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Permalink Reply by Skip Peel - Mineral Consultant on November 8, 2012 at 16:28

Bloomberg Business - Politics & Policy - February 17, 2012

The Lazarus of political dramas known as Keystone XL gained new life yet again this week as Senate Republicans introduced an amendment to force approval of a $7 billion, 1,750-mile, Alberta-to-Texas oil pipeline, and environmentalists generated 800,000 letters to the Senate in two days opposing it.

A quick review: In November, President Obama sent TransCanada, the Calgary-based oil services company that planned to build the pipeline, back to the drawing board when he rejected the proposed route through Nebraska, where the pipe would lie inches above an aquifer that sustains the Great Plains. Then in December, Republicans in Congress required the President to make a final decision within 30 days so they could portray him as a job-killer; he obliged, denying the permit in January. This week’s Senate amendment and its corollary in the House—a measure tied to offshore drilling in the Atlantic Ocean that passed with a vote of 237-187 on Feb. 17—are attempts to override the President’s ruling.

As skilled as opponents were in defeating the pipeline, which seemed a sure thing as recently as September, pro-pipeline commentators and their allies in Congress have proven equally adept at making the case for it. The pipeline’s champions argue it will create jobs, slash domestic gas prices, and reduce dependence on oil from the Middle East.

Just how realistic are these claims?

Clearly, the construction of the pipe, most of it below ground, will be a huge undertaking. The estimated number of people it will employ in the process, however, has fluctuated wildly, with TransCanada raising the number from 3,500, to 4,200, to 20,000 temporary positions and suggesting the line will employ several hundred on an on-going basis. The U.S. State Department, which made its own assessment because the pipeline crosses the U.S.-Canada border, estimates the line will create just 20 permanent jobs. One advantage of a pipeline, after all, is that it’s automated.

The gas price argument rests on the bump in supply the Keystone XL will bring to market. Keystone XL would deliver around 830,000 barrels a day. Not all of that would be used in the U.S., however: The pipeline delivers to a tariff-free zone, so there’s a financial incentive to export at least some of this oil. This is especially true because area refineries are primed to produce diesel, for which there’s less stateside demand. But let’s say two-thirds of the capacity—half a million barrels a day—of Keystone oil stays in the U.S. That’s a convenient estimate on which to gauge the impact of Keystone oil, because it’s the supply increase the U.S. Energy Information Administration, which provides independent data on energy markets, expected in a recent study of the expiration of offshore drilling bans. In 2008, it studied what 500,000 barrels more per day would save consumers at the pump: 3¢ a gallon.

The point is not that the Keystone XL won’t deliver on the economic claims made for it, but that it’s highly probable the gains will be modest for consumers, while carrying significant financial risks, as we previously explored.

Meanwhile, those opposed to the pipeline—including environmental groups that sent all those e-mails to Congress—might want to put their energies instead into passing fuel economy legislation. The mileage upgrade for cars and trucks that Obama proposed last July would displace 11.6 percent of current consumption by 2025. (This upgrade is already technically feasible.) After 2025, the new fuel economy standards could well reduce consumption by 4 million barrels a day—nearly five times the capacity of the Keystone XL—and more than we get from OPEC.

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Permalink Reply by adubu on November 9, 2012 at 1:10

Skip--all that is correct about the Keystone XL pipeline  and as Steve P says below the Keystone was to be build primary to transport crude from canada but it added a great benefit for the Bakken which extends a major part into Canada. This field has reserves to match Saudi and Warren had influence on Obama to denial of the permit for profit to transport the crude via rail and not for reason that EPA and water table risk

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Permalink Reply by Skip Peel - Mineral Consultant on November 9, 2012 at 2:24

Objections to the route owing to concerns for the aquifer came not only from national environmental groups that usually weigh in on such matters but from a diverse group of stake holders.  While the energy industry was attempting to make political hay over an issue they deemed an election year opportunity local interests were debating the impacts and potential benefits of the Keystone.  IMO any president would likely refrain from imposing a federal mandate as long as the issue was unsettled by the people who had the most at stake.  To Nebraskans for example it wasn't pro-business or pro-energy against greenies and libs, it was about their farms, their drinking water and their environmental concerns.  Even the most ardent drill-baby-drillers can get a little antsy when a crude pipeline actually does run through their backyard.  Once the locals have had their debate and made their decision I hope the pipeline is built.  I'll take 3 cents lower gasoline and the twenty permanent jobs.  I just know that the real benefits aren't worth the time and effort both sides have spent on the Keystone.  And neither are the environmental concerns for a properly sited and constructed pipeline.  Forget the partisan rhetoric and look at the facts is my mantra.  Here's an article from the Omaha Herald.  There are news sources out there speaking to the facts for those who truly care about the issue.

WORLD-HERALD EDITORIAL

Proper pipeline path

When the Legislature passed a law allowing the state to regulate the route an oil pipeline took across Nebraska, the idea was that officials would be able to assess risk and steer the pipeline away from environmentally sensitive areas such as the Sand Hills. That process seems to be working well for the Keystone XL pipeline.

A preliminary review by the Nebraska Department of Environmental Quality indicates that Trans- Canada Inc., promoter of the high-pressure pipeline from Canadian oil sands to Gulf Coast refineries, has addressed most of the concerns raised in July by a previous DEQ report. That earlier report asked TransCanada to avoid areas of sandy soil and some community drinking-water supplies.

The new review found that the company had minimized sandy areas and avoided water supplies for two communities. It also said that TransCanada had successfully bypassed the Sand Hills region.

The report also noted that the company would come up with an emergency response plan in case of leaks and would keep a $200 million liability insurance plan in effect. Other concessions the company made include baseline testing for domestic and livestock water wells near the pipeline and identifying a range of crude oil mixtures that would flow through the line.

TransCanada has made compromises in its route and procedures, and the state has obtained concessions that the DEQ deemed necessary to protect Nebraskans. Nebraska’s pipeline regulation law appears to be working as it should. It was passed so that Nebraskans would have a say on where and under what conditions oil pipelines, including Keystone XL, were located — and that is what it is doing.

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Permalink Reply by adubu on November 9, 2012 at 3:45

Skip-- I understand all that but are you thinking and saying that the Keystone XL will only transport the heavy bitumen crude from canada to Olk? I think the line will have multiple usage of course guess they can not mix with lighter crude at the same time in the line. I just saying Warren RR had a windfall without the pipeline. No this is not the primary and only reason Warren back Obama. There are other pipelines from Canada to USA at this time. This is just IMO and of course who knows what is the correct reason. We can just have a disagreement in our thinking. I understand the EPA thinking althought I do not totally agree with them. Thanks for input and your opinion.We can respect each others opinion for I do not think we are both nor neither 100% correct or wrong but somewhere in the ball park.You may have the last comment in this debate now for you have heard my closing statement :))

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Permalink Reply by Skip Peel - Mineral Consultant on November 9, 2012 at 3:49

The article is about the Nebraska DEQ, not the feds.  It's a state issue.  IMO that should be settled before any federal agency makes a determination.  And the points regarding possible benefit are based on pipeline capacity, not the source of the crude.

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Permalink Reply by Krkyoldhag on November 10, 2012 at 10:06

This is why Trinity Industries has crews working overtime to build those rail tankers for the oil. 

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Permalink Reply by Steve P on November 8, 2012 at 20:37

I understand that land/mineral owners benefit from the depletion allowance, and I'm sure that someone in the WH knows that as well.  but for every $1 that you and I benefit, the producers get $3 - 7 benefit, so it's a huge target for the Dems.  Our status won't get 5 minutes of time in the debates, and if we ever make it into the news articles in the NYT, WAPO or WFJ, it will be in paragraph 16 of the article.

I won't discount the impact that Warren Buffet could have on the Keystone outcome, but his impact will be far from the light of day.  He places a higher value on protecting his Boy Scout reputation that a few extra $$ in profits from a very small part of Berkshire Hathaway.  In other words, he could affect the outcome and we mere mortals will never know. 

 

Of course, the proposed purpose of the Keystone is to transport the crude from Canada, not the Bakken Field.

 

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Permalink Reply by P.G. on November 10, 2012 at 6:01

If Warren Buffet benefited from the Keystone being cancelled..who would benefit from Fracking being banned (for legitimate reasons of course) in the US?

NG would go back to the pre-fracking pricing and we would need to import NG..likely from countries who are still fracking..?

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Permalink Reply by adubu on November 10, 2012 at 7:12

PG---benefits would be operators and royalty owners with wells already on line with increased nat gas prices, coal, etc But don't count on Fracking To be ban will not happen IMO because would have major effect on oil production in USA which presently is more important to USA than Nat Gas

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Permalink Reply by P.G. on November 10, 2012 at 17:36

You are making sense...since when has that been a criteria for rational governance lately?

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Permalink Reply by GoshDarn on November 10, 2012 at 9:40

P.G.:

Seems to me that there's absolutely no way to reach "energy independence" (in the near term) if safe, non-polluting, chemical-free fracking were to be put on hold for further study.  Only the truly fanatical -- and, y'know, there doesn't appear to be any such prime-time U.S. politicians who'll actually vote for oil dependency via foreign governments.

Yet, if one wanted to hedge the hedge, then here's a thought.  If there ever was a short-term moratorium placed on "safe" fracking -- then there'd be some logic to excluding offshore frac drilling in such a regulatory scenario since the aquifer tables offshore have no drinking-water potential users.

See the logic?

Ergo, offshore fracking might quite possibly be excluded from regulation, which means offshore service companies and operators might, in fact, see a spike up in their efforts (and in their stock-market values) if a fracking moratorium was hammered out -- especially if onshore fracking comes to a halt and the price for NG and oil zooms up to further monetize the upside on offshore production.

Think about it.

Note:  Safe fracking fluid (and possibly gas-frac technology), along with safe fracking standards will eventually win the day for the U.S. of A. in order for our country to achieve energy independence from foreign oil (until our shale deposits are depleted and we find yet another fossil formation to supply our needs).

Finally, the above is simply an investor's perspective of an unlikely hypothetical as to how to leverage equity income per a what-if scenario.  In other words, this what-if isn't meant to be viewed politically (or realistic in it's action-ability), in that it's only being offered as a thought exercise into a future uncertainty that will not happen.

GD 

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Permalink Reply by Keith on November 11, 2012 at 7:27

From what I can tell offshore fracking (especially in the GOM) and onshore farcking, more specifically shale fracking have very little in common.

Offshore fracking is a misnomer, they are really large gravel pack jobs are mainly for sand control. It has a very different purpose and outcome than shale or even hard sand stone fracking.

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