SIOUX FALLS, S.D. (KELO) — Even as oil production falls and prices rise, the United States of America remains the largest producer of oil in the world.
Under former President Donald Trump, oil production in the U.S. peaked at 13.1 million barrels being produced per day. As of today, Poynter reports that oil production has dropped to 11.6 million barrels of oil being produced daily which still surpasses every other country in the world.
On Tuesday, President Joe Biden announced a ban on the import of Russian oil because of the invasion of Ukraine. This move has had many politicians demanding that the Biden administration invest in the production of oil on American soil to secure energy independence from other global leaders. South Dakota Governor Kristi Noem has been among those voices and has repeatedly called for the President to resurrect the Keystone XL pipeline and begin drilling in America.
Keystone XL and the transportation of Canadian crude oil
The Keystone XL pipeline project was proposed by TC Energy (formerly TransCanada) in 2008 as an extension of the Keystone pipeline that stretched from Canada to the Gulf Coast. The XL pipeline would have exported 830,000 barrels of Alberta tar sands oil per day with 730,000 barrels coming from Canada and the remaining 100,000 being drilled from the Bakken formation in North Dakota and Montana.
During President Barack Obama’s administration, the pipeline failed to receive the Presidential permit necessary to begin the construction of the pipeline. The Obama administration cited several environmental concerns such as carbon emissions, oil spills, as well as effects on water sources, air quality and soil. In 2015, the administration struck down the proposed pipeline.
“Undoubtedly, enactment of the Committee bill and construction of the Keystone XL pipeline is in TransCanada’s interest. But the proper test is, and should remain, whether it is in the national interest, not TransCanada’s interest,” the Senate Committee on Energy and Natural Resources concluded in its 2015 report.
Under President Trump, the pipeline was brought back for approval in 2017. A report from the Department of State found that the XL pipeline would serve the national interest and a permit for its construction should be issued. As of the 2017 report, the State Department found that despite the volatility of oil prices, forecasts “…affirm the Department’s conclusion that such infrastructure is supported by mid-and long-term market outlooks.”
The report also found that 42,100 temporary jobs would be created during the two-year construction of the pipeline with 12,000 jobs being spread across the Upper Plains region of Montana, South Dakota, Nebraska, and Kansas. Following the completion of the pipeline, only 50 people in the United States would remain employed by the pipeline, 35 of which would be full-time employees and the remaining 15 being contract workers.
“This small number would result in negligible impacts on population, housing, and public services in the proposed Project area,” the report stated.
The question of whether the pipeline would give America energy independence is addressed in the report but was inconclusive. While the Department of State found that the project would “meaningfully support U.S. energy security” through the transportation of crude oil, it also stated that America would have to remain integrated with the global oil markets despite self-sustainability and be “subject to global price volatility.”
The oil itself would have primarily been a Canadian export as only 100,000 of the 830,000 barrels were from the U.S according to the State Department. Once the oil arrived in the Gulf Coast and was refined into usable gasoline and diesel, the oil would then have been exported. Some Democrats stated at the time that the oil would primarily be exported out of the U.S. to other countries but a report from PolitiFact found that to be mostly false.
PolitiFact reported that two-thirds of the oil from Keystone XL would have been exported with the rest being sold to the U.S. Right now, 9% of imports in the Gulf Coast come from Canada with most of the oil being imported from Latin America and the Middle East. The Keystone XL would have increased Canadian oil imports to 25% in the Gulf.
The pipeline would have contributed $3.4 billion to the U.S. Gross Domestic Product and aided in reducing unemployment which at the time was 4.1% compared to 4% today. The State Department was also encouraged by the stability of Canada and long-standing friendship between the two countries as a factor in the building the pipeline to further rely on Canadian crude oil, rather than other countries with political unrest or conflict such as what is happening in Russia now.
Pain at the pump
Between the conflict in Ukraine, the U.S. imposing sanctions on Russia, including an oil ban, and inflation, gas prices in the United States continue to increase daily. A month ago, gas in South Dakota cost $3.32 on average. A week ago, gas in the state increased to $3.44 and then again went up to $3.85 as of Tuesday. Today, gas is once again increasing to $3.92. This is all compared to $2.75 one year ago in South Dakota.
As prices increase and politicians and everyday citizens call for energy independence, some people are wondering whether gas prices would be cheaper had the Keystone XL pipeline been built. The short answer, according to the State Department, is no, American production of oil would not impact what Americans pay at the pump.
According to the State Department’s 2017 report, the pipeline would have had no measurable impact on lowering retail gas prices. Instead, the global oil market would continue to determine the cost of oil.
“As a result, the level or origin of U.S. oil imports has a minimal impact on the prices U.S. consumers pay for refined products,” the report said.
Had the Keystone XL not been canceled, Anthony Swift, Director of the Canada Program for the National Resources Defense Council (NRDC), says that the pipeline would still be in its construction phase. “It likely would have been operating in late 2023 or 2024,” Swift told KELOLAND News Wednesday.
Swift and the NRDC were strong opponents of the pipeline due to environmental concerns and the possible impact on climate change. Swift describes the tar sands crude oil that would have been transported as the “dirtiest kind of lowest-grade kind of oil in the world” and harmful to the land if spilled. The process by which the oil is refined is carbon-intensive as well according to Swift.
Like the State Department, Swift says that Keystone XL would have negligible impact on what Americans pay for gas. Rather, Swift says that the money America was giving to Russia to import oil was aiding in Putin’s military offense. By banning Russian oil, though, U.S. consumers will be hit hard in their wallets according to The Hill.
“The U.S. simply cannot protect itself from investing in these oil shocks by investing more deeply into the global oil market that generates them,” Swift said.
In an opinion piece for Fox News, Governor Noem blamed Biden’s blockage of the pipeline and support of the Nord Stream 2 pipeline for Russia’s energy hold on Europe and subsequently the invasion of Ukraine. In the piece, Noem wrote that under Trump, America became a net exporter of energy to European alliances and therefore reducing reliance on Russian energy. Noem says that Biden’s support of Nord Stream 2 in Europe is hypocritical as he previously struck down Keystone XL in the U.S.
Noem blamed both decisions on gas prices currently rising across the country.
“In this tale of the two pipelines, President Biden’s disastrous foreign policy and energy agenda intersect. His twin failures are putting our nation, and the entire free world, at risk,” Noem wrote.
Investing in American energy
While the State Department under Trump found that the pipeline would have little to no impact on gas prices for Americans, the report concluded that America should strive for energy independence. It’s something that both Democrats and Republicans agree on as well. But the question remains of how America should go about divesting from foreign oil.
Governor Noem is not alone in calling for more drilling in America despite the country being the largest producer of oil in the world. Senator John Thune, Representative Dusty Johnson and Senator Mike Rounds have also called for more drilling in the U.S. and the resurrection of the Keystone XL pipeline to secure energy independence. Even Democrats have called for the divestment from oil imports. But the difference is that Democrats are calling for complete divestment from fossil fuels and turning to clean energy, which they say is better environmentally and will create more jobs.
“Circumstances we don’t control determine the price of oil we pay, and it happens regardless of how much oil we produce because our oil industry is connected to a global market,” Swift said.
Instead, Swift and the NRDC would rather see states like South Dakota invest in wind and solar resources to produce clean American energy. But he recognizes that no matter what the Biden administration and lawmakers decide to do with the Build Back Better plan and energy policy, energy independence will not be attained overnight.
“Whether you’re looking at increasing oil production or reducing our consumption through clean energy it’s going to take a matter of months and years,” Swift said.
As the conflict progresses and uncertainty over the crisis in Ukraine grows, prices will continue to rise according to economic experts. But whether that uncertainty will be met with more American oil production or a shift to clean energy in the U.S., both Swift and Noem come to the same conclusion: America needs energy independence.
“A sanction on Russian oil MUST be met with a boost in American energy production,” Noem tweeted on Tuesday. “Cutting off Putin’s American piggy bank just to give that money to Maduro for Venezuelan oil is NOT the answer – DRILL HERE, DRILL NOW!”