The tendency of all too many of us to limit our knowledge of fossil fuels to price variances at the gasoline pump is absurd and could become dangerous. That's not to say we should expect expertise from our citizenry about the complex worlds of oil and gas in, say, Saudi Arabia, Iran, Libya, or Nigeria. But plugging in to energy-related occurrences in our own active hemisphere is a fine starting point.

For instance, as I noted last week, OPEC has just released a report that catapults Venezuela, the home of the antagonistic Hugo Chavez, into first place in oil reserve wealth among the producing nations -- including Saudi Arabia.

That's a change based on growth in heavy crude during 2010 in several existing fields. However, that crude may be tough to produce, especially given Venezuela's weak economy, technological inferiority, and steadily declining year-over-year output. Those conditions have followed behind Chavez's nationalization of the country's oil industry and ouster of several big companies, including Chevron (NYSE: CVX) and BP (NYSE: BP), from Orinoco belt operating positions.

Going north
So let's head north to another site of oil riches in our hemisphere: Alberta, Canada. As you know, the province has been blessed by having voluminous deposits of bitumen, or tar sands. Tar sands are also challenging -- technologically and environmentally -- to produce, transport, and refine. The sands are often transported to the U.S., where they can be refined into gasoline, diesel, or jet fuel and marketed to fill our voracious needs for those products. Otherwise, they adopt a form that's essentially a combination of tar and quartz sands at room temperature.

TransCanada (NYSE: TRP) is endeavoring to gain approval to build what it's calling its Keystone XL pipeline, which would carry approximately 1.1 million barrels per day of Canadian crude to the plethora of refineries in Texas. Approval for that $7 billion project ultimately will be issued or denied -- potentially by year's end -- by the U.S. State Department, since two countries are affected by the proposal. However, the process has hit environmental headwinds in the U.S. from concerns about the potentially negative effects of bitumen on pipelines and the possibility that its continued carriage could rupture the lines.

A newly lurking solution
Nevertheless, a potential solution involving Canadian governments and the producers operating in the country has suddenly emerged. It involves a degree of cooperation that's difficult to imagine for our country. As it now stands, the Alberta and Canadian national governments will jointly implement an air- and water-monitoring system that they hope will assuage environmental concerns in the U.S. The system's $53 million in annual costs will be borne by the companies, while its operation will be administered by the government.

As The Wall Street Journal noted earlier this month, it's been less than a decade since definitive information was compiled about the nature of the Alberta tar sands reserves. Therefore, in 2003, several providers of energy information, including the Department of Energy's Energy Information Administration, were able to credit Canada with far higher implied reserve volumes than had previously been the case. As such, our neighbor's 170 billion barrels of proved reserves now place it third in the world behind only Saudi Arabia and Venezuela, or Venezuela and Saudi Arabia, depending upon your perspective.

Canada's deal climate is warm
With TransCanada awaiting a ruling on the Keystone pipeline, there continues to be a bevy of deal activity in oil- and gas-rich Canada. For instance, Royal Dutch Shell (NYSE: RDS-B) has decided to exit the $17 billion Mackenzie Gas Project, a production and pipeline project in the far north, which it shares with the likes of ExxonMobil's (NYSE: XOM) Imperial Oil Ltd. unit and Conoco Phillips (NYSE: COP). Like Keystone, Mackenzie, in which Shell has an 11.4% stake, also is in limbo. While it has received a regulatory construction imprimatur, following seemingly interminable analyses, low gas prices have cast doubts on the timing of its completion.

At the same time, while the Canadian government has intensified its scrutiny of foreign investment, China's largest offshore oil producer, CNOOC (NYSE: CEO), has announced that it will pay about $2.1 billion for OPTI Canada, a bankrupt tar sands developer. The proposed deal remains subject to Canadian government approval.

Battling congressmen
But back to the Keystone proposal. It's likely that opposition to the project will continue to come from Democratic Rep. Henry Waxman of California, the ranking member of his party on the House energy committee, who opposes tar sands development, along with other forms of energy development, it seems. It's likely that Waxman will be supported by the Environmental Protection Agency, which has previously called for more stringent environmental studies to evaluate the potential effects of Keystone.

Opposing that team is likely to be a group headed by Republican Rep. John J. Duncan Jr. of Tennessee who, by golly, represents my district and last week intensified his criticism of the EPA, which he accused of displaying a "dictatorial or arrogant attitude." He accused the agency of being controlled by "very left-wing environmental radicals."

Meanwhile, it is clear that the companies involved have determined an alternate course, should the State Department deny their request to build the line. If the U.S. turns up its nose at Alberta's oil, it'll simply be sold to Asia, primarily to China.

My inclination, especially regarding Canadian tar sands in general and the approval process for Keystone, is simply to watch the process carefully until a State Department determination is rendered. From a specific company perspective, my inclination is to feast my eyes on ExxonMobil, given its active status in both Imperial Oil, of which it owns nearly 70% -- and which itself owns 25% of Syncrude Canada -- and its position in the pending MacKenzie Gas Project.

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