Canada Will Move Its Oil Whether or Not Keystone XL Is Approved
March 20, 2014
Unfortunately, many in the United States seem to think that blocking the Keystone XL pipeline will simply keep the oil in Canada. But if the pipeline isn't built, Canada plans either to ship the oil by railroad to the United States or by pipeline to Europe or Asia. Or, Canada may ship the oil up to Alaska and then use the Alaska pipeline to bring it back into the United States. Regardless, Canada is intent on exporting its oil, says Diana Furchtgott-Roth, director of Economics21 at the Manhattan Institute.
- Environmentalists have argued that pipelines are unsafe, but the U.S. State Department's latest report confirmed that pipelines are safer than rail transport.
- Specifically, the report determined that 830,000 additional barrels of oil per day shipped by rail would cause a potential 49 additional injuries and six fatalities, compared to only one additional injury and no fatalities for the pipeline.
Both federal and state governments are losing tax revenue due to the United States' lack of pipelines. The inability to transport oil makes its value drop.
- In December, North Dakota had to sell its oil at a $26 discount.
- What does this add up to? According to the Energy Petroleum Research Foundation, a dollar discount reduces North Dakota tax revenues by $3 million each month. A $26 discount? That's $78 million per month in lost revenue, for a total of $936 million each year.
- North Dakota is not alone. Rocky Mountain oil also sold at a discount (of $28) in December, and Canada is currently in the same boat. Its Western Canada Select crude oil is currently selling at a $29 discount.
All of these lost revenues could be used to fund energy technology research or any manner of environmental initiatives, or they could be used to expand refundable tax credits. Whatever the use, the point is that the United States is sacrificing economic growth by failing to approve the pipeline.
Source: Diana Furchtgott-Roth, "Keystone XL Pipeline Delays: Don't Blame Canada," MarketWatch, March 14, 2014.
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