The fate of the northern portion of the multi-billion-dollar Keystone XL oil pipeline from western Canada to the Gulf of Mexico (GOM) in the hands of the Obama administration will be the bellwether this coming year, determining if the U.S. technology-driven abundance of hydrocarbons is going to be cashed in as part of a North American-wide energy transformation, according to a former private equity energy star and now senior think tank fellow.

Mark Mills, senior fellow with the Manhattan Institute for Policy Research, told a forum earlier this week that he is an “optimistic cynic” about the fate of the TransCanada Corp. oil pipeline that the Obama administration denied last January. The U.S. State Department said at the time it was not in the U.S. national interest to build the 1,700-mile link from Canadian oil sands to U.S. refineries near the GOM.

“The president concurred with the [State Department] recommendation [see Daily GPI, Jan. 19], which was predicated on the fact that the department does not have sufficient time to obtain the information necessary to assess whether the project in its current state is in the national interest,” said a State Department spokesperson, adding that the current denial does not “preclude any subsequent permit application or applications for similar projects.”

Critics don’t believe the qualifier, and argued last Monday at the Manhattan Institute forum that President Obama and his U.S. Environmental Protection Agency leaders want a renewable-based energy strategy — not one dominated by the nation’s new wealth of hydrocarbons. Mills, a former aide in the Ronald Reagan White House, indicated he disagreed with their pessimism.

While Mills didn’t mention it, the 485-mile southern (Gulf Coast Project) portion of Keystone (see Shale Daily, Feb. 28) from Cushing, OK, to the GOM already is being built, which should free the bottleneck for bringing Bakken oil to the Gulf. He sees the eventual approval of the northern part out of Canada as a key to unlocking more extensive hydrocarbon development throughout North America. Basically, the northern part of the project, from Alberta to Nebraska, would connect Canadian oilsands output to the U.S. and foreign markets.

As of Thursday, all three spreads, or segments, of the Gulf Coast project are actively under construction, a Houston-based TransCanada spokesperson told NGI. On the preparatory work (cleaning and grubbing), 97% of the work is done on Spread 3; 80% on Spread 2; and 36% on Spread 1, he said. “The project is in varying stages of completion of 12 tasks involved in each of the three spreads,” all of which are scheduled to be completed by the fourth quarter next year.

Mills was asked by a participant in the institute’s forum if over the next four years there can be aggressive development of hydrocarbons in the United States, given the president’s reelection and his EPA appointees?

“I think the amount of money [from shale development] that is available to our unions and our government is overwhelming,” said Mills, who thinks the economic multipliers will win out in the end. “We’re not talking about a few thousand jobs and a few million dollars; we’re talking about millions of jobs and hundreds of millions — if not a trillion — dollars.

“The bellwether will be the XL pipeline. My prediction today is that the president gave the greens [environmentalists] what they wanted last term, and now I think he will give the private sector what it wants this term, which is jobs. Just that one pipeline is tens of thousands of jobs and billions of dollars.”

Mills said he sees a lot of momentum building behind it because of the money. And he thinks there will be “fig leaves,” or mitigation measures, on the environmental side.

Mills said California also could be a bellwether on this topic of fully developing the nation’s fossil fuel bonanza. “If [California Gov.] Jerry Brown were to unleash the Monterey Shale, along with the federal Bureau of Land Management, just for the state there are a potential $250 billion of tax receipts just from the shale development there.

Mills thinks it is important that Brown last year fired two state oil/gas officials who were holding up drilling permits (see Daily GPI, Nov. 10, 2011). The governor is showing a willingness to push hydrocarbon development, he said. “So, it is going to be interesting and a political challenge on both sides of the [Canadian-U.S.] border, but I think the money and jobs when packaged properly will win out against the reality that this is modern technology, it can be done cleanly and ultimately it will just come down to money.”

Keystone XL was originally conceived as one project to tap Canadian oil supplies and upper Midwest U.S. oil. The U.S. Department of State is currently reviewing TransCanada’s new application for a Presidential Permit to proceed with the 1,179-mile (1,897-km) Keystone XL pipeline from Hardisty, Alberta to Steele City, NE, and is expected to make a decision in the first quarter of 2013 (see Shale Daily, July 30).

©Copyright 2012Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.