Now Here's A Reason To Oppose The Keystone XL

The Keystone XL pipeline project, which would bring bitumen down from Alberta's Oil Sands region to refineries along the United States' Gulf Coast, has been in the news a lot lately.  Opponents are trying to block approval of the US portion of the pipeline since they argue that Oil Sands crude production is a major source of greenhouse gas emissions, destructive to the arboreal forests in Alberta and that the pipeline puts the American heartland and the massive Ogallala Aquifer at-risk since bitumen is highly corrosive, making pipeline leaks more likely, and difficult to clean when it spills.  Late Thursday they may have won a partial victory as the Obama Administration requested an additional review on the potential impacts of the pipeline which will likely punt any final yea or nay decision out past the 2012 presidential elections.  Of course a delay is not a denial and it's quite likely the pipeline could get the green light late next year or early in 2013, especially if a Republican wins next year's presidential elections, so the protests against the pipeline continue.

In an earlier post, I was critical of the protesters, not so much because I whole-heartedly support the pipeline idea, but because I find a lot of their rationale incredibly parochial – if we Americans refuse to build the Keystone XL, those silly Canadians will stop ruining their environment.  Of course Oil Sands production began before the Keystone XL project was even thought up and Canadians have a couple of Plan B's in mind in case Keystone XL is blocked.  One is to build pipelines west to the Pacific, where the bitumen can be shipped off to always energy-hungry China; the other is to build “upgraders”, a kind of refinery that converts heavy, lower-value into light, valuable synthetic crude oil (SCO) that can be processed like natural crude oil and which fetches a premium on the open market. In fact, some Canadians are wondering why they're even shipping out the lower-cost bitumen and not the higher-value SCO in the first place.

In a column in The Guardian, Sen. Bernie Sanders hits on a much better reason to oppose the Keystone XL – namely that little, if any, of the Oil Sands bitumen will actually be used in the United States.  The Oil Sands are being touted as a hedge against more unreliable sources of imported oil (i.e. the OPEC nations).  But internal documents from Valero, the refining company most invested in seeing Keystone XL completed, show that the company plans to convert the Alberta bitumen into gasolene and diesel fuel that they will then ship out to Latin America and Europe.  The reason is that their refinery in Port Arthur, TX is in a special enterprise zone where no export taxes are charged, so shipping the gas/diesel abroad is more profitable than selling it in the US, plus Europe has a much larger market for diesel than does the United States.

That argument knocks the legs out from the Oil Sands argument in the US – namely that they will provide America with a source of imported oil from a stable and trusted ally.  It also makes opposition to the pipeline a lot more palatable - why should the United States put its environment at-risk so a private company can make profits selling products from our “domestic” oil abroad – than some fantasy that if we “tell” the Canadians to stop exploiting the Oil Sands they actually will.

Update: According to Toronto’s Globe and Mail, Canadians are pissed about the delay decision.