The proposed Keystone XL pipeline, which would bring crude oil from the so-called oil sands in Canada's Alberta province through an almost 2,000-mile pipeline to the U.S. Gulf Coast, has in many ways become ground zero in the U.S. debate over fossil fuels, the environment and climate change.
But perhaps most relevant in the current row, though
practically absent from the debate, is the increasing awareness that energy
security must be included as part of the calculus in determining energy
sources. Indeed, terminology such as "friendly" supplier -- regularly
applied to Canada in U.S. energy discussions -- underscores what is at stake in
global geopolitical terms. But while the implications and role of China's
increasing demand for energy are openly recognized in calculations over energy
supplies in other parts of the hemisphere and across the globe, for many they
remain only implicit when it comes to expanded delivery from Canada.
Highlighting this anomaly, the public discourse in the
U.S. surrounding Keystone XL has largely been framed in familiar environmental
and economic terms. The U.S. State Department's approval process for the
pipeline has fueled the smoldering debate over the production of oil from
Alberta's oil sands. Protesters were arrested by the hundreds during recent
demonstrations against the project outside the White House, while just
yesterday, more than a hundred demonstrators were arrested outside the Canadian
Parliament in Ottawa. Just as passionately, supporters of the project have
fanned out to extol its economic, job-creating virtues.
But with high gasoline prices, continued turmoil in North
Africa and the Middle East and declining supplies from longtime oil providers
Mexico and Venezuela, the energy-security card appears to be a strong one in
this debate -- especially given China's investment in the oil sands and its
eagerness to develop another pipeline under consideration in Canada, the
Northern Gateway project. In assessing the Keystone XL debate, it is worth
considering China's effort to tap Canadian energy reserves and direct them to
the Chinese market. In many ways, the push for Northern Gateway signals that
China's efforts in Alberta are practically indistinguishable from elsewhere in
the world, with the imperative being to secure supplies and, when possible,
bring barrels to China.
While Keystone XL has become a household name among those
active in energy and environmental matters in the U.S., the Northern Gateway
project is rarely mentioned. Like Keystone XL, Northern Gateway is a
mega-pipeline project to tap the Albertan oil sands. But, instead of a southern
route, the pipeline would head west, traversing more than 700 miles to Canada's
Pacific coast for export to Asia.
The Northern Gateway project is the culmination of
several factors, most importantly supply and demand: China and Asia's craving
for oil has soared at the same time that development of Canada's oil sands has
become feasible, thanks to the surging global oil market and technological
advances.
A New York Times editorial that declared Keystone XL to
be the "wrong pipeline, wrong assessment," was perhaps unknowingly
prescient. One can imagine Chinese energy policymakers and oilmen nodding
affirmatively as they read the headline. For them, the Northern Gateway is the
"right pipeline, right assessment."
Add to Northern Gateway's market fundamentals China's
ample checkbook and desire to secure global oil supplies along with Canada's
interest in diversifying its markets, and all the necessary ingredients are in
place to help bring the immense and costly infrastructure project into being.
As with Keystone XL, there are entrenched opponents who decry the project's
impact on the environment and aboriginal communities, so the battle to build
Northern Gateway could become fiercer as it moves forward. But the pipeline's
significance should not be overlooked.
It seems unlikely that a zero-sum pipeline game is
unfolding in Canada. But what does seem readily apparent is that without
continued progress on increased access to the United States market for Canadian
crude oil, whether via Keystone XL or an alternative, excess Canadian oil
resources developed in the near future could conceivably be routed to Asia
through the Northern Gateway pipeline that maintains high-level political and
financial support. To wit, the pipeline's developers recently announced that
the project was fully subscribed by possible Canadian and Chinese crude oil
shippers.
Indeed, on many levels, Canada may have as strong of a
rationale for working with China to build the Northern Gateway as it does for
Keystone XL. Beyond the critical element of market diversification, Northern
Gateway could also provide an outlet that would allow for more financial upside
than the typically discounted U.S. price received by Canadian producers.
U.S. Energy Secretary Steven Chu ably summed up the
situation when he noted that, when it comes to these types of projects,
"there are trade-offs."
Regrettably, the U.S. debate on developing domestic and Canadian energy
sources has not yet begun to address the need to consider such trade-offs in an
increasingly competitive energy landscape. Rather, the clearest signal being
sent is that energy is yet another divisive wedge issue affecting domestic
policymakers as well as those charged with diplomacy and international
relations.
**Jeremy M. Martin is the director of the Energy Program
at the Institute of the Americas at the University of California, San Diego.
The institute is a nonprofit inter-American organization focused on economic
development in the Western Hemisphere. Martin can be reached at jermartin@ucsd.edu.