How much supply relief could the Keystone XL pipeline project provide to the United States? During today's OnPoint, Rayola Dougher, senior economic adviser at the American Petroleum Institute, discusses the project's regulatory hurdles and addresses price manipulation concerns. She also talks about the House's proposed Nov. 1 deadline for approval of the project.
Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Rayola Dougher, senior economic adviser at the American Petroleum Institute. Rayola, it's great to have you back on the show.
Rayola Dougher: Oh, thank you.
Monica Trauzzi: Rayola, the House Energy and Commerce Committee recently approved legislation that would require the president to make a decision on the Keystone XL pipeline by November 1. Is the administration stalling here or are they doing their due diligence to figure out if this pipeline makes good sense from a national -- an economic and environmental standpoint?
Rayola Dougher: Well, this project has been under environmental review for three years now, almost three years. So, it is time to make this decision. They've done a supplemental environmental impact statement. There's been a lot of public comment. We've gone through this whole process, so it really is time to make that decision. There are 12 different federal agencies involved. Everyone has taken a look at this and it's time to get off the mark, make that decision and move ahead. This is an extremely important source of supply for us moving forward and it can make a real difference in the marketplace and it would certainly make a big difference to us in terms of jobs, the energy we could bring and it would be a terrific addition.
Monica Trauzzi: Do you think this new timeline gives the State Department the appropriate amount of time to do the job that they're supposed to be doing? I mean I think they had said --
Rayola Dougher: Sure.
Monica Trauzzi: That they needed until the end of this year.
Rayola Dougher: Well, I don't know, November 1 seems like the end of this year to me too, maybe we'll quibble over dates, but certainly that's plenty of time to make this decision. They've reviewed it, they've gone over the plans, they've done everything that you need to do. So let's just make the decision and get going.
Monica Trauzzi: Do you think the State Department is qualified here to make this decision? I mean they have jurisdiction here, but are they qualified to make this decision?
Rayola Dougher: Well, they get input from 12 different federal agencies and they take all those comments into consideration too. So they're not alone in this. They get input from everybody they can get input from and they certainly hear from the EPA and others who would be very interested in this project.
Monica Trauzzi: There are already two Canada-U.S. pipelines in existence. How is this project different and why is there so much controversy with this one?
Rayola Dougher: Well, this is going to extend all the way from Alberta, Canada down to Port Arthur, Texas, and I think it's a 1,700-mile-long pipeline. And it's going to bring up to as much as 830,000 barrels a day, starting off with 700,000 barrels a day. This is the equivalent of half of our imports from the Persian Gulf and it can get up and running fairly fast in terms of that capacity. It's going to make a terrific difference in offsetting some of the loss of supply that we're getting from Venezuela sending more product to China for example. Mexican oil, production is down. They have less to give to us. So it's going to make a big difference to us and take some of that pressure off of some of the storage in Cushing and also help our refiners along the Gulf Coast. They can use this product instead of importing from other areas. So it's a win for us in terms of the supply. It's a big win in terms of jobs, because every dollar we spend in Canada, for example buying those oil imports, they spend $0.90 in the United States. So, in the next 20 years or so that can add up to as much as over $500 billion added to our GDP and as much as 465,000 new U.S. jobs. So this is a big win in terms of energy security, jobs, revenue, government revenue. I can't -- you know, I'm very anxious to see it happen and we can see what's happening today in the world in terms of instability in the Middle East, the products that have been taken off the market. If the world, if the U.S. had had that 700,000 barrels a day today, it would've made a big difference already. So the longer we postpone this decision, the larger the impact it is on us and even on the world's market. Seven hundred thousand barrels a day is a lot of oil.
Monica Trauzzi: But doesn't this project sort of go against the U.S.'s longer-term goal of a clean energy future? I mean we're committing to continuing to use a large supply of oil.
Rayola Dougher: Well, we're continuing to demand a large supply of oil and the Department of Energy's forecasts moving forward show that we're going to need a lot more oil in our energy future. We'll have some of it offset by renewables, but still, the largest share of our fuel use in the United States will come from oil for the next 20 or 25 years. It's going to be -- 33 percent of our energy demand is going to be for oil. So where are we going to get it? Right now we produce only 38 percent of what we use. Canada gives us 25 percent of our imports and has the possibility to offset a lot of our dependence on other sources. So which direction do we want to go with, a friendly neighbor to the north, a reliable, stable partner who's going to spend those dollars in the United States or continue to be less secure? To me it's an easy decision.
Monica Trauzzi: Why is this a better option or is it a better option than ramping up our offshore drilling?
Rayola Dougher: Oh, this isn't an either or. The thing that we need to do, these are the two things that we can do, partner with Canada and make sure this pipeline goes through and the second thing is open up areas to access. Now, if you look at the Department of Energy's recent forecast of the energy future, you just add that pipeline, that 830,000 barrels a day, and you add opening areas to access. In the next 20 years we can, just between Canada and the United States, supply 92 percent of our liquid fuel needs. And it's a very simple, very straightforward equation. You could bring on as much as a million barrels a day in the next 10 years and up to as much as four in the next 20 if you open areas to access. You've got nearly a million extra coming from Canada and you have some extra biofuels, you have 92 percent. And those are just policy decisions. Without it we only get to 70 between Canada, ourselves, and the biofuels. So this could make a huge difference in jobs, in energy, and everything. And it's just a policy decision. It's not -- no one is asking for any money, any handouts, anything. Let us just do this job and fulfill the demand that this country is going to have.
Monica Trauzzi: We recently had Jeremy Symons on the show. He's from the National Wildlife Federation and they're strongly opposed to this pipeline. And he said this pipeline is designed to take the oil and instead shift it down to Gulf Coast refineries. And when they do that, they can manipulate the supply between two pipelines and charge higher prices. Do you see a window for price manipulation here?
Rayola Dougher: Absolutely not! The Canadians and pipeline companies do not get to determine what the price is going to be or manipulate that price, because we are in a world market and our buyers, our refiners have options from all over the world and Canada does not have a corner on the market. Neither the Canadian production nor the pipeline company can determine what price they're going to receive. So this is actually having an extra supply of a low-cost fuel, relatively low cost. The refiners in the Gulf are already configured to be able to process this heavier crude oil. So bringing on such a large extra supply, based on historical experience, when you put extra supply of low-cost fuel in the market you're actually bringing the price down. And plus we have an FTC out there and they monitor prices in 360 cities, 20 wholesale markets every single day and they're looking out for that every single day. I don't believe that for a minute.
Monica Trauzzi: And yet we're still paying four something a gallon at the pump.
Rayola Dougher: Well, it should come down. It's about 3.50 right now. It's actually been coming down for the past six weeks, and it came down again recently with the announcement of the SP release, so we'll see how it bottoms out in the end.
Monica Trauzzi: OK, we'll end it right there. Thank you for coming on the show.
Rayola Dougher: Thank you.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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