Keystone XL Pipeline—Boon or Boondoggle?
By Richard Bergen
People say the XL pipeline will bring more oil from Canada to the U.S., resulting in cheaper gas. Not only that, they say it will create tens of thousands of much-needed jobs.
Yet President Obama has twice refused to permit the construction of the new pipeline. All this while the price of gas is now hovering around $5 a gallon. Why not build it? It defies common sense.
Well, first of all, it’s important to understand that the reason the TransCanada company wants to build the pipeline is to get access to American refineries that are capable of turning the heavy “tar sands” oil (which will be piped from Alberta) into useable transportation fuel. It is not, as most people assume, to sell and distribute oil in the U.S. market.
All the oil companies, except one, that will receive oil from the pipeline are foreign owned. The details of their contracts are confidential.
The one exception is Valero, a U.S. company, that has made its intentions public: it intends to refine its share of the oil into diesel and jet fuel and sell all of it to China and South America.
The Valero model will almost certainly be followed by the other oil companies. Why? Consider the following facts: (i) In 2011, U.S. demand for gasoline hit a 10-year low. At the same time, the number of oil drilling rigs in the U.S. has quadrupled. We now have more drilling rigs than any other country on earth. Oil supply is not the problem.
(ii) In view of the foregoing, it is not surprising that the number one export of the U.S. last year was oil. Oil companies can, and do, sell our oil to the highest bidder, anywhere in the world.
(iii) The U.S. refineries receiving and refining the Canadian tar sands oil are located in Port Arthur, Texas, in a Foreign Trade Zone. This means that any product made in that zone is exempt from U.S. customs duties and federal and state taxes—as long as it’s exported!
So the chant should be, “drill, baby, drill! . . . and export the oil, baby!”
The Keystone XL pipeline, if it is built, will be an oil export pipeline. In all probability, nary a drop of fuel from it would reach the gas tanks of U.S. consumers.
There are other negatives associated with the XL pipeline. Unfortunately, there’s not enough space here to explain them all.
The product that would be shipped in the pipeline is not like conventional crude oil. It is a tar-like substance dissolved in natural gas condensate that is called dilbit (diluted bitumen). If it is spilled in the environment, this toxic broth can cause significant health hazards and major clean-up problems.
As for jobs, the job creation claims made for the pipeline have reached farcical proportions. Suffice to say, the most dependable, and independent, estimate of jobs comes from a university think tank, the Cornell Global Labor Institute. They estimate the XL pipeline would create 127 permanent jobs.
The XL pipeline is a con job. It’s not going to give us more oil, cheaper gas, or any important job growth. All that it will give us, if it’s built, is a significant environmental hazard.
President Obama is right to resist its construction in the U.S.
Richard Bergen is a Ramona resident.
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