Keystone XL Delayed
Research for Online Investors

by John Dalt

11/14/11

Last Thursday, Obama’s State Department extended the project review process on the Keystone XL pipeline project until after the presidential elections.  A decision was due by the end of the year, but politics dictated a delay.  The Keystone XL pipeline was designed to transport up to 700,000 barrels of oil per day from Canada’s tar sands mining area to refineries in Texas.  It has been under review since 2008.

Under executive order #13337, the U.S. State Department must approve construction of the $7 billion dollar pipeline since it crosses an international border.  You can read the State Department Keystone XL Decision here.

The Keystone XL pipeline was a “shovel ready” project that would have immediately provided 20,000 construction jobs…without one dime from the government.  The Keystone XL is a perfect example of the stranglehold regulations have on the U.S. economy.

It would be impossible to build a Hoover Dam in the U.S. today.  Environmentalists would delay the construction for generations with required government reviews and if they lost, would then turn to the courts to challenge the decision.

Environmentalists were strident in their opposition to the Keystone XL, because they don’t want the U.S. to use crude oil from the tar sands.  For that matter, they don’t want the U.S. to use crude oil from any source, but this was the latest project they could protest against.  Choking off crude oil supplies means higher energy prices and the ability for "green" energy to be competitive.

The interesting thing about this project was the protesters were able to gain support from Nebraskans that did not want the pipeline to go through the sand hills of their state.  This grass covered area sits over the Ogallala aquifer.  The Ogallala aquifer is a massive underground “sea” of water that sits under 27% of the nation’s irrigated land.

Map courtesy of http://creationwiki.org/Portal:Geography

The Ogallala aquifer occupies 175,000 square miles under eight states.  The Keystone XL route through eastern Nebraska was over the shallowest part of the aquifer.  Nebraskans were concerned about a leak from the pipeline contaminating the aquifer.  I talked to one and asked, “Even if there is a leak, doesn’t oil float on water?”  I kind of got a blank stare on that one!

Most of the aquifer is more than 50 feet underground.  The pipeline would be buried at six to seven feet deep.  Where the aquifer is shallower the separation is enough, and if not…oil floats on water.  Oil and water do not mix.

Canada’s tar sands hold reserves of 171.3 billion barrels of oil according to the Alberta government.  Saudi Arabia claims reserves of 264.2 billion barrels.  Who should the U.S. rely on as a safe supplier for crude oil?  Our politically stable neighbor to the north or a Middle Eastern country subject to the political upheaval or instability?  Would you rather have our imported oil delivered in a pipeline or on ships crossing the ocean?

We have written about the Keystone XL pipeline on 6/07/11 in You Are What You Eat and again on 8/31/11 in A Tough Day.

President Obama is at an Asia Pacific Economic Cooperation summit in Hawaii.  He criticized the Chinese for not letting their currency appreciate fast enough, saying it was time to “Grow Up.”

Mr. President, maybe you and your administration should take the same advice!  It is time to approve the pipeline, not vote ‘present’ as you did while a state and U.S. Senator.  Delaying the Keystone XL makes America more dependent on Middle Eastern oil.

Canada’s Prime Minister Stephen Harper said his country will step up efforts to sell tar sands oil to Asia.  Canada has a pipeline to send the oil to the Pacific coast where it can be loaded on ships for China.  The U.S. government’s refusal to approve the Keystone XL pipeline disappointed Canada.  He told China’s President Hu Jintao that supplying crude oil to China was an important priority for Canada.

It is time to Grow Up

Harper met with Obama, where the U.S. president confirmed his opposition to the pipeline. Harper told Obama this was why Canada would increase its efforts to supply oil to markets outside the U.S. and to Asia. After the meeting, Harper told Reuters “In the meantime, Canada will step up its efforts in that regard.”

China’s President Hu Jintao invited Harper to visit China next year.  We have just witnessed our government turning their collective back on an ally.  We might as well have offered to ship the oil to China.  Does the president have our country’s best interest in mind?  Does he want to see the unemployment rate go down because of 20,000 good construction jobs to build a pipeline?  Does he want to ensure a safe, sure supply of 700,000 barrels of crude oil every day from our neighbor?

The answer is obvious.  Obama is worried only about one job…his.  He needs Daryl Hannah and her environmental friends for contributions and votes in 2012.  It is time for the president to grow up and do what is right for America!

The European Central Bank bought $6.3 dollars in eurozone sovereign debt last week in the secondary market.  This compares to $13 billion dollars in bond purchases the previous week.

Italy sold $4.1 billion dollars in five year bonds this morning at 6.29%.  Spain’s yields rose to 6.119% today.  The market looks lower as a new leader takes over Italy and Greece works to form a new “unity” government.

Mailbag:
Thank you for your tribute and support on the occasion of the Marine Corp Birthday and Veteran’s Day.  Semper Fi!—subscriber C.B. USMC

John’s reply:  Thank you for your service to our country.

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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