The People of America's Oil and Natural Gas Indusry

Keystone XL and Our Energy Partnership with Canada

Mark Green

Mark Green
Posted November 12, 2015

Another postscript to the president’s unfortunate and shortsighted rejection of the Keystone XL pipeline last week: The U.S. Energy Information Administration reports that as total U.S. crude oil imports decline, Canada’s share of the imports total is rising. EIA’s chart:

imports_canada

The data behind the chart shows that in August 1995 the U.S. imported a total of 7.43 million barrels per day (bb/d), including a little over 1 million bb/d from Canada, about 13 percent of the total. In August this year U.S. oil imports were 7.63 million bb/d (down from a high of 10.7 million bb/d in June 2005), including 3.4 million bb/d from Canada, about 45 percent of the total. (At the same time imports from Venezuela, which produces a heavy crude similar to oil sands crude, have declined from 1.29 million bb/d in 2004 to 849,000 bb/d in August – no doubt, a result of increasing supply from Canada.)

What we see here is a snapshot of the strategically important growth in the United States’ energy partnership with Canada. Our neighbor and ally is our No. 1 source of imported oil – almost three times larger than imports from Persian Gulf countries. And, as we’ve discussed before, there’s more to the U.S.-Canada partnership than energy, because the broader trading relationship also benefits the U.S.

Two points from the above are connected to America’s strength here at home and abroad: First, with oil (36 percent) and natural gas (29.6 percent) furnishing nearly 66 percent of the energy that powers our country, the more energy we produce here at home the better. We’re seeing that with the decline in crude imports. Second is that securing stable and reliable sources of imported oil for today and tomorrow is vital. Domestic production and secure sources of imports are fundamental to a strong domestic economy and America’s safety in the world. EIA:

The United States has been the primary destination for Canada's crude oil exports since the early 2000s. Based on data through the first half of this year from Canada's National Energy Board, 99% of Canada's crude oil exports were sent to the United States.

Clearly, the Keystone XL pipeline would be an important part of our energy partnership with Canada, bringing upwards of 800,000 barrels of oil per day to U.S. refineries. The big question now is how might the Keystone XL rejection affect that partnership?

Here’s what the U.S. State Department said about that in its national interest determination document:

The Department recognizes the importance of the proposed Project to Canada and places great significance on maintaining strong bilateral relations. Canada is one of the United States’ closest strategic allies, and our economies are deeply integrated with over $2 billion in trade per day. Although the Government of Canada has indicated its strong interest in the completion of the Keystone XL pipeline and a denial of the permit will have a negative impact on our relationship, our strong and historic relationship with Canada will endure. The United States will continue to work with Canada to ensure our shared interests in energy, environmental, and economic issues prosper.

Short version: Canada most likely will get over it.

Maybe that analysis will prove true. While Canadian leaders voiced clear disappointment with the decision, incoming Prime Minister Justin Trudeau said the U.S.-Canada relationship is bigger than one project. Conservative interim leader Rona Ambrose sounded less inclined to move on:

“I’m from Alberta. Fifty-thousand people have lost their jobs in less than a year. This is tough news for Alberta, and this is tough for the energy sector. (Obama) has been focused squarely on the Keystone XL pipeline as a symbolic gesture to his environmental legacy and his environmental supporters when we know that there (have) been thousands of miles of pipeline built in the meantime. … The politics of Keystone continue to unfold and there may be an opportunity for the (U.S.) senate and (U.S.) congress to still intervene.”

With the U.S. State Department consistently concluding that Canada will develop its oil sands over the long haul, how might the Keystone XL rejection impact how that oil reaches the market place? More questions: Will 99 percent of Canada’s crude exports continue to go to the United States? If not, how might that affect U.S. security? And how might it affect climate, with Canadian crude potentially going to countries whose refining sectors aren’t as environmentally sound as ours?

The bottom line is that the White House’s handling of the Keystone XL project, including taking more than seven years to render a decision and the rejection itself, impacts the United States’ vital, secure and beneficial energy partnership with Canada – impacts that bear watching. 

ABOUT THE AUTHOR

Mark Green joined API after a career in newspaper journalism, including 16 years as national editorial writer for The Oklahoman in the paper’s Washington bureau. Mark also was a reporter, copy editor and sports editor. He earned his journalism degree from the University of Oklahoma and master’s in journalism and public affairs from American University. He and his wife Pamela live in Occoquan, Va., where they enjoy their four grandchildren.