the $8-billion US Keystone XL. This is because most of the oil — the pipeline’s daily capacity 830,000 barrels — that will travel through the pipeline to Gulf Coast refineries will be carbon-heavy bitumen from Alberta’s oilsands.
Obama has stated that the effect of the pipeline on oilsands expansion and therefore on climate change will be a major factor in guiding his decision.
The U.S. president has delayed his decision pending the final resolution of a Nebraska court case on the pipeline’s route. A court ruling is expected this month.
Obama has also minimized the project’s job-creation potential and suggested that recent increases in U.S. oil production negate the secure supply argument, rendering the Keystone and its Canadian oil irrelevant to U.S. energy needs.
Yet the precipitous decline in oil prices, which this week dipped below $50 a barrel from well over $100 only six months ago, has added a fresh dimension to the energy security argument.
Most new U.S. oil production comes from hydraulic fracturing, which is the process by which oil drillers use a high-pressure water-chemical-sand mixture to crack open underground shale formations to release the oil and/or gas trapped within.
These wells require repeated fracking to keep the oil or gas flowing. Because the fracking is confined to a relatively small area of the oil and gas field, drilling into a shale formation is intense.
All of this means high costs. Experts claim most operators in the Bakken oilfields, located in southern Saskatchewan, northern Montana and North Dakota, need $80 to $100 a barrel oil prices to make a profit.
Oil consultant Arthur Berman, who worked for 20 years as a geologist for Amoco Corp., recently told Oilprice.com he expects Bakken production to drop by the end of this year as current drilling contracts expire and investment money dries up.
“When the drilling slows down and production drops—which won’t happen until at least mid-2016—we will see the truth about the U.S. shale plays,” he said. “They only work at high oil prices. Period.”
According to the U.S. Energy Information Administration, U.S. oil production will level off this year and begin to decline in 2020. Unless consumption declines, U.S. reliance on foreign oil will increase.
Berman said oilsand bitumen transported by Keystone XL would be a vital feedstock for U.S. refineries. They will need it to blend with Bakken light oil and condensate to create refined products for both domestic and international markets.
“This, by the way, is the heart of the Keystone XL debate,” he said.
Despite its production increases, the U.S. still imports 40 per cent of its oil consumption. Experts predict that that won’t change. Canada remains America’s largest foreign supplier at 33 per cent of imports.
Source:: canada.com
