The fight over the Keystone XL Pipeline is likely to heat up in Congress this week.
Senate Bill 1 would permit the pipeline to cross the Canadian border into Montana, moving Alberta tar sands oil. Sen. Lisa Murkowski, as the new chairman of the Energy Committee, is leading the Republican charge. But, some Alaskans say she’s pulling for the wrong project.
Mike Wenstrup, chairman of the Alaska Democratic Party, says Murkowski should be working to advance Alaska’s energy projects, not Canada’s. In an op-ed published in the Alaska dispatch News this weekend, he alleges she’s following orders from pro-Keystone lobbyists. For Wenstrup, it’s a direct line between the dots.
“The low oil prices the sands development in Alberta isn’t viable without Keystone,” Wenstrup said. “Alberta sands, tar sands, compete with Alaska oil fields for capital. Promoting Keystone will help our competitors in Canada, at the expense of our fields.”
What’s in state’s best interest?
Murkowski, on the Senate floor last week, said she’s been hearing from constituents who wonder if Keystone would be bad for Alaska.
“I’ve been asked, they say ‘Well we understand Keystone is in the national interest. We get that. But, is it really in Alaska’s best interest?’ And folks back home are a little worried right now,” she said.
Murkowski says Keystone helps Alaska. For one thing, she says, the pipeline is expected to pick up some Bakken shale oil, from Montana and North Dakota, as it heads down to refineries on the Gulf Coast. Without the pipeline, Murkowski says, some of that oil moves by rail to West Coast refineries, which is where Alaska’s oil goes.
“This ANS crude, Alaska North Slope crude, as we call it, now finds itself in competition with the shale plays out in the Bakken,” Murkowski said.
Keystone will redirect that oil south, leaving more refinery space for Alaska crude, Murkowski says.
Economists weigh in
We put the question to two oil economists. Both said Keystone would do no harm to Alaska oil prices or investment in Alaska fields. Kenneth Medlock is the senior director of the Center for Energy Studies at Rice University.
“In reality, the amount of oil you’re talking about moving out of the KeystoneXL pipeline down to the Gulf Coast is not enough to really do significant harm to the economic viability of ANS,” Medlock said.
Medlock says the Keystone output and Alaska oil differ in weight and composition, and in an efficient system wouldn’t likely go to the same refineries. Medlock says the oil from Keystone will displace oil at the Gulf Coast refineries, but it will be heavy barrels from Venezuela and Mexico that are displaced, not those from the North Slope. He says the same of investment dollars. If Keystone makes Alberta projects more attractive, it’s at the expense of Venezuela and Mexico, he says.
“When you take a step back and look at it from a broader, global perspective and understand the efficient flow of crude oil and understand the differences in grades of crude oil, I think it actually makes a lot of sense for Alaska to support Keystone, believe it or not,” Medlock said.
As Medlock sees it, when everybody’s oil moves efficiently to the most appropriate refinery, everybody benefits.
Threat to development?
Ed Hirs, who teaches energy economics at University of Houston, also says Keystone XL isn’t a threat to Alaska’s development, citing similar reasons. Heavy Canadian crude is already flowing down pipelines to Gulf Coast refineries, Hirs says, and just last week that capacity shot up when a new line opened.
“Keystone’s just one more avenue for doing that,” Hirs said. “This is not going to depress the price.”
The existing low prices do inhibit investment, but Hirs says the harm is much greater in North Dakota and Alberta than in Alaska, where production is relatively cheap.
“We’re seeing hundreds of rigs being laid down in the shale plays right now across the United States,” Hirs said. “And this will only portend well for Alaskan development because of the size of the conventional reservoirs in Alaska that could be accessed.”
Senator Murkowski says Alaskans should also want to see Keystone built as a test.
“It’s a test of whether or not we as a nation can still review, can license, can permit and build a large-scale energy infrastructure project,” Murkowski said.
If we can’t build this one, she says, what hope do we have for Alaska’s next big project.
Related stories from around the North:
Canada: Canada ponders exceptions to relief well rule for Arctic oil drilling, Alaska Dispatch
Finland: Solar and wind power yield cheapest energy say Finnish experts, Yle News
Greenland: Arctic oil and gas must stay in ground to restrict warming to 2°C says study, Blog by Mia Bennett
Iceland: From Arctic Circle 2013-2014, a big drop in the price of oil, Blog by Mia Bennett
Norway: Norway offers 34 Arctic blocks along Russian border, Barents Observer
Russia: Russia wants Total out of Arctic project, Barents Observer
Sweden: Lower electricity bills for Swedes, Radio Sweden
United States: Oil prices expected to stay low through 2016, Alaska Dispatch News