Over the weekend, media outlets reported that the US president-elect, Joe Biden, intended to pass an executive order that would stop the building of the Keystone XL pipeline, during his first day in office this week.
Naturally, Alberta premier, Jason Kenney, responded in disagreement to this revelation. But he left out some context from his response, which I thought I’d include here.
I am deeply concerned by reports that the incoming administration of President-elect Joe Biden may repeal the Presidential permit for the Keystone XL border crossing next week.
Support independent journalism
I mean, sure. I get that it’s disappointing for Kenney, but it shouldn’t be surprising. The cancellation was part of Biden’s campaign platform, as was made public as early as last May. And while that was after Kenney’s commitment of the money, at least 8 Democratic presidential candidates had pledged months before that they’d kill the pipeline if elected, including Vice-president Elect Kamala Harris. I don‘t know whether Kenney thought they were all bluffing, or whether he thought outgoing president Donald Trump—who received nearly 3 million fewer votes than Hillary Clinton in the 2016 election and who rarely had majority approval ratings during his term—would somehow win the election. Either way, this outcome was a strong possibility, one Kenney should’ve prepared for.
Doing so would kill jobs on both sides of the border, . . .
These jobs Kenney refers to only “exist” because Trump resurrected the pipeline that Barack Obama, in 2015, had rejected. The pipeline wasn’t supposed to be built in the first place.
Even so, this won’t kill jobs. Not in the sense that this rhetoric tries to conjure up in our imaginations. Or at least not by any substantial amount.
Construction jobs are unique in that they’re project-based. Construction workers work on one project, and when that project is complete, they move onto a new project. The hiring of construction workers isn’t so much the creation of jobs but the moving around of workers. Likewise for the cancellation of projects.
Sure, there might have been some new workers hired on to this job, but I’m willing to bet that the majority would’ve been wrapping up construction on other projects and would’ve simply transition to this one once they were done. Now, they’ll transition to whatever other project the company where they work wins a bid for.
. . . weaken the critically important Canada-U.S. relationship, . . .
The Canada–US relationship was damaged by Trump. This will not additionally damage that relationship in any significant way.
. . . and undermine U.S. national security by making the United States more dependent on OPEC oil imports in the future.
Wait. What? National security? Canada already accounts for nearly half of all the US imports of all petroleum products. And that’s without Keystone XL.
In October 2020, the US imported 3.97 million barrels of crude from Canada. Once operational, Keystone would’ve increased that by 830,000 to 4.80 million. Total crude imports from all countries was about 5.29 million barrels per day. Keystone XL would’ve increased that to 6.12 million. We’d go from providing 75% of the US’s oil imports to 78.4%.
By comparison, the US imported 568,323 barrels of crude a day from OPEC countries during the same period. That’s 10.7%. If Keystone XL had been operational in October, that number would’ve been 9.3%.
Not building the Keystone doesn’t make the US more dependent on OPEC countries than it already is. It only makes the US more dependable relative to the increased imports if Keystone XL was operational. It’s a hypothetical increase in dependance.
And even though they would be technically less dependant on OPEC oil than they are now, these 13 countries collectively make up a small percentage of crude imports. There’s no real threat of the US depending on OPEC in a way that undermines their national security.
I mean, if we want to talk about the connection between national security and oil production, perhaps we can talk about the decades of US interventionism in the Middle East.
In 2019, the United States imported 9.14 million barrels per day of petroleum, 3.7 million of which came from Canada. The rest comes from countries like Venezuela and Saudi Arabia, none of whom share the commitment of Canada and the United States to environmental stewardship, combatting climate change, or North American energy security.
I already addressed the part about Canada above, but again, the US imports the vast majority of its crude from Canada already, even without Keystone XL, and building the pipeline increases that amount from 75% to 78.4%, not really a significant amount.
It’s misleading to say “the rest comes from countries like Venezuela and Saudi Arabia”. In October 2020, the US imported crude from 20 countries in total, only 7 of which were OPEC countries. For example, they imported 471,580 barrels a day from Mexico during that period.
Among the non-OPEC countries the US imported crude from in October 2020 were the United Kingdom, Norway, Ecuador, Columbia, Argentina, and Brazil. Does Kenney think none of these countries share the “commitment of Canada and the United States to environmental stewardship [and] combatting climate change”? Does Kenney think Mexico isn’t concerned with North American energy security?
Also, the US imported no crude oil from Venezuela in October 2020. Heck, it didn’t import crude from them between May and October 2020.
So, actually, the statement isn’t just misleading, it’s downright false.
Even so, here’s something to keep in mind. Look at this graph showing monthly crude imports into the US over the last century or so.
For over a decade, the US has been increasingly importing less crude oil. In fact, they’re importing less crude now than they were in the late 1980s.
Plus, even though imports have been decreasing for the last 15 years or so, Canada’s imports have been increasing. In 2005, total oil imports were 13.71 million barrels a day; Canada was 2.18 million—15.9%. In 2019, Canada made up 48.6% of net imports: 4.42 million out of 9.10 million.
Over the last 15 years, Canada increased oil imports into the US by 202.8%, even while total net imports into the US decreased by 33.6%. Canada keeps increasing its share of an ever-decreasing market.
And why does the amount of crude they import keep dropping every year? Well, look at this graph.
As crude imports began to decline about 15 years ago, crude production in the US increased. And this relationship between imports and domestic production continued: as production kept increasing, imports kept decreasing.
Why is Canada increasing imports while OPEC and the Persian Gulf are decreasing imports? Why is Canada doubling down on a dwindling market?
Here’s something else you should know.
In 2019, the US produced 19.47 million barrels per day of petroleum products, making them the single largest oil producer in the world. They also happened to be the world’s largest consumer of oil, at 20.51 million barrels. In other words, US oil production is enough to cover 94.9% of its consumption.
Take a look at this graph from the U.S. Energy Information Administration:
See that blue line at the top? That’s consumption. The brown one just under it is production, and the yellow one is exports. Not only does the US produce nearly all of the oil it needs, production levels get closer to consumption levels every year.
And if these rates were similar in 2020 and continue this year, the US may actually end up producing more oil than it consumes very soon. As in maybe even this year. Which means they won’t even be consuming crude they import. They won’t even need it. All they’ll end up using it for is to refine it and ship it elsewhere. They’ll just be Canada’s middleman.
While OPEC countries might make up 10% of the crude oil imported into the United States, they’re certainly not making up 10% of its consumption. Total net imports (imports minus exports) account for only 3% of US consumption. That means oil products imported from OPEC countries have a net contribution of only 0.32% to US consumption, and that number would’ve dropped to just 0.28% in 2019 if Keystone XL had been built and operational.
And Canada? Well, that 75% of crude imports actually ends up being only 2.25% consumption currently and becoming 2.35% with Keystone XL.
As President-elect Biden’s green jobs plan acknowledges, Americans will consume millions of barrels of oil per day for years to come. It is in perfect keeping with his plan that the United States energy needs should be met by a country that takes the challenges of climate change seriously.
Except the United States energy needs are being met: by itself. It doesn’t need Canada’s oil. Certainly not oil that is going to make up only 0.1% of its total annual consumption. And certainly not as domestic production keeps rising and foreign imports keeps declining.
The Keystone XL pipeline also represents tens of thousands of good-paying jobs that the American economy needs right now. That is why major American labour unions who supported President-elect Biden’s campaign strongly back the project, as do First Nations who have signed partnership agreements, and all state governments along the pipeline route.
This is just virtue signalling. Kenney is mentioning labour unions and First Nations not because he considers their input valuable, but because he thinks it’ll get buy in for the project from the centre and the left.
Here’s the thing though: Biden had the cancelling of the pipeline as part of his campaign platform before getting support from the four labour unions contracted for the pipeline’s construction. Months before. They supported him despite his promise to axe it.
Kenney spent $1.5 billion on buying equity shares in the project. He spent $6 billion on loan guarantees for the project. That means Alberta’s on the hook for $7.5 billion if this project falls through.
Kenney decided to gamble on a pipeline to import more crude into the US, despite the US cutting back on crude imports for 15 years, despite crude imports being at levels not seen in over 30 years, and despite the fact that this pipeline will meet only 0.1% of US oil consumption.
He gambled on this pipeline because he thought it was the only thing he could do to increase bitumen mining production. This pipeline would potentially increase Alberta’s crude exports from 3.2 million barrels a day to just over 4 million, an increase of 25.9%. And more pipeline capacity means more production; more production means more revenue.
(More production is a politically correct way of saying more extraction, or more environmental degradation, but that’s a story for another day.)
Given that the 10 largest companies—as measured by revenue—in Alberta were all oil and gas related in 2018 (with a combined revenue of $227.32 billion), it shouldn’t come as a surprise that Kenney would make this gamble.
You see, for Kenney, boosting revenue for companies—even if indirectly—serves the same purpose as cutting the corporate income tax rate from 12% to 8%: increasing profits. Because a 25.9% increase in exports is more important to Kenney than the 1/10 of a percentage point increase in US crude imports. Despite the rhetoric in this week’s statement centring around US national security, US jobs, and the US environment.
Ultimately, Kenney never cared about jobs, or pipelines, or the economy. Not in any altruistic sense. He saw pipelines and “the economy” as ways to boost profits for corporations, and when the economy tanked, all he had left was pipelines and cutting taxes.
“Jobs. Pipelines. Economy.” was nothing more than a populist rhetoric device designed to garner enough political support to win a majority government, so he could pass legislation that would benefit large corporations.
And now that he can’t cut taxes any further without driving up the provincial debt higher than the already-projected $125 billion, he’s desparate for his last Hail Mary to work.
Even if it means using public tax dollars to fight a foreign government in court to “protect Alberta’s interest in the project”. Because apparently, $7.5 billion wasn’t enough.