Tar Sands Pipeline to Serve Exports, Not US Demand

The oil industry and its political patrons would like you to think that the pipeline that would carry dirty tar sands oil from Canada to oil refineries in the Gulf Coast is good for America.

The position they’re pushing on President Obama – who alone will make the decision on whether it’s approved – is that the pipeline is necessary for American energy security and its construction will help wean America of dependence on Mideast oil. And it will create jobs.

A closer look at the realities of the global oil market and the companies who would profit from the pipeline reveals a completely different story, according to a report by Oil Change International, a nonprofit that researches links between fossil fuel companies and governments.

The US is, in fact, awash in oil right now – it has four times as many oil rigs pumping domestic oil today than eight years ago, notes the report,"Exporting Energy Security."

The US oil industry is primarily interested in who will pay the most on the global marketplace. They call that "energy security" when it suits, but in reality it is "oil company security" through maximising profits, says the report. 

Instead of reducing US depence on foreign oil, the pipeline  would merely transport Canadian oil to American refineries for export to overseas markets.

The report is based on documents from the US Energy Information Administration and the Canadian National Energy Board, corporate disclosures to regulators and investors, and analysis of the rapidly shifting oil market.

Here are the facts as presented in the report:

  • Keystone XL is an export pipeline. The Port Arthur, Texas, refiners at the end of its route are focused on expanding exports to Europe and Latin America. Much of the fuel refined from the pipeline’s heavy crude oil will never reach US drivers’ tanks.
  • Valero, the key customer for crude oil from Keystone XL, has explicitly detailed an export strategy to its investors. Because Valero’s Port Arthur refinery is in a Foreign Trade Zone, the company can carry out its strategy tax-free.
  • Demand for crude oil is, in fact, shrinking in the US and the pipeline isn’t needed. 

    The oil industry acknowledges that higher fuel economy standards and slow economic growth mean declining US oil demand and domestic production is booming. Tar sands oil would actually displace US crude from new, "unconventional" domestic fields in Texas or North Dakota.

"To issue a presidential permit for the Keystone XL, the Administration must find that the pipeline serves the national interest," says Stephen Kretzmann, executive director of Oil Change International. "An honest assessment shows that rather than serving US interests, Keystone XL serves only the interests of tar sands producers and shippers, and a few Gulf Coast refiners aiming to export the oil."

Valero has contracted to take at least 100,000 barrels of tar sands crude a day from Keystone XL until 2030. Its publicly disclosed business model relies on refining heavy sour crude for export. It is upgrading its Port Arthur refinery to process heavy sour into diesel fuel. Its investor presentations clearly show it plans to ship diesel to Latin America and Europe.

Valero – the Texas oil company behind last year’s attempt to overturn California’s landmark climate change bill AB32 – is the only U.S. company among the six customers who have jointly committed to purchase 76% of Keystone XL’s initial capacity.

The other refiners are Motiva, a joint venture between Royal Dutch Shell and the Saudi government, and Total of France, both of which have newly upgraded facilities in Port Arthur tax-free trade zones. There are also two Canadian producers and one international oil-trading firm in the group of six customers.

"Oil is a fundamentally global market – the idea that the pipeline enhances our energy security is a scam," says Kretzmann. "Let’s hope the Obama Administration doesn’t fall for it. In fact, the only way to truly reduce our dependence on foreign oil is to reduce our dependence on all oil. Let’s not fool ourselves that we will achieve ‘energy independence’ by serving as a middleman for access to overseas markets."

Keystone Just the Beginning

Oil company would actually prefer to build a pipeline going west in Canada through the Rockies – it would be the shortest route to the big Asian markets.

The proposed Northern Gateway pipeline would have to travel through Canadian indigenous lands where they would face strong opposition. They see the US as an easy pushover where there’s less resistance.

After this one succeeds, there will be others. Massive tar sands pipelines are planned to bring crude to New England and the Great Lakes. Once they are built, it will be extremely difficult for governments to turn off the spigot.

The Obama administration is aware of this and the impact it would have on climate change, but it’s also aware of oil lobby’s unlimited funds to attack Democrats in elections if they don’t get what they want.

Read our coverage of the tar sands fight.

Read the full report:

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