Keystone XL delay a blip in Canada/U.S. relations

The relationship between Canada and the U.S. is about more than just a mega-pipeline

December 6, 2011

By Laura Dawson
Senior Fellow
Macdonald-Laurier Institute
and Stefania Bartucci

OTTAWA, ON, Dec. 6, 2011/ Troy Media/ – Delayed approval of the Keystone XL pipeline is not indicative of a relationship on the rocks. And it should not have a lasting impact on what is a large, complex partnership in energy development.

The relationship between Canada and the U.S. is about more than just a mega-pipeline. It is about decades of cooperation and a shared interest in developing North America’s most abundant source of petroleum. 

U.S. and Canada have common interests

As the drama subsides, we must remember that Canada and the U.S. share both the problems and profits of the oil sands. Massive U.S. investment in Canada’s oil sands and a highly integrated supply chain are evidence that cooperation is key to ensuring future economic growth and energy security.

By 2030, oil sands products will likely supply over 30 per cent of U.S oil imports, more than offsetting expected declines in supplies from Mexico and Venezuela. As the U.S. aims to decrease its dependence on unstable sources of oil, the Canadian oil sands are a natural choice, but many are unaware of the extent to which U.S. and Canadian fortunes are intertwined in oil sands development.

American and Canadian companies are partners in the development, production, transportation and marketing of oil sands products. Success of our collaboration is confirmed by the comprehensive cross-border infrastructure to upgrade, refine and transport petroleum products. Bitumen and synthetic crude oil are shipped (mostly) via pipeline from Alberta to the U.S. Midwest, where they are upgraded into gasoline and other refined petroleum products. The majority of these refined products are destined for American domestic markets, but the U.S. ships over 200,000 barrels a day back to Canada, making it the United States’ second largest market for refined products.

We built this system together. And, as the only market outside of Canada with the capacity to upgrade large volumes of bitumen, the U.S. is Canada’s best bet for projected oil sands exports. Looking ahead, new infrastructure will be required to support the forecasted increase in production. This will translate into new opportunities for jobs and growth in both countries.

Future opportunities for collaboration in the oil sands supply chain are not limited to pipelines. They include the development of technologies to improve energy efficiency, reduce the environmental impact of production and extraction, expand refining capacity, and more efficiently ship product by road and rail.

The Alberta government says the oil sands will face a shortage of about 75,000 workers in the next few years. American electricians, engineers, and construction staff are ideally suited to fill this gap, but our governments need to work harder to eliminate barriers to temporary movement of cross-border workers. Canada’s temporary worker program is a good first step, but more attention is needed to recognize skills and certification on both sides of the border.

Canada and the United States must also maintain a united front against barriers in foreign markets. The proposed EU Fuel Quality Directive may ban imports of Canadian and American energy products sourced from the oil sands because of concerns about carbon emissions. Industry should continue to reduce the carbon footprint of oils sands production, and our governments must speak together when foreign countries threaten to raise protectionist barriers against our products.

We must also reduce the regulatory burden affecting the oil sands supply chain. This does not mean decreasing our environmental and safety standards. It means working with provinces towards a ‘one project, one review’ system to streamline approval processes, such that they are not deterrents to future development and investment.

United approach needed

Finally, we need to ensure that our own citizens are well informed about the benefits and challenges of the oil sands. Ad hoc, reactive attempts to influence public opinion about the benefits of oil sands cooperation have not been effective. What works are inclusive stakeholders meetings held early and often, modeled after the 2010 Oil Sands Dialogues hosted by the Canadian Association of Petroleum Producers.

The missteps of Keystone XL should not have long-term effects on the Canada-U.S energy partnership, but it does underscore the need for a united approach to problem-solving. We have much to gain from oil sands development, and a fair-weather friendship will not benefit either nation. Only in solving problems together can we generate the full benefits of the oil sands as an engine of economic growth in both countries.

Laura Dawson is a Senior Fellow at the Macdonald Laurier Institute in Ottawa and Public Policy Scholar at the Woodrow Wilson Center in Washington, DC, and Stefania Bartucci is an independent energy researcher.

One Response to "Keystone XL delay a blip in Canada/U.S. relations"

  1. CHWE_PARAFFINIC   December 6, 2011 at 6:21 pm

    “Laura” You are 100 per cent correct with your analogy in this article: it’s one of the best ever that I have ever had the pleasure of reading. Having been involved since 1967 directly in Oil sands processing, research & consulting for 45 years it was a pleasure to read your information.

    Thousands of people have been involved in the development and evolution of Canada’s Oil Sands into Bitumen, Light Hydrocarbons and its by products.

    Oil Sand development started in the 20s and progressed at a virtually unknown rate until the 50s. It was, however, first commercially developed through investment with the Alberta Government from Howard Pew (independently owed Sun Oil) from U.S. It was the Great Canadian Oil Sands plant (now Suncor) that went into production and it took years of de-bottlenecking and many dollars to become a viable successful operation. Many projects with much more new technology has since evolved.

    Oil sands are now being processed under the most stringent environmental and economic standards with changes being made all the time. Bitumen from Oil Sands has become a strategic, secure resource and power for Canada. NAFTA intertwined our countries but there are now dangerous signs on the horizon as American Corporatocracy and Politics have clearly started to treat us as their pawns..