America / Economy / Energy

Damaging Effects of Denying Expansion

The Keystone XL pipeline could have provided Americans more economic, energy, and job security. However, in January 2012, President Obama announced he would not permit TransCanada to build a $7 billion pipeline from Alberta, Canada across international borders to the US Gulf Coast. Since then, Canada’s Prime Minister, Stephen Harper, has turned to China to continue with oil production expansion and break into the Asian market. The Keystone XL pipeline should not be confused with the Keystone pipeline, which already transports tar sands oil (a combination of water, sand, clay and oil) from Alberta to Cushing, Oklahoma. TransCanada estimated that the 1,700 mile pipeline expansion would have provided the US around $585 million in tax revenue, supplied Americans with 1.1 million barrels of crude oil a day, created new jobs and reduced US dependency on foreign oil.[1]

Currently, pipelines in the US are functioning near capacity. Likewise, Cushing, Oklahoma,  known as the pipeline crossroad of the world, has a surplus of crude oil because it cannot refine it  or ship it elsewhere to be refined quickly enough.The Keystone XL pipeline would have helped alleviate this problem because it would extend pipelines to other refineries in Texas.[2] Instead, now US oil production will continue to stall, maybe even decline, while demand steadily increases.

Despite the United States’ “sophisticated oil development technologies and methods to get more mileage out of old oil fields,” 60 percent of the trade deficit is due to the purchase of foreign oil.[3]  To ease this burden, in February, President Obama approved TransCanada to continue the pipeline expansion from Cushing to the Gulf Coast. Although more oil will be transported to other refineries in the South, it still leaves the northern fuel source open for other bidders, specifically, China.

Shortly after the permit denial, Canadian Prime Minister, Stephen Harper told President Obama that Canada plans to “diversify its energy exports” since output is expected to double in less than ten years and the US already receives 99 percent of Canadian oil.[4] He believes that extending markets into Asia is in the best interest of Canada since they cannot depend on the US. Due to their dependence on foreign oil, China has offered to pay for the construction of the Canadian pipeline extension to British Columbia and ship the oil by tanker overseas. Speaker John Boehner criticized President Obama, saying the decision to stop the construction of the Keystone XL pipeline across US-Canadian borders destroyed thousands of potential jobs in the US and shipped American energy security to China.[5]

At a time when more than 8 percent of Americans are unemployed and gas prices continue to soar, President Obama denied TransCanada from expanding the Keystone XL pipeline across the northern US-Canada border. The State Department later explained for environmental reasons, the pipeline expansion does not serve the national interest.[6] Regardless of the US’s decision to participate in the Keystone XL project or the environmental effects of extracting and refining tar sands, Canada is expanding its oil extraction market. President Obama’s decision has now, shipped potential job and market expansion and energy security to China.