U.S. State Department Backs Cross-Border Pipeline

While it’s not the Keystone XL, U.S. State Department does approve important cross-border pipeline project.

| More on:
The Motley Fool

Investors, political junkies and environmentalists eagerly await U.S. President Obama’s final decision on the hotly debated Keystone XL pipeline by TransCanada (TSX:TRP, NYSE:TRP). Meanwhile, another cross-border project, the Vantage Pipeline, has been approved by the U.S. State Department to little fanfare. While few have even heard of the Vantage Pipeline, it’s an important project for both countries.

What is the Vantage Pipeline?

There are several major differences between these two pipelines, in fact, in some regards these projects are exact opposites. The Keystone XL is a major oil pipeline which will stretch 1,179 miles and take 830,000 barrels of oil per day produced from the Canadian oil sands as well as oil from the Bakken all the way to the U.S. Gulf Coast refinery center.

Vantage, on the other hand, will go from a Hess (NYSE: HES) processing plant in North Dakota to a petrochemical complex owned by NOVA Chemicals in Alberta some 430 miles away. This pipeline won’t even carry crude oil, instead, it’s designed to carry ethane.

The $300 million (USD) project will have the capacity to transport 40,000-60,000 barrels of ethane per day. It marks the first time liquids from the Williston Basin will flow north into Canada. It’s also a really innovative solution to the
Williston’s natural gas problem.

Advantaged feedstock

A major problem for producers in the Williston Basin is the region’s overall lack of oil and gas infrastructure. This has caused many producers to flare natural gas because there just isn’t a way to get it to the marketplace. Hess’ Tioga Gas Plant is an important project as it takes natural gas and processes it into higher value feedstock such as ethane, propane and butane. The Vantage pipeline will give Hess an outlet for that ethane, while providing Nova with a cheap feedstock for its petrochemical plant.

The project could be expanded in the future to the full 60,000 barrels per day of ethane capacity as other producers sign onto the project. More natural gas being processed would help reduce the continued flaring that has been a big problem
in the Bakken. Enerplus Energy (TSX:ERF,NYSE:ERF), for example, just recently applied for approval to flare at least one of its 30 wells while it waits for a pipeline to be constructed. Not only does flaring harm profits as the gas can’t be sold, but it’s not the most environmentally friendly practice.

Keystone to follow?

It will be interesting to see if this is an indication that Keystone XL approval is not far away.  U.S Senator John Hoeven commented after the Vantage Pipeline was approved and said,

Another major piece of infrastructure that will help us build our North American energy security partnership with our closest friend and ally Canada. The project illustrates clearly how modern pipelines can create jobs, make us more energy secure, and do so with good environmental stewardship. It will enable us to reduce flaring in North Dakota and also reduce emissions where the natural gas is used by industry.”

While many opposed to the Keystone XL pipeline worry about an environmental issue if oil is spilled, it’s important to remember that the pipeline is critical to reduce truck traffic in the region. Further, additional pipeline infrastructure in general is important to reduce natural gas flaring, which is a bigger environmental issue.

Final Foolish thoughts

Cross-border pipeline projects like the Keystone XL and the Vantage Pipeline are critical to North American energy security. Also, pipelines like Vantage are a much more environmentally friendly option as they help to reduce natural gas flaring. If these projects are not built, it then puts the future of both countries in jeopardy as Canada might have to look to Asia to get full value for its oil.

How Canada is Powering China

It wouldn’t be a stretch to think that oil from Canada could one day make its way to China, especially if the U.S. decides not to approve the Keystone XL. One reason for this is that Canada is already powering China by way of uranium – the key ingredient for nuclear power. That is why The Motley Fool has prepared a Special FREE Report that will clue you into the two best uranium companies in Canada. It’s called “Fuel Your Portfolio With This Energetic Commodity,” and you can receive a copy at no charge, by simply clicking here!

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool Canada’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.

Follow us on Twitter and Facebook for the latest in Foolish investing.

Fool contributor Matt DiLallo does not own shares in any of the companies mentioned.  The Motley Fool does not own shares in any of the companies mentioned. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

More on Investing

Gold bars
Metals and Mining Stocks

Here’s a Precious Metals Stock With Less Risk

Wheaton is well positioned to form a small part of a much

Read more »

Natural gas prices are rising, making energy companies a good investment.
Energy Stocks

Bonterra Energy Stock Has Doubled: Is There More Upside in 2022?

It's been one of the best-performing TSX small-cap energy stocks in 2022, yet shares are cheap today.

Read more »

Early retirement handwritten in a note
Stocks for Beginners

How This Stock Market Selloff Can Help You Retire Early

The ongoing market crash can massively enhance your potential long-term profits to let you plan your early retirement.

Read more »

Question marks in a pile
Tech Stocks

Should You Finally Buy BlackBerry (TSX:BB)?

Is it time to finally buy BlackBerry?

Read more »

Community homes
Dividend Stocks

Canada’s House Prices Cool: 1 REIT to Buy the Dip

Canada’s house prices are cooling. Should you be concerned about falling house prices or use the dip to buy a…

Read more »

grow dividends
Tech Stocks

3 Top TSX Growth Stocks to Buy for Less Than $10

These high-growth TSX stocks are trading less than $10 and have strong potential to beat the broader markets in the…

Read more »

Top view of mixed race business team sitting at the table at loft office and working. Woman manager brings the document
Bank Stocks

Top 2 Stocks for Beginners in 2022

Bank stocks like Bank of Montreal (TSX:BMO)(NYSE:BMO) are top picks for 2022.

Read more »

protect, safe, trust
Dividend Stocks

Market Selloff: 2 Safe-Haven Dividend Stocks to Limit Your Losses

Instead of worrying about the ongoing market selloff, investors should act now and add some safe dividend stocks to their…

Read more »