Pipeline = Principle. No for a No.

As you may all know the Keystone Pipeline XL project was vetoed by President Obama earlier this week. Why? If the state department has reported the project would create 3,900 full time construction jobs, not to mention the 30,000 jobs created through indirect economic stimulus. (Economist) But within hours Senator Mitch McConnell republican majority leader said they would have the decision overridden by next week. That is unlikely, unless they persuade the four senate votes they are short to overturn the veto.

Away from that bill and in a different corner. The immigration issue has finally risen to the top of President Obama’s agenda. However, that was not the case for the republican led congress and senate. After much deliberation and negotiation congress has failed to find a solution to the problem. With no other option left, President Obama enacted executive action introducing (DAPA) Deferred Action for Parents of Americans and Lawful Permanent Residents. DAPA would allow a non-citizens, already in this country, temporary authorization to stay and issue work permits to these individuals. He also expanded protection for (DACA) Deferred Action for Childhood Arrivals who have been in this country continuously since January 1, 2010.

The lack of congressional action forced President Obama to create a temporary fix. But now that executive order is stuck in a Texas court. Reuters reports that “U.S. District Judge in Brownsville, Texas issued a temporary court order on Monday stopping Obama’s executive actions that bypassed a gridlocked Congress.” 26 states brought forth a lawsuit calling into question the constitutionality of the actions. The judge has said “The states have sufficient cause to challenge.” The executive order has been slammed with an injunction and is at a standstill. However, President Obama will not go down without a fight and said the Department of Justice was going to repeal the injunction. Needless to say, this is the beginning of a legal battle for the executive branch.

Congress has been strongly rallying for the expansion of the keystone pipeline to the point of salivating for the past 5 months, and President Obama has been pressuring congress for comprehensive immigration reform for the past 2 years. Clearly, if President Obama is struggling to execute his agenda, then why should congress get what it wants? Revenge is a dish best served cold and our President has just forced congress into shelving their dream job creating pipeline.

Sources:

http://www.reuters.com/article/2015/02/24/us-usa-keystone-idUSKBN0LS2FH20150

http://www.economist.com/blogs/democracyinamerica/2015/02/keystone-xl-and-presidents-veto

http://www.reuters.com/article/2015/02/17/us-usa-immigration-idUSKBN0LL0AT20150217

What is all this commotion… Keystone Pipeline XL defined

First of all there is a fully functioning international pipeline already in place, called the Keystone Pipeline, that runs 590,000 barrels per day from Alberta, Canada to Cushing, Oklahoma transporting Canadian Sand Bitumen Crude Oil to be refined and supplied to the Midwest. This part of the project was granted a presidential permit and started operations in June of 2010.

The proposed expansion is the much debated “Keystone Pipeline XL.” This is an additional pipeline that would connect Alberta, Canada to Steele City, Nebraska supplying an extra 510,000 barrels for a total of 1.1 million barrels per day. (Picture 1 illustrates the various phases)

Many who oppose this project say that the Canadian crude oil with high levels of bitumen is bad for the environment, but some of it is already coming in anyway. Researchers have also discovered that it is comparable to California crude and creates the same outcome when refined properly.

Others say they oppose the expansion because “ the threat of a leak would be detrimental to the local environment.” My question for those people is “how do you think crude oil is transported throughout the US currently?” Through pipes in the ground, some a mere 20 feet under residential homes. Is that not as bad as the keystone pipeline? At least these are new pipes equipped with pressure checking sensors and automatic shut off valves unlike the former. (Picture 2 is the current network of underground pipelines running through the US)

Politically: The expansion of the “Keystone Pipeline XL” is up for presidential permit approval. Since this keeps falling off the Presidential agenda, a new Republican Senate and House is hoping to make it happen. But let’s not forget about President Obama’s sarcastic skit on The Colbert Report where he said “I still have the veto and I’m not afraid to use it.”

Bottom line: Why do we need an extra 1.1 million barrels of Canadian crude per day coming into the US? When there is plenty of California crude, Texan crude, and shale oil in the Dakotas. There is so much crude that the trading price keeps dropping. Nevertheless, crude oil is coming into this country by pipeline, by train or by boat but it’s coming in. Some say the pipeline is the best option. But this issue is no longer about crude oil, this debate is fueled by personal interest and the power struggle between an aggressive congress and a president standing his ground.

Picture 1- Keystone Pipeline & Proposed Expansion XL

Picture 2- Current network of underground pipelines transporting liquid oil (Blue) and Natural Gas (Red)

Picture 3- International Pipelines

Mega Takeover Shell vs. BP

“Cuando el rio suena es que agua lleva.”

A Spanish proverb that states there must be some truth to every rumor. Recently, there has been reports that Royal Dutch Shell (Shell) is seeking a  takeover merger of British Petroleum (BP/Arco). It could possibly just be a rumor but I think it is a story to see if there are any takers on a tanking BP, as stocks continue to plummet. With BP’s stock trading at a low $40 and Shells stock standing healthy at $70, I still doubt it could happen.

As a mega merger of all assets would be almost impossible because of the logistics and the legality of the merging of that amount of market shares, although the individual selling of BP’s American assets is reasonable speculation.

When Tesoro Corp. bought out BP Carson in June 2014 financial analyst said that the overall loss to BP over the Deepwater Horizon Oil Spill would burn through its financial reserves fast and start irreparable damage by January 2014.  Fast forward to December 2014 with the downfall in the price of crude oil because of the surplus effecting the oil market, BP is hurting for money.

As the energy and oil industry begin to suffer the effects of a low price per barrel of crude oil, all companies are looking to downsize and cut excessive spending for lean times to come. While Exxon Mobil said it would be fine if the barrel sold at $40. We will see an evolving oil and energy market in the future. This year is going to be interesting to see how the big companies cope.

Big picture: There is a little chance that Shell will completely buyout all BP assets but buying a few assets this upcoming year is not such a farfetched idea.