What’s likely to happen with the Keystone XL oil pipeline

Keystone pipelineWith President Obama’s veto of the Keystone XL pipeline bill last week, it’s likely that the Canadian-US oil agreement will be stalled out for now. On Wednesday, the Senate will vote to override the president’s veto, but it will be a very close call.

The Keystone XL pipeline has been a battleground for environmental groups, the Canadian government and oil companies, Republican leaders in the House and Senate, and the US State Department for the past six years. In his written statement, Obama said that because the bill “cuts short thorough consideration of issues that could bear on our national interest — including our security, safety, and environment – it has earned my veto.”

So, what are those issues that could bear on national interest?

  • Economics: House speaker John Boehner (R-Ohio) thinks it’s a “no-brainer” and a national embarrassment that countries like Russia and China are moving ahead on massive pipelines, but the US can’t get the project off the ground. “The president is just too close to environmental extremists to stand up for America’s workers,” Boehner said in a statement. Supporters of the pipeline say that it would create construction jobs, reduce oil prices, and help grow the economy.
  • Environmental issues: Sierra Club Executive Director Michael Brune says that the president has all the evidence he needs to reject the Keystone pipeline for now – it may contribute significantly to the climate crisis, and Republicans are too tied into their big oil allies. Other Keystone opponents argue that it would accelerate climate change, it could pollute waterways along the pipeline’s route, and won’t be contributing very much to the US economy.
  • State Department: White House Press Secretary Josh Earnest told media that one of the reasons the president vetoed the bill is that the US State Department is still conducting a review of the massive pipeline that would be moving about 800,000 barrels of crude oil per day from Alberta to oil refineries in Port Arthur, Texas. Secretary of State John Kerry has been getting a great deal of pressure to give the green light to the pipeline, but the review process has been dragged out. The State Department had asked federal agencies for feedback on the $8 billion pipeline project, and hasn’t been clear about when its official statement will be released.
  • US and Canada relations: The Canadian government and oil industry need to have Alberta tar sands processed in Texas and then distributed to oil refineries in the US and Canada. Canadian officials have expressed frustration with the decision, and suggest that it could set a bad precedent for bilateral trade agreements between the US and Canada.
  • Too much gray area: Some of the Keystone opposition arguments come from concern that the facts may be distorted, and that investing $8 billion in the pipeline may not be worth it. While up to 42,000 jobs could be created, these are temporary construction jobs lasting one-to-two years; only about 50 full-time jobs such as pipeline inspectors would be put into place. There’s also the fact that plenty of oil and gas are being extracted from shale fields through hydraulic fracturing; and there’s so much global oil supply out there that oil prices – and gasoline – will stay low for the foreseeable future.

Big Oil investments in alternative fuels and energies – how serious are they?

big oilIn recent years, major oil companies (also known as Big Oil) have been investing in alternative fuels and energies to meet government and corporate mandates and through their own speculation about the future of oil supply and changing public attitudes. There’s been a mixed bag of perspectives shared by leaders in sustainability and cleantech on the role that Big Oil will play in the future; some would rather see these companies completely go away soon while other analysts suggest supporting oil industry investments in alternative energies and carbon mitigation. Here’s the latest from Lux Research and other analysts……….

Lux Research has seen enough movement in the alternative fuels industry to release a report analyzing how oil companies have been financing its commercialization. The analyst firm explored its database of over 1,000 deals and partnership engagements between 2000 and September, 2014. Methods analyzed included private placement, equity stake, JVs, mergers and acquisitions, other than general partnerships. The seven most active oil major companies in its database are Shell, BP, Total, Valero, Chevron, Petrobras, and Reliance.

Long before its Gulf of Mexico oil spill, BP has been active in alternative energy invesments; Lux Research says the oil giant leads its industry in investment frequency in a variety of alternative fuels and energies. BP has had a strong focus on the crop development by transgenics and breeding, with repeated investments made to Chromatin and Mendel Biotechnology. It also continues investing in biomass to sugar technology including cellulosic biomass.

Shell forecasts that energy demand will double in the world by 2050 and is now working with partners to ensure that it can survive through the next century; carbon emission mitigation is another force for change Shell is monitoring. Meeting that demand will require being open to new energy resources. Shell CEO Ben van Beurden talked about the urgency of mitigating carbon emissions and its impact on climate change in a recent speech at Columbia University. He also talked about supporting renewables and energy efficiency.

Shell has formed partnerships and joint ventures (JVs) with Codexis , Cosan, and Novozymes to support growth in cellulosic ethanol. Shell has invested in Raizen, its ethanol JV with Cosan to create what it calls the largest sugar and ethanol company in the world. It also partnered with Virent on the biomass catalytic conversion to produce renewable gasoline, and Cellana on algae biofuel.

However, don’t forget to keep it all in perspective. “If Shell is serious about investing in a clean energy future they must stop actively undermining our climate and clean energy laws,” said Merrian Borgeson, senior scientist at the Natural Resources Defense Council (NRDC). The Union of Concerned Scientists (UCS) also launched a campaign pressuring Shell to join tech firms in dropping support for the American Legislative Exchange Council, a group that has modeled legislation to oppose climate action and repeal incentives for renewable energy. Shell came under fire from environmentalists in 2009 for selling off its wind and solar projects to focus on biofuels and carbon capture and storage.

Oil companies do work hard at keeping their investment portfolios profitable – that might mean leaving an energy sector behind. In September, Chevron Corp. finalized the sale of its renewable energy subsidiary OpTerra Energy Services. The oil giant also sold the energy efficiency and renewable energy arm of Chevron Energy Solutions, a division of Chevron USA, and pulled back funding for biofuel projects. ExxonMobil Corp. has also dropped funding for biofuels projects; natural gas has paid off better for the oil giant. BP divested its wind farm division in the United States last year to focus on its high-yield oil and gas projects.

Energy Trends: The latest on oil and gas, fracking, fuel prices, and the future of OPEC

oil drillingOil and gas fields in North America are getting a lot of attention this year as a source for more transportation fuel – keeping gasoline and natural gas prices down and reducing imports of foreign oil. It’s Here’s the latest news and market trends to follow on where all this appears to be heading……

  • The US company credited with combining horizontal drilling and hydraulic fracturing (fracking) – which is thought to have unleased the current energy boom in North America – just made the largest US oil and gas industry transaction for the year. Devon Energy Corp. has acquired GeoSouthern Energy’s assents in Eagle Ford Shale, a prolific oilfield in South Texas. The $6 billion cash acquisition brings in 53,000 barrels of oil equivalent per day and 82,000 net acres with at least 1,200 undrilled locations. Those reserves may have as much as 400 million barrels of oil equivalent. About 10 years ago, Devon acquired Barnett Shale in Texas, which is credited for helping create a nationwide glut of natural gas – keeping the prices down.
  • The US is poised to become one of the leading sources for natural gas exports overseas. Under the current US regulatory structure, natural gas has to be converted to its liquid form and loaded into tanker ships. That means building liquefied natural gas (LNG) terminals that are expensive (about $5 billion per export facility), controversial, and difficult to get approved by the US Dept. of Energy and Federal Energy Regulatory Commission.
  • California Gov. Jerry Brown is getting heckled by environmentalists for permitting fracking in the state. Brown is credited for being stringent on renewable energy powering electricity in the state and for supporting alternative fuel vehicles and electric vehicle charging stations. He’s also been criticized for signing a bill into law this fall that will oversee fracking operations. Senate Bill 4 requires oil producers to notify people leaving near wells, conduct groundwater monitoring, and providing more disclosure on chemicals used in fracking. Environmental groups want to see fracking stopped altogether and say that the bill is way too lenient. Several other states are seeing similar political and litigious battles being fought over fracking, while the federal government is keeping a low profile on it for now.
  • OPEC’s power over oil prices is diminishing. With huge growth in US shale and Canadian oil supply – and the easing of sanctions on Iran – analysts think there will be a sizable boost to global output. The OPEC cartel of Middle Eastern, Latin American, and African oil producing nations, are worried that the profit margins won’t be as good as they were in years past. While meeting last week in Vienna, they decided to maintain their 30 million barrels per day production volume at least through May of next year.

40 years after OPEC oil embargo – and the problem hasn’t been solved yet

OPEC oil embargoOctober 17th saw the 40th anniversary of the oil embargo by the Organization of the Petroleum Exporting Countries (OPEC) – a six month embargo that cut the supply of oil to the US and skyrocketed gasoline prices. The days of 25 cents per gallon gasoline were over and the coming years would see desperate attempts to solve the problem. The 1973 embargo started right after the Yom Kippur war was launched, and was spurred by US support for Israel; the second gasoline crisis in 1979, again driving up pump prices and forcing drivers to wait in long lines to fill their tanks, was triggered by another Middle East crisis – the takeover of the US embassy in Iran.

For Keith Crain, editor-in-chief of Automotive News, it was the end of innocence – when automakers had been competing to provide the biggest and best cars to drivers and mileage didn’t really matter at all. The OPEC oil embargo changed all of that; General Motors president Ed Cole vowed to raise the automakers corporate average fuel economy (CAFE) by 50% from 12 mpg to 18 mpg within a decade. The US Congress thought it was very good idea and raised the bar even higher – CAFE was to be 27.5 mpg by the 1985 model year, though that did not happen. For Peter Ward, then with the California Energy Commission, the 1973 oil embargo was the watershed, defining moment illustrating the power of the oil cartel on global economics and clarifying the necessity for alternative fuels.

There were other watershed moments taking place after the initial OPEC embargo….

  • “Non-OPEC” oil field drilling started to break dependence on OPEC supply, led by drilling in the North Sea and Alaska.
  • The Keystone XL pipeline fight had a predecessor with Alaska’s Prudhoe Bay oil field. It had been stopped by environmentalists in the late 1960s, but Congress approved the pipeline that would eventually add up two million barrels a day to the US supply.
  • Alternatives to oil took off – nuclear power and coal became important in electric power stations. Solar energy saw a startup phase that didn’t take hold until very recently.
  • Import cars stated being taken seriously in the Detroit 3-dominated US market. Japanese small cars provided the fuel economy, and owners started expecting their cars to be more reliable and long lasting from their experience with these cars.
  • In 2008, the US (and the rest of the world) once again experienced the power of oil on the economy. Oil and transportation fuel prices skyrocketed in August 2008; within a month, the Lehman Brothers debacle spurred the Great Recession, and the dramatic oil price increase from the previous month was thought to be instrumental in the recession’s tipping point being passed in September.

As then-president George W. Bush said a few years ago during his State of the Union address, “We’re addicted to oil.” Recovery from oil addiction is being played out now in the federal fuel economy standards; growth in plug-in, hybrid and alternative fuel vehicle launches; development of the alternative fuel and charging infrastructure; California’s (and states following California’s guidelines) zero emission vehicle targets; and demand for green, alternative fuel vehicles from consumers, fleets, municipalities and government agencies, and transportation companies. There’s a still a long ways to go, but oil supply disruption and skyrocketing pump prices continue to be a very motivating force.