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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Posted by Karen Brainard on Mar 8 2012. Filed under Commentary. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

7 Comments for “Keystone XL Pipeline—Boon or Boondoggle?”

  1. john

    good job..Why did a ditch through the heart of our Country for no good purpose?

  2. john RAJCIC

    AGREE…WHY DIG A DITCH THROUGH THE HEART OF OUR COUNTRY..

  3. Ryan

    Richard – I have to disagree with your assessment that all of the refined oil that would come into Texas would be exported. Here’s why:

    1. The products currently refined in Texas are primarily sold in the US. While it’s true that our domestic demand for crude has decreased very slightly in the US (kudos to us), we still import just over half of our oil and we remain the largest market for crude in the world. It doesn’t make sense to export this oil.

    2. The heavy oil that is currently being refined at these facilities comes primarily from Mexico and Venezuela, which have either dwnidling supplies, an unwillingness to sell to the US, or both. These supplies need to be replaced and Canada would like to be that supplier.

    3. If Canada wants to export from Alberta to China, they will do so via their Pacific coast.

    And a few other points I’d like to address. First, heavy crude comes from all over the world, not just Canada. I don’t accept the premise that shipping oil via tanker is safer than via pipeline, thousands of miles of which already criscross our country.

    As for Cornell’s dependability, they also released a report in 2011 that coal was better for the environment than natural gas. I don’t buy that or the jobs estimate.

  4. Judas

    Well said Mr. Bergen, well said.

  5. kafantaris

    The Wyden Amendment makes sense. If we are risking an oil spill on our homeland from the Keystone pipeline, then we should insist that all the oil it transports stays here.
    And that the pipeline should be built and maintained by American workers — with American made materials.
    Otherwise, we would be relegating our land to a 30 year stepping stone for Canada to transport its dirty oil to foreign markets.
    Indeed, the Wyden Amendment should be used as a model for all offshore and public land drilling. If our country incurs the long term risk of an oil spill, then it should also get the maximum benefit.
    The “free market” will have to take a back seat on this one.
    Our environment ain’t free — even to the free market.

  6. Richard Bergen

    It’s not Canada that wants to export oil to China, its Valero (and maybe the other oil companies who have contracted to take and refine the dilbit). It’s my understanding that the terminus of the pipeline would bring the dilbit to Port Arthur, to at least one refinery owned by Valero, and maybe one other owned by a company called Motiva. These refineries are supposed to be configured to refine the middle distillates (diesel and jet fuel).

    In my view, the question of where the refined product will go has been made moot by the Wyden amendment (an amendment to a highway bill currently under consideration that would give the Congress the authority to permit the pipeline). The Wyden amendment would have required the refined product from the XL pipeline to be sold only in the American market. Harry Reed said the Dems would vote in favor of the pipeline if the Repubs would back the Wyden amendment. The Wyden amendment was voted down yesterday by strong Repub opposition.

    I never said that shipping crude via tanker is safer than pipeline. I didn’t get into the spill and safety record of dilbit because of keeping the editorial short. Dilbit is not like conventional crude. It is tar dissolved in a toxic solution of condensed natural gas (containing a goodly content of benzine – - a known carcinogen). It needs to be heated to a temp of 160 degrees F and pumped at pressures of 1400 psi (crude is shipped at ambient temp and at max pressures of 600 psi) to move it through the pipeline. Current U.S. pipeline safety standards do not address that kind of transport mode.

    There are three dilbit pipelines that come from the Alberta tar sands to terminals in the upper Midwest of the U.S. They are the Lakehead, Keystone, and one other (the name escapes me for the moment). They have a lousy safety record. Something like 22 times the spill instance of conventional crude pipelines. The Lakehead pipeline spilled 800,000 gal of dilbit into the Kalamazoo (Mich) river in July 2010. Since dilbit is denser than water (unlike conventional crude which floats on the surface), it promptly sank to the bottom (try cleaning that up). A recent Mich Dept of Health report shows approx 60% of residents in the area of the spill now show respiratory and nervous system problems consistent with acute benzine exposure. These poor souls will probably develop cancer in due course.

    From what I’ve read, TransCanada will pay top dollar to anyone who will grant them right of way thru their land. Since the route of the XL extension is still up for grabs, and since it is so safe and will mean so many jobs, maybe we all could form a coalition to get it routed thru Ramona.

  7. Charlie

    As usual, we are fed what they want us to believe. Anyone with half a brain could see that there was much more underlying the pipeline controversy. Thanks for giving us the real scoop instead of the Republican side which, of course, is supported by the big oil companies.

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