Will Low Oil Prices Affect Debate Over Keystone KL Pipeline?

Jan 8, 2015
Originally published on January 8, 2015 7:44 am
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STEVE INSKEEP, HOST:

Here is an underlying fact about the proposed Keystone XL pipeline. Congress is preparing for a battle with the president over completing that pipeline intended to bring oil from Canada across the U.S. The oil is extracted from Canadian tar sands. An analyst says that no matter what happens with that debate, the oil is likely to flow for years. That's the underlying fact.

Oil prices have dropped dramatically in recent months but analyst Sandy Fielden told us that does not matter. Even at current low prices, Canadian producers will keep running the equipment they spent a lot of money to install.

SANDY FIELDEN: Once you've made the upfront investment, you're going to just keep on pulling the oil out. There's no incentive to stop unless the price gets really low - down to, you know, $30 a barrel or something like that.

INSKEEP: The only real change that's likely is that oil producers may not expand their operations in future years. A vital political question of course is what happens to oil production if the Keystone pipeline is finished? Fielden says, once again, the answer is not so much. Sending oil through the new pipeline would save producers money, but without it they will still move the oil through other pipelines or on trains.

FIELDEN: So far, they've delayed Keystone by three or four years from when it was originally supposed to be online. And yet, the industry has continued to find a way to get the oil to the market. So it's not just about the pipeline, in other words, I think it's already become clear that the fact that Keystone's been delayed does not seem to have had a significant impact on production.

INSKEEP: Because producers have developed pipeline alternatives.

FIELDEN: Many of those alternatives are building rail loading terminals to use rail to get their oil to market. Some of them involve moving crude by rail to barge locations on the Mississippi River to complete the journey by barge. And in addition to that, some of the existing pipelines have actually been expanded to accommodate increased flow.

INSKEEP: Let's look at another argument over Keystone, that Canadian production helps U.S. energy security. Canada of course is more stable than the Middle East. Fielden says that claim is out of date though, since the U.S. is actually getting more oil from an even more secure source - the United States.

FIELDEN: Effectively. Because we're less overall dependent in the last four years, we've reduced our dependence on imported oil by about 4 million barrels a day. It's halved our dependence on foreign oil. So it's not such a big issue anymore to feel more secure that we're getting some of our oil from Canada.

INSKEEP: That is Sandy Fielden, the director of energy analytics at RBN Energy in Texas. Transcript provided by NPR, Copyright NPR.