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Energy Insights: Energy News: A pipeline runs through it

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A pipeline runs through it


Canada can’t wait to start pumping. The United States can

MINUTES after America’s State Department declared on January 31st that a proposed cross-border oil-pipeline would have little environmental impact, Canada’s ruling Conservatives posted an online ad bluntly directing Barack Obama to “approve Keystone XL now”. It is not the first time that Canada has dropped the diplomatic niceties when pressing Mr Obama to approve the Keystone pipeline, which would carry crude from Alberta’s tar sands to refineries on the Texas coast. Stephen Harper, Canada’s prime minister, has previously threatened to sell the oil to Asia, called approval a “no-brainer” and insisted he “would not take no for an answer”. But Mr Obama seems to be in no rush.

Developing the tar sands and exporting its oil is a priority for Mr Harper, whose political roots lie in energy-rich Alberta. The pipeline, which would carry up to 730,000 barrels a day (b/d) of Alberta crude and an additional 100,000 b/d of Bakken crude from Montana and North Dakota, was first proposed in 2008. The southern part of the proposed network, within the United States, went into operation last month. But the northern bit, which crosses the border, has been held up by court challenges and environmental reviews. Greens, who want tar-sands production curtailed, remind Mr Obama of his 2008 promise to “free from the tyranny of oil once and for all”. The pipeline’s backers promise that it would bring jobs and investment.

Despite its title, the State Department’s “Final Supplemental Environmental Impact Statement” is not the last word on the matter. The public has 30 days to comment and America’s federal agencies have 90 days to weigh in before Mr Obama will be called on to make a decision. With congressional elections due in November, he may prefer to take his time. A White House spokesman said after the report’s publication that the president would not be hurried into making up his mind.

The report supplied ammunition to both sides of the debate. Producing and using a barrel of Albertan oil emits 17% more greenhouse gas than the average barrel refined in the United States, it said. But building the pipeline would not have much impact on climate change, because without it Alberta crude would probably still be produced and shipped to market, through other pipelines or by rail. Unless the price of oil dropped below $75 a barrel (it is now about $97), tar-sands producers could absorb the cost of rail transport, the report said. Rail freight had risen to 180,000 b/d in Canada by the end of last year, from almost nothing in 2011.

Last July Mr Obama said that Canada could do more to lower its carbon emissions. Yet Mr Harper, who has accused the American president of “punting” the Keystone decision, did some punting of his own, saying just before Christmas that he hoped new emissions regulations for Canada’s oil and gas sector, first promised in 2006, would be passed within two years.

Canada had a bigger stick to wave at the United States before the surge in hydraulic fracturing (“fracking”) led to predictions of American energy self-sufficiency by 2035. Mexico, which has begun to liberalise energy, also looms as a potential rival. Mr Harper and the oil industry must hope that they can secure Keystone’s approval before the well of interest dries up.

From the print edition: The Americas

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