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Public Radio's Environmental News Magazine (follow us on Google News)

Keystone Pipeline Oil for Export

Air Date: Week of

The proposed Keystone Pipeline would carry oil from the tar sands of Canada to refineries in Texas. The project has been touted as a way to reduce American dependence on foreign oil. But Steve Kretzmann of Oil Change International tells host Bruce Gellerman about a new study from his group that suggests the bulk of the oil would actually be for export. LOE called Valero Energy Corporation for a response. Spokesman Bill Day says the study is misleading and the refined oil isn’t set for export.


GELLERMAN: From the Jennifer and Ted Stanley Studios in Somerville, Massachusetts, this is Living on Earth. I'm Bruce Gellerman. The proposed Keystone XL pipeline would carry crude oil from the tar sands of Alberta Canada 17 hundred miles to refineries on the Gulf Coast. Critics say the crude is dirty and will speed up climate change; that extracting it from the northern boreal forest is destructive, and the potential for pipeline leaks, disastrous.

But supporters of the seven billion dollar project say we need the oil, that it will enhance US energy security, and make us less dependent on petroleum from unfriendly nations. Now, however, comes a new report that refutes this claim. The environmental organization Oil Change International’s report is called “Exporting Energy Security.” Steven Kretzmann is the group’s Executive Director.

KRETZMANN: It turns out when you look at the pipeline that is being built - the Keystone XL pipeline - it turns out that much of this oil that is coming down from Canada is going to be destined for export. And what we did was a little bit of sleuthing, and we went back to TransCanada’s original declarations to the Canadian regulators and we found out that they’re shipping to a certain number of refiners on the Gulf Coast, and when you look at the top one there, that’s Valero.

Valero is configuring their refineries to be able to produce 50 percent diesel. There’s really not that much of a market for diesel in the United States. I mean, there is a glut of diesel in the United States; there is a much better price to be had for that in Europe and Latin America. If they’re configuring those refineries for 90 percent diesel, and the heavy sour crude that’s coming down from Canada is much more easily refined into diesel, it makes sense that they’re going to be using the majority of that to be shipped overseas.

GELLERMAN: So lets follow the flow. It starts in Canada at the tar sands, it gets transported via this proposed pipeline, it comes into the United States - does it get taxed there?

KRETZMANN: No! See, that’s the wonderful, interesting thing. It comes in via something called a "foreign trade zone," which is what the refineries are located in, and that foreign trade zone means they get to import the oil from Canada tax-free, and get to turn around and export the oil abroad tax-free, once again.

GELLERMAN: So where does the energy security come through that the companies say we’re supposed to derive from this pipeline?

KRETZMANN: We really … it doesn’t seem like there is really any increase in energy security from this pipeline. There is increased profits for the oil industry because of this pipeline, and the tar sands producers desperately need an export outlet for their product.

There’s actually a huge glut of tar sands oil in the Midwest United States. This is going to allow that glut of oil to drain, and much more oil to be shipped overseas, more oil to be produced in Canada, more very dirty, carbon-intensive tar sands oil to be produced, and it’s going to make them a lot more profit, and worsen climate change in the process.

GELLERMAN: So okay, we won’t get a new source of oil, and we won’t be making money in terms of taxes from the transportation of the pipeline, but will it create jobs? They say, lots of jobs - I think, upwards of 20,000 or more!

KRETZMANN: Yeah, that’s an absurdly optimistic number on their part. The State Department’s impact study of jobs actually had it coming in at about one quarter of what TransCanada’s impact was. They said about 6,000 jobs - the State Department did. And again, these are not long-term jobs - there’s a boom-bust cycle associated with the industry. There will be some jobs during construction, for sure, but then most of them will go away.

And, you know, a pipeline is a pretty self-sufficient thing. There may be more jobs involved in cleanup when the inevitable spills happen, but it’s really not a good job creating device. It’s just ... you can create a lot of jobs by digging a giant hole in the ground all the way to China, but is that a good idea? I don’t think so.

GELLERMAN: Now because this pipeline would cross the US/Canadian border, the State Department has to sign off on it. And they’ve said that it will have no significant environmental impact. And the EPA actually has chimed in, while it has no authority in this regard, it has actually gone head-to-head with the State Department and it’s not usual, typical, that that happens - where two governmental agencies are at odds with each other.

KRETZMANN: Yeah, well, unfortunately there seems to be something a little fishy going on at the State Department. It seems that one of Hillary Clinton’s top campaign aids has been hired by TransCanada - the pipeline firm - and has been, sort of, directly working behind the scenes with State Department staff using his connections to actually try to grease the way forward for the Keystone XL pipeline.

GELLERMAN: President Obama has the final say on this, though, right?

KRETZMANN: Sure. But I think all of us feel like this thing is really a key litmus test of the President’s commitment to the environmental community and environmental issues in general. And, if he wants environmentalists to step up during his reelection campaign, this is a minimum bar that he has to clear in terms of rejecting this pipeline.

GELLERMANN: Well, Mr. Kretzmann, thank you so very much.

KRETZMANN: Thank you very much for having me.

GELLERMANN: Steve Kretzmann is Executive Director of Oil Change International.

Well, of the six companies that have so far committed to buying oil from the Keystone XL pipeline, only one is based in the United States. That’s Valero Energy Corporation of San Antonio, Texas. Company spokesman Bill Day says Kretzmann’s report is wrong.

This map shows the three main oil sands in Alberta, Canada. (Photo: Norman Einstein, Wikipedia Creative Commons)

DAY: This is not an export-dedicated pipeline, which is one of the things that opponents have been saying. This is a supply pipeline to get crude oil to a refinery that has actually been in place for over a hundred years, and has been processing heavy grades of crude oil for many years, before the Keystone XL pipeline was ever even heard of.

GELLERMAN: But what percent of the oil that will be shipped through this proposed pipeline would be used by your company domestically, as opposed to being exported?

DAY: Unfortunately there is absolutely no way to know that, because that oil coming down from the Keystone XL pipeline to our Port Arthur refinery is one source of crude oil for the plant, but it’s not the only source. So it’s going to get mixed in with oil from other places, but there's no way of knowing which particular barrel of oil was the source of which particular barrel of gasoline or diesel. Anybody who says they know, does not know.

GELLERMAN: The flow of oil is driven by global demands, not domestic need. If you’ve got more money from another market, you’d be more likely to sell it there than here.

DAY: Well, it’s actually driven by both global and domestic needs. The United States remains the largest consumer of petroleum and petroleum products, so this is the biggest and most lucrative market. But demand for gasoline has been fairly flat here with the economic downturn. So, in order to keep the refineries running at full steam, it helps to have some place else to send those products.

GELLERMAN: Bill Day is Executive Director of Media Relations for Valero Energy Corporation. Mr. Day, thanks a lot.

DAY: I appreciate the opportunity.



Oil Change International

Dirty Energy Money


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