Last week the State Department took a positive step on the long road to approval of the Keystone XL pipeline, which will bring oil supplies from Canada into the U.S. Construction of the pipeline seems like a no-brainer. We get access to reliable energy supplies from our neighbor and ally to the north—and, as an added benefit, construction of the pipeline will create 20,000 jobs and add billions to our economy.

The pipeline, however, has its detractors, who have “made Keystone into a cause celebre,” as Robert Samuelson puts it in today’s Washington Post.

He goes on:

Actually, the reality is more complex. If Obama rejects the pipeline, he would — perversely — increase greenhouse gas emissions. Canada has made clear that it will proceed with oil sands development regardless of the American decision. If the United States doesn’t want the oil, China and other Asian countries do. Pipelines would be built to the West Coast. Transporting the oil by tanker to Asia would almost certainly create more emissions than moving it by pipeline to closer U.S. markets.

Samuelson highlights the stark choice: “Do we say yes to oil sands? Or do we increase our exposure to unstable world oil markets?”

It’s past time for approval of this project, which has been awaiting the government’s sign-off since 2009.  Manufacturers—and everyone who depends on affordable, secure energy is waiting for the administration to move forward.

From The Globe and Mail, “Canada’s economy keeps roaring ahead“:

The Canadian economy, already the envy of the Group of Seven, is within striking distance of returning to its pre-recession peak.

Fuelled by a hot housing market, a rebounding manufacturing sector, higher incomes and a mini-hiring boom, the economy expanded in the first three months of the year at the fastest annualized pace in more than a decade. The stronger-than-expected 6.1-per-cent rate reported by Statistics Canada Monday was more than twice the rate of growth in the United States in the same period.

Looking at the March update, as well, we’d highlight the energy sector. More from the StatsCan release:

Manufacturing rose 1.8% in March with 20 of the 21 major groups advancing. Manufacturers of machinery, primary and fabricated metal products, as well as non-metallic mineral and food products recorded significant production increases.

Mining and oil and gas extraction rose 2.7%, mainly as a result of a significant increase in oil extraction. Increased activity at copper, nickel, lead and zinc mines, as well as at gold and silver ore mines also contributed to the growth. Support activities for mining and oil and gas extraction retreated after seven consecutive monthly increases.

Missing from U.S. Trade Rep Ron Kirk’s admirable speech Thursday (see posts here and here) expressing the Obama Administration support of expanded trade was any mention of the Mexican truck controversy, i.e., the NAFTA-violating provision in the stimulus bill that effectively ended a cross-border trucking program. In response, Mexico slapped duties on 90-plus U.S. products, especially consumer and agricultural products. Here’s the latest consequence, as reported in the Green Bay Press-Gazette, “Mexican tariffs impede paper company exports.”

You can only address so many issues in a speech, and in any case, Kirk’s remarks emphasizing the importance of enforcing trade agreements were relevant. The United States should indeed aggressively address violations of trade agreements through established processes and authorities. As a country that generally embraces trade, those procedures will tend to favor the United States.

But not always. We see that California Gov. Arnold Schwarzenegger is trumpeting yet another market-distorting, cost-adding environmental regulation, the low-carbon fuels standard. As AP reports, the Governor expressed utopiangastic pleasure at the California Air Resources Board’s decision:

Gov. Arnold Schwarzenegger said the rule would “reward innovation, expand consumer choice and encourage the private investment we need to transform our energy infrastructure.”

Sure. Just like all the other excessive environmental rules adopted over the past decade in California. And how’s California doing?

• Los Angeles Times, “California unemployment rate reaches 11.2%“
• The Desert sun, “State leads nation in March layoffs“
• The Daily Sound, “Economists: things could be worse in SB County“

Then there is the trade angle. The state regulations have an obvious and disproportionate impact on fuels derived from Alberta’s oilsands, which require additional energy to process. From The Los Angeles Times: “Canada’s consul general in San Francisco charged that the rule discriminates against oil from Alberta tar sands. ”

Canada is the No. 1 supplier of foreign crude to the United States, and now California is declaring its own (non-tariff) trade (barrier) war against those imports. But just because they’re not tariffs or quotas doesn’t make the regulations any less a servant of the protectionist cause — especially since they represent unilateral state action.

And what form might retaliation take, a year or two down the road? The new Mexican tariffs hammered California farm products. That could look like a smart strategy to the Canadians.

Seems like the big economic news in Canada was happening in Atlanta yesterday. Or at least being reported from there (see posts below here and here).

From the Globe and Mail:  

CALGARY AND OTTAWA — Three groups have quit a government-sponsored forum for assessing environmental costs in the oil sands, a move that undercuts government efforts to burnish the image of the massive developments in U.S. markets.

The latest flare-up between the Alberta government and environmental activists came as federal Industry Minister Jim Prentice sought to reassure an international audience that the oil sands are being developed in a responsible way and are critical to U.S. energy security.

“Developing our oil sands has had its environmental challenges, but we’ve come a long way,” he told an Americas Competitiveness Forum.

The story notes that anti-energy environmentalists in Canada have gained support in the U.S. Congress for their campaign against the oil sands. (See this story about the ban on U.S. government purchases of the oil.)

In Atlanta, Industry Minister Jim Prentice reminded the U.S. attendees of the Americas Competitiveness Forum that Canada has been the No. 1 energy exporter to the United States since 1999 and claims 14 percent of the world’s oil reserves. (Ottawa Citizen story.)

From The Calgary Sun:

In what is billed a congressional investigative trip, two U.S. lawmakers will get a bird’s-eye view of Alberta’s oilsands today, a region which has lately been denigrated by mayors south of the border as well as Democratic presidential hopeful Barack Obama’s campaign.

But despite the recent spate of criticism, the two Democratic congressmen told the Sun crude from Alberta’s oilsands is vital to the energy security of their country.

“It’s critically important,” said Rick Boucher, a congressmen from Virginia who also chairs the subcommittee on energy and air quality. “We need that oil and we’re going to take whatever steps are necessary to make cure that we continue to have access to it.”

Boucher and Florida congressman Tim Mahoney were in Saskatchewan yesterday to visit the Weyburn carbon dioxide sequestration project. Today, they are touring the Alberta oilsands and meeting industry representatives in Calgary.

Congratulations to Reps. Boucher and Mahoney for their investigations, which show an appreciation of Canada’s role in addressing U.S. energy needs. Many Canadian officials and commentators were offended by the recent know-nothing, no-nothing resolution adopted by the U.S. Conference of Mayors condemning the use of “high-carbon” fuels such as the heavy oil from Canada.

Fortunately, Western governors are less reflexively anti-energy. From The Edmonton Journal, “Governors Cheer Oilsands.”

JACKSON HOLE, Wyoming – Alberta found some allies Sunday at a meeting of governors of western U.S. states, when a pair of lawmakers

defended the oilsands and suggested Canada continue to ramp up its output in the face of environmental concerns.

“I look forward to the day that we markedly increase the oilsands production,” said Montana Gov. Brian Schweitzer, a Democrat. “We have an energy crisis in this county and maybe the only reliable trading partner that we have in this country is my neighbours, my friends in Alberta.”

Boucher, Mahoney, Schweitzer — all Democrats. Very good to see the pro-energy caucus taking an active role in shaping policy.

Above is the Canadian Press photo that CBC used to illustrate a story, “Bakken Formation: Will it fuel Canada’s oil industry?”

Couldn’t the editors find a photo of whalers processing blubber from a right whale?

The point being that the photo depicts the mining of Canadian oil sands, which has little to do with the drilling used to access the Bakken Shale formation. That process looks more like this:

(Minnesota Public Radio photo)

Just a guess, but we bet there’s a CBC editor or two who really dislike the Canadian oil sands and will find any reason at all to justify a photo. (Without mentioning reclamation.)

BTW, the CBC story itself is quite good. Saskatchewan, long a poor relative among the provinces, is a real growth story these days.

Production from the Bakken has been stupendous,” said Roy Schneider, spokesman for Saskatchewan Energy and Resources. “As recently as 2004, production was 278,540 barrels; last year, 2007, we were nudging up against five million barrels – the exact figure was 4,965,000 barrels.

 Hope our U.S. politicians don’t alienate the Canadian oil suppliers. We need that energy.

Union County, S.D., voters have expressed strong support for construction and operation of a new oil refinery in their county, the first new refinery in the United States in three decades. From the Sioux City Journal:

On Tuesday (June 3rd), county voters approved, by a 58 percent to 42 percent margin, Hyperion’s request to rezone 3,292 acres of farm land just north of Elk Point for a 400,000-barrel-a-day oil refinery and gasification power plant.

That’s a $10 billion project to produce ultra-low sulfur gasoline (ULSG), including reformulated blends and various grades of conventional gasoline and ultra-low sulfur diesel (ULSD). An integrated gasification combined cycle (IGCC) power plant will produce hydrogen, power and steam for the refinery, consuming refinery’s petroleum coke byproduct. 

A $10 billion project? Good thing oil companies make money.

Hyperion Energy, based in Houston, has a webpage devoted to the Hyperion Energy Center  with lots more details, including a FAQ. The Sioux City Journal also has a blog devoted to the topic.

It’s expected the crude oil would come from the Alberta oil sands, yet another target for environmental groups who oppose any expanded energy production. We note the Canadian-American Business Council is holding its annual general meeting across the street today at the Ronald Reagan Building, an event, “Northern Exposure: Can Canada Reduce the United States’ Reliance on OPEC Supply?” 

We sure hope so. But domestic U.S. production better also play a part. Rep. Rahm Emmanuel (D-IL) on CNBC (quoted here, about 2 minutes into the CNBC video): “I think you have to have a blend of both — obviously more production — but also start to invest, which has not happened, in (energy) alternatives as well.”

Even as gasoline heads toward an average $4 a gallon, an environmental group demands LESS petroleum supply. From the Houston Chronicle:

Refinery expansions in the U.S. focused on processing crude from Canadian oil sands show an entrenched reliance on fossil fuels even as concerns grow about the effects of oil sands production, an environmental group said Wednesday.

Such multibillion-dollar investments illustrate a long-term shift in refining toward so-called heavy oil, which requires more energy-intensive production and prompts worries about emissions and waste runoff, the report’s authors said.

“The first step is to start with awareness of what it means,” said Eric Schaeffer, a former Environmental Protection Agency lawyer who is director of the Washington-based Environmental Integrity Project, an advocacy group that produced the report.

“This is an intensely wasteful way to feed an oil habit,” Schaeffer said.

The group’s materials, including the report, are available here. No domestic drilling, no imports, no Canada…hey, and why are you driving, anyway?