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Frances Beinecke’s Blog

America Doesn't Need More of Canada's Dirtiest Export: Tar Sands Oil

Frances Beinecke

Posted April 11, 2012 in Moving Beyond Oil, Saving Wildlife and Wild Places

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Since President Obama rejected the Keystone XL pipeline for dirty tar sands oil, some pundits have claimed that Canada’s tar sands oil must be “set free.” Energy companies, they insinuate, are at the mercy of America’s shifting energy policies. Even Canadian Prime Minister Stephen Harper has taken to saying tar sands oil is “captive” to the U.S. market.

Unwanted is more like it. America imports some tar sands oil, but expanding U.S. dependence on this polluting fuel is not in our national interest. It’s a bad product, and we don’t need more of it. And energy companies angling for bigger profits shouldn’t play the victim.

America remains a trusted trade partner for Canada’s conventional oil. We buy more oil from Canada than from any other nation, including Saudi Arabia, Mexico, Venezuela, or Iraq.

But just because we buy their conventional oil doesn’t mean we have to buy their tar sands oil too. Tar sands oil is the worst of the dirty fuels. Strip mining tar sands from the Boreal Forest, separating the oil from the sand, upgrading it, and refining it uses so much energy it generates three times as much global warming pollution as conventional crude—and that’s before it gets burned in our cars and trucks.

Transporting it is also perilous. Tar sands oil is highly corrosive, and pipelines that carry it have proven more prone to spills than those for conventional crude. One tar sands pipeline operated by the same company behind the Keystone XL project experienced 35 leaks in the U.S. and Canada its first year of operation and had to be temporarily shut down by the U.S. Department of Transportation. Hauling this dirty fuel through our communities is a threat to our water, farms and ranch lands.

Backers of the Keystone XL downplay those threats, just as they downplay their long-term plans for the pipeline. Harper and other Canadian leaders like to imply it is America’s fault that Canada must look for new export markets. But make no mistake; energy companies have always viewed the Keystone XL pipeline as a link to markets beyond America.

In the Canadian press, oil companies have talked freely for months about using the pipeline to export oil to Asian markets and charge more money for the oil they do sell in the U.S.

Here’s how it would work. Existing pipelines coming out of Canadian tar sands mines mostly end in the U.S. Midwest. By bringing tar sands oil to the “Foreign Trade Zone” in Port Arthur, Texas, companies can ship it anywhere in the world. Indeed, companies get incentives to export from there. By diverting Canadian oil that would otherwise go to the Midwest, TransCanada has admitted the pipeline would increase the price Americans pay for Canadian oil by $3.9 billion.

Canada has its own coastline is a lot closer to Alberta than the Gulf of Mexico. But 135 First Nations and thousands of Canadian residents have successfully fought off a tar sands pipeline through British Columbia for years.

They don’t want a pipeline running through their communities any more than residents of South Dakota, Nebraska, or Texas do. We don’t blame them.

Prime Minister Harper and his fellow leaders have it wrong: tar sands isn’t captive, it doesn’t allow us to move towards the clean energy pathway that we need. There are reserves of arsenic and radon scattered all over the world, and one could say those are held captive too because they hard to get to market. But the truth is that no one wants them, and they should stay right where they are. The same is true for tar sands oil.

 

 

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Comments

Elizabeth CunneffApr 11 2012 03:48 PM

Good job. You've summed it up nicely; however, you didn't mention that ridiculous vote of Congress on February 15th. Mention that, and you've clinched it for thinking readers. Of course, there are some folks who will NEVER agree, but that's their problem. We just have to get the truth out there in print. Thanks for doing that.

chuck swatrzApr 12 2012 01:01 PM

Frances, you mention Foreign Trade Zones for export. Why do we even have Foreign Trade Zones in America?? Shouldn't we keep foreign countries and products out of America? Foreigners like the Chinese own America. Foreign crude from Canada is still foreign even if it's exported which may even reduce our trade deficit with foreigners like the Chinese. Aren't there a bunch of Foreign Trade Zones around New York City? Isn't New York City Foreign Trade Zone #1? America is for domestic products before foreign goods or people!!

Tim MarshallApr 13 2012 12:19 PM

The export of oil from would allow for the refiners in Texas to keep their workers employed. The one thing that the NRDC commentators keep ignoring is that at its peak the most ever exported from any gulf refiners is 15% of production. Also there is already access to Asian markets through Vancouver. No doubt this will expand and any discounted oil the US receives will not be discounted any more. The glut of oil in Cushing will not remain so the artificial price break on oil is going away. As to the make up of tar sands oil it has chemicals added to make it flow. These chemicals already are in regular crude.

Frances BeineckeApr 13 2012 03:55 PM

Tim, Keystone XL is intended to feed into Texas Gulf refineries. We asked the Energy Information Administration for the export numbers for Texas Gulf Coast refineries specifically and found that over half over all diesel and gasoline produced there is being exported – specifically 73 percent of gasoline and 40 percent of diesel.

As far as employment goes, let’s remember that Gulf Coast refineries are doing fine without Keystone XL. Texas Gulf refineries have very little idle capacity right now.

Meanwhile, Canada has very little access to the Asian Markets. Only 12,000 barrels per day of its tar sands exports went to anyone other than the United States according to the latest figures at the National Energy Board.

As I wrote in the post, Enbridge has proposed the Northern Gateway pipeline to give another outlet for tar sands to the Pacific. But more than 70 percent of British Columbians don’t want the project and the First Nations have refused to grant easements.

Just to be clear: the Keystone XL isn’t about whether or not Texas refineries export refined products. It’s about whether it makes sense to support a tar sands pipeline that will threaten the country’s land and water resources, expands the extraction of some of the dirtiest, most carbon intensive oil on the planet, and increase oil prices in the United States in order to boosts the profits of Canadian tar sand producers and the export of refined products from the Gulf.

AnonymousApr 13 2012 04:37 PM

chuck swartz - do you have any idea how many people are employed in Foreign Trade Zones?! WOW - I suggest you do some research before you disapprove of something you clearly know nothing about.

BSApr 13 2012 04:55 PM

Frances, somehow I doubt your claims about the TX gulf coast exports. 70% of gasoline, huh?

According to the EIA, the US exports 380,000bpd of gasoline. You're telling me that the TX gulf coast, which refines 3,600,000bbl/day of oil only produces 543,000bbl/day of gasoline? Give me a break.

Supporting data:
http://www.eia.gov/dnav/pet/pet_move_wkly_dc_NUS-Z00_mbblpd_w.htm

http://www.eia.gov/dnav/pet/pet_pnp_unc_dcu_r3b_m.htm

Are you lying to your readers or did you just make a mistake. I didn't find all the data to do the math, but the TX gulf coast produces at least 1.5MMbpd of gasoline, meaning they export less than 25% of the gasoline they produce.

And also, the US is a net importer of gasoline.

BSApr 13 2012 04:58 PM

Frances Beinecke says, "Texas Gulf refineries have very little idle capacity right now."


Frances, I'm glad to see you've been reading my comments. So now that I know that the NRDC knows that the TX gulf coast has little spare refining capacity, are you ready to admit that the oil from Keystone XL will displace oil imports from other countries?

Yes, there are a couple of planned gulf coast refinery expansions, but there are also refineries on the east coast that are on the chopping block because they are not sufficiently profitable.

Anthony SwiftApr 13 2012 07:31 PM

Ms. Beinecke's statements are accurate and supported by EIA data.

In the fourth quarter of 2011, Gulf Coast refineries exported an average of 551,000 bpd of finished motor gasoline. (U.S. Energy Information Administration data)

During the same time, Texas Gulf Coast refineries produced 557,000 bpd of gasoline. (U.S. EIA data)

While the EIA doesn’t post gasoline exports of the Texas Gulf Coast refineries on its website, it does track them. We contacted EIA for its those numbers for the 4th quarter of 2011. Surprisingly, Texas Gulf Coast’s share was 422,000 bpd of gasoline exports – that’s 73% of 577,000 bpd. The 422,000 bpd and 73% figure was verified by E&E News.

And of course, EIA makes that information available to the public on request.

Regarding a couple factually incorrect statements made in comments…

1. The United States IS a net exporter of gasoline. In 2011, the US exported an average of 479,000 bpd (mostly from Texas Gulf refineries) and imported 105,000 bpd (mostly into the East Coast).

US Exports

US Imports

2. As shown above, EIA shows that Texas Gulf refineries produce about a third of the 1.5 million bpd of gasoline you mention. The entire Gulf Refinery District (including Arkansas, Louisiana, and inland Texas and New Mexico refineries) only produces slightly over 1 million bpd.

BSApr 13 2012 09:33 PM

Sigh.... Anthony, expecting that you won't actually come back and admit I'm right, I'll address your comments one at a time.

First, gasoline imports/exports. Please look at the link below:
http://www.eia.gov/dnav/pet/pet_move_wkly_dc_NUS-Z00_mbblpd_w.htm

US imports of gasoline are down in recent years, but have been averaging somewhere around 750,000bpd (varies depending on time of year). This includes both finished gasoline and gasoline blending components. We mostly import "unfinished" gasoline and "finish" it in the US. The stats you posted were only for "finished" gasoline.

US exports of gasoline exports have been around 450,000bpd lately. We only export finished gasoline, not blending components.

Do you see how, when you look at the correct data, you come to the correct conclusion that the US is a net importer of gasoline?

When you're ready to admit you were wrong, let me know and we'll move on to the next topic.

BSApr 13 2012 09:50 PM

By the way, if you follow through on what I ask, I'm going to wind up admitting to an error I made. But if you want me to do that, you're first going to have to admit to yours.

Anthony SwiftApr 15 2012 01:12 PM

It’s true that while the United States is a net exporter of finished gasoline and refined products in general, if you take gasoline blending components (which the East Coast imports the vast majority) an finished gasoline, the U.S. is still a net importer. But a debate of whether East Coast blending components count as gasoline takes us out of the subject matter covered in Ms. Beinecke's blog and the question of whether the Keystone XL tar sands pipeline is a worthwhile project.

Keystone XL is going to Texas Gulf Coast refineries, which are exporting the majority of what their output. Because Canada doesn’t have surplus oil to send to the U.S., Keystone XL will divert oil away from Midwestern refineries, which produce refined products almost exclusively for the U.S. market.

Let’s remember why this has become such a big issue. The environmental impacts of tar sands development are significant and well known – the argument on this count has been on how much worse tar sands development is relative to conventional crude, not whether it’s worse. In order to make the case that the benefits of Keystone XL outweigh its costs, many pipeline proponents are using the disingenuous argument that the pipeline is necessary to increase U.S. oil supply and lower gasoline prices – but it’s not going to.

That’s why the fact that the refineries interested in Keystone XL are exporting the majority of their product internationally is important. Texas refineries can export their product to international customers if they want to – but you can’t argue that a pipeline that diverts crude from refineries that serve the U.S. market to refineries that export is going to help American consumers or the country’s energy security.

Aside from being a poor deal for American consumers in the short term, this pipeline is a step in the wrong direction in long term development of our energy infrastructure. Keystone XL supports long term growth of an industry with tremendous impacts the continent’s land, air, and water, and which is incompatible with an energy future that addresses the significant risk posed by increasing carbon emissions.

BSApr 15 2012 07:54 PM

So are we a net importer of gasoline or not. Really a simple yes or no question.

Also, could you please do some research on how much gasoline, gasoline blendstock, and diesel are transported from PADD 2 to PADD 3, please? Do you think it's possible that some of those products are being exported? Do you think some of what gets exported might have come from inland PADD 3 refineries?

Again, it's easy to tell a false story when you don't look at the right data. Just because fuel was exported from the TX Gulf Coast doesn't mean it was refined there. Gasoline is gasoline. Let me know how you tracked the barrels and determined that all the exports come from the TX Gulf Coast refineries and not from other refineries. After all, they're all in those evil foreign trade zones.

Anthony SwiftApr 16 2012 12:18 AM

The important point for this discussion is that the Texas Gulf Coast refineries that will receive tar sands from Keystone XL are net exporters of gasoline (and other refined products). If you count blending components with finished gasoline, yes, the U.S. is a net importer of gasoline – but again, this is because of the refinery structure in the East Coast and isn’t particularly topical to the Keystone XL discussion (as discussed above).

Some exports do come from PADD III refineries outside the Texas Gulf Coast – in the fourth quarter of 2011, EIA data shows that 129,000 bpd of gasoline was exported from those refineries. That doesn’t change the fact that 422,000 bpd was exported from Texas Gulf Coast refineries (or 73% of their total production).

EIA export data includes oil that is sold from a refinery district to international customers – Midwestern refineries aren’t selling refined products to Gulf refineries that then sell it abroad. As it stands, Midwestern refineries are marketing about 10,000 bpd of gas, diesel and blending components to international customers.

That said, we have taken a look at blendstock, gasoline and diesel volumes transported between refinery districts. The Gulf imports very little from other refinery districts – gas, diesel and blending component imports from other PADDs are about 100,000 bpd (mostly from PADD 2).

PADD 2 to PADD 3: http://www.eia.gov/dnav/pet/pet_move_ptb_dc_R30-R20_mbbl_a.htm

All of this supports the reality that Texas Gulf refineries are focused on selling internationally, not domestically. They’re welcome to do so. But again, it’s disingenuous to argue that diverting oil from the Midwest to the Gulf is going to increase the volume of gasoline available to American consumers – it’s not. In fact, it’s likely to decrease U.S. gasoline supplies.

BSApr 16 2012 10:52 AM

Is it really that hard for you to simply admit that yes, the US is indeed a net importer of gasoline?

Well I'll still go ahead and be the adult and point out that the TX Gulf Coast does seem to export far more than I originally thought it did. However, please keep in mind several things: You were looking at winter data when exports are higher. December was also an unusual month. Gasoline exports in January were a full 40% less than what they were in December. Diesel exports were 25% lower. Q1-Q3 exports of gasoline last year were also 30% lower than in Q4.

Your statistic of >70% of gasoline being exported, even if it is true for 4Q11 is not typical at all.

And I see you've brought out the same, tired argument that Keystone XL will "divert" oil from the Midwest to the gulf coast. The Midwest is already taking all the Canadian oil it can. And even with that supply, the existing Keystone line is not full. You have exactly zero evidence to support your claim that the Keystone XL system will "divert" oil from the Midwest. None. Because it won't.

Simply building the southern leg of Keystone will allow Canada to ship more oil on the existing systems that come south from Canada without taking anything away from the Midwest.

Gasoline in the US is not in short supply. That's why US refineries are exporting. Because US demand is down. Nobody is under the impression that Keystone XL will magically make more gasoline available. But it will increase the global supply of crude oil. And increasing supply means lower prices. Canadian oil prices will go up significantly, but that will be more than offset by the slight change in price of the other 100+ grades of crude oil available on the market. Period.

chuck swatrzApr 16 2012 02:20 PM

Just found this on US Foreign Trade Zones from the National Association of Foreign-Trade Zones at www.naftz.org talkin bout imported oil!!

http://www.naftz.org/resource/collection/EFD869A5-F2E9-4FC4-AC9C-845C677C70D4/Why_Zones_are_Important_to_the_Oil_Refining_Business.pdf

America shouldn't be for foreign stuff, nope!!!

Tim MarshallApr 17 2012 02:56 PM

Ironically the export means there is enough refined product to export. Gas has been driven up for a number of reasons, speculation being the most galling of these. If the refiners can export that means they have enough domestic supply and the US dollar is favourable to allow for export.
The Keystone XL will supply bitumen to the refineries. If as you say they are doing fine, why build it? One bitumen is cheaper than crude oil, and the refiners can already upgrade and refine it, increasing their profits. Crude from Venezuela and Mexico will not be going to Texas for too much longer, Venezuelan contracts are going to expire and not be renewed. As for Mexican crude some systemic problems have lessened the production. In order for the refineries to not idle their production a source must be found.
Canada’s access to the Pacific will increase, there a three pipelines proposed to reach the coast. One can see that one may be denied, but it is very long odds all three will. British Columbia’s sentiment are well known but the surveys seem to be anywhere from 90% to 50% depending who funded it. That said the common phrase heard on both sides on the 49th parallel is, National Interest”
The impact of any pipeline will have to be examined, that is true, even if you and your compatriots exaggerate the danger. The volume of oil delivered in the US in 2005 572, 000, 000, 000 ton miles. 721 reported incidents occurred in 2005. That would make it safer than flying, driving or rail travel.

BSApr 18 2012 08:00 PM

Tim,

How do you figure that speculation is causing high prices? I know the argument is thrown around a lot, but nobody ever actually gives any evidence.

I know it CAN cause prices to go up (ex: summer 2008?) But then you also have natural gas which is at $2/MMbtu which is dirt cheap. Why is speculation not driving up natural gas prices? It would seem there would be more to gain in that market.

Also, if prices are higher than what would normally be supported by supply and demand fundamentals, then oil producers should be making obscene profit margins. Twisted facts from the NRDC aside, profit margins are maybe 10%. Does the data show significantly increasing profit margins as prices go up? If so, that would suggest speculation, because increased competition and more "shopping around" by consumers would tend to keep profit margins in check.

And speculators can make money when prices are going down just the same as when prices are going up. So normally (but not always), there's not going to be any incentive to create a bullish bias.

I can certainly see how speculation COULD drive prices up (and perhaps it has during the past few months?), but I don't see any sustained bias.

And lastly, it's worth pointing out that when speculation does cause fundamentals to go out the window, it's often the average Joe investor buying ETFs, etc that has the biggest hand in it.

Anyway, I'd be interested in any thoughts you may have. I'm far from an expert on the matter.

Comments are closed for this post.

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