This article was originally published by Energy & Mining International on March 23, 2017. Click here to view original article.
You may have thought that the Keystone pipeline project is dead. Perhaps you felt that there were just too many obstacles. It appears that you’d be wrong – the project is, for better or worse, expected to move forward and be huge. (Or at least it has the potential to be.)
In January, President Trump signed an executive order to advance the much-debated Keystone XL pipeline. This coincides with the President’s energy plan, which appears to be to make the U.S. energy market self-sufficient and independent. This executive order is going to impact employment, energy pricing and foreign relations, but to what extent?
The group most impacted by the executive order is the American workforce. Crude oil is currently being transported by trucks from the Canadian sands south and west through the United States. However, once the pipeline is implemented, there may be a decline in trucking and the Canadian sands oil will be transported via the pipeline to southern refineries. Though this will impact the trucking industry and the refineries in the Midwest, it will not cripple them, as the Enbridge and Lakehead system will continue to supply an average of 1.4 million barrels of crude oil to the Midwest and Canada, relying on the trucking industry to do so.
In January, President Trump stated that he would like all pipes of American pipelines to be made from U.S. steel. Since then it has been noted that the president’s order was only for new, expanded or repaired pipelines, and may not affect the Keystone XL pipeline; however, there is still reason to believe the U.S. steel industry will be affected by these results. If the order is determined to be a success and new pipelines are set into motion, the steel industry will be ready to take on the increased demand.
Debating the Impact
Oil and gas pricing will also be affected, with the magnitude depending on the location. The South will most likely see the most favorable returns, while the Midwest may see pricing increases. This is a result of the Keystone pipeline running oil to the South for refining and exporting, whereas it was previously distributed across the country.
However, the actual impact is debatable. Change in pricing could actually be minimal, as Canadian crude is already, and will continue to be, shipped to the Midwest, and contrary to popular belief, the United States is already primarily self-sustaining in its energy production versus consumption.
What could be the most interesting effect to see in the future is how this will interact with the United States’ relations with the United Nations as a member of the Paris Agreement. The Paris Agreement went into effect in 2016, and with more than 130 countries signing on. The agreement demonstrated the UN’s desire to promote alternative and renewable energy, and its desire to decrease carbon emissions.
Supporting increased use of fossil fuels and continuing to make fossil fuels the future of energy puts the United States in a precarious position. However, as risky as it might be, it could also be a chance for the United States to be innovative with its renewables in hopes that as that sector grows there will be an economy of scale, with savings passed on to the consumer.
Whether you are for or against the pipeline being built, the executive order has been signed. It would be foolish of us all not to think about what change this could bring, and where our opportunities will be going forward.