US puts Canadian pipeline decision on hold

The US Department of State has extended an inquiry into a major crude oil pipeline expansion that could transport 1.1 million barrels per day from Alberta, Canada, to refineries on the US Gulf Coast

The US State Department has postponed a decision on TransCanada’s Keystone XL pipeline expansion this week, giving federal agencies involved in a consultation on the project extra time to provide their views. It now plans to complete an environmental impact study and will give federal agencies another 90 days after that to submit comments.

The pipeline will deliver crude from Alberta, Canada, home of the oil sands deposits that make up 95% of Canada’s reserves, which are the second largest in the world at more than 178 billion barrels.

Oil from the sands is often criticised as environmentally unsound due to the energy- and water-intensive extraction methods used, as well as the carbon footprint of the crude extracted. According to Greenpeace, the tar sands generate 40 million tonnes of carbon dioxide per year – more than all of the cars in Canada combined.

If approved, the expanded Keystone Pipeline System will provide a significant influx of Canadian crude to refineries on the US Gulf Coast. An initial phase of the pipeline started shipping crude from the sands to market hubs in the US Midwest on June 30 this year. This next phase, Keystone XL, would extend the pipeline to the US Gulf Coast, boosting its capacity from roughly 591,000 barrels per day (bpd) to 1.1 million bpd.

Don Thompson, president of the Oil Sands Developers Group, which represents producers in the region, is confident the expansion will happen. “I fully expect this critical piece of infrastructure for US energy security will be approved,” he says.

Canada remains the top supplier of crude oil to the US, followed by Mexico and Saudi Arabia. Figures from the US Energy Information Administration show the US imported approximately 1.9 million barrels per day from Canada in 2009, about 21% of its total imports.

While the environmental impacts of oils sands development are high, importing from other regions could mean trading with more politically unstable regions. As such, Dr Joseph Doucet, a professor of energy policy at the University of Alberta, says it is hard to imagine a situation in which the US could suddenly stop imports from Alberta. 

Commenting on the environmental concerns, Dr Doucet said producers should continue to work on reducing the carbon footprint of fossil fuels, but added: “There is no “perfect” oil that doesn’t have a carbon footprint. It’s important for consumers to understand that this is not a question of stopping imports and simply changing our habits. For the most part, the US would be looking at stopping Canadian imports and importing oil from somewhere else instead, where the trade-off [in terms of environmental and other issues, such as human rights] could be minimal or might even be worse.”

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