Two Countries, Two Energy Revolutions

Mark Green
Posted June 5, 2015

OK, so EPA says safe hydraulic fracturing isn’t a threat to the nation’s drinking water. That’s great news for America’s energy revolution, which is being driven by advanced fracking and horizontal drilling. Without them there’s no revolution and certainly fewer jobs and less economic opportunity. Thanks, EPA, for following the science and recognizing – as industry has for some time, producing specific best practices for fracking – that the focus should be on continually improving safe operations and advancing technologies. These will help ensure our energy revolution goes forward.

Now, let’s talk about another country’s energy revolution – one that hasn’t gotten a lot of attention in the U.S. beyond the unfortunate, protracted debate over the Keystone XL pipeline. Canada’s own energy revolution is at the heart of the U.S.-Canadian relationship and is so integral to U.S. security. The vitality of Canadian energy is something more Americans should care about, as it bears directly and indirectly on our lives in a number of ways:

Supply and Security – The first and most important point is that our energy security and our overall security in the world is closely tied to Canada, our largest supplier of imported oil – about 36 percent of our total net oil  imports in 2014, according to the U.S. Energy Information Administration (EIA). (By comparison, Saudi Arabia supplied about 16.5 percent of our net imported oil in 2014.)

The vast majority of that is oil sands. That’s why Keystone XL is so critical, as it would bring about 800,000 barrels of oil per day from Canada (and the U.S Bakken region) to our Gulf Coast refineries. It’s a vital piece of energy infrastructure, for both the supplier and the supplied.

U.S. refineries have been handling Canadian crude, including oil sands, for decades. And they’re good at it, reducing emissions over the past two decades. With those refineries are largely configured to handle slates of heavy oil, oil sands trade is essential to the business of producing refined products, sustaining jobs in our refining sector and helping boost the economy.

Environment – Energy from Canada is energy from a country with strong environmental standards in the development of its resources. These include reclamation of affected areas and an aggressive plan to reduce emissions from energy development.

According to the Environment Canada 2014 report, between 1990 and 2012, greenhouse gas emissions associated with every barrel of oil sands were reduced 28 percent. Oil sands accounts for 8.7 percent of Canada’s overall emissions and about 0.13 percent of global emissions.

Contrary to the assertions of some, on a wells-to-wheels basis, oil sands is comparable to other heavy crudes – including some that would be displaced by Canadian imports – again, with the help of the Keystone XL pipeline. Pipelines have been safely transporting oil sands for decades. According to a 2013 report by an expert panel formed by the National Research Council, oil sands is just as safe to transport by pipeline as other types of crude.

Jobs – Tens of thousands of American jobs are connected to Canadian crude – in terms of heavy equipment purchases, the refineries mentioned above and pipelines that both deliver the crude to the U.S. as well as the refined products from that crude.

We’ve noted the jobs impact Keystone XL would have in a number of posts, including this one. The U.S. State Department’s latest Keystone XL analysis said the project would support about 42,000 jobs (direct, indirect and induced) during its construction phase – so important to thousands of U.S. skilled workers. It also would support about $2 billion in earnings throughout the U.S. and add approximately $3.4 billion to U.S. gross domestic product.   

Trade – Canada is our top trading partner. A good deal of that trade is in energy, as discussed above, and it’s a beneficial relationship for the United States. According to government data, for every dollar spent on imports from Canada, the U.S. receives 90 cents back in exports sold to Canada. Those exports represent American jobs and American economic growth.

Strengthening our energy partnership with Canada has the bonus of growing that trading relationship. The more oil the U.S. imports from Canada, the less it has to import from others with whom our trading relationship is not as beneficial. Trade with Venezuela, for example, has a rate of 36 cents on the dollar.

Bottom line: EIA projects that oil and natural gas will continue to be the leading energy sources for Americans for decades to come. So it’s incumbent that we increase development of domestic oil and natural gas reserves, even as alternative energy sources like ethanol and other renewables grow.

At the same time it’s also important that we maintain and grow our energy relationship with Canada. Oil sands will be developed – if not for the U.S., then for other countries. That would be unfortunate, given the United States’ relationship with Canada and the benefits to jobs and trade we’ve discussed. Oil sands will be developed, and the U.S. is the most efficient and environmentally responsible transportation destination for that crude.

Which gets us back to the Keystone XL pipeline, a lynchpin for jobs, economic growth an energy security – and a boost to two countries’ energy revolutions.