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Keystone XL oil would go overseas, benefits overstated, finds new report

The primary beneficiary of the proposed Keystone XL pipeline is a company that wants to refine tar sands oil into diesel and ship it to Europe while avoiding taxes, according to a new report by Oil Change International.

TransCanada’s Keystone XL pipeline would move diluted bitumen — oil from the tar sands region of Northern Alberta, Canada — across the U.S. to refineries in the Houston area at the rate of 700,000 barrels per day.

Because the pipeline would involve a new U.S. border crossing it must obtain a presidential permit. In order to grant a permit, the State Dept. must find that the project serves the national interest.

The project has been presented by oil industry and government sources as a way to improve American energy security through increased trade with Canada, a county seen as more stable and U.S.-friendly than other oil-producing nations.

But in a new report that looks at data from the U.S. Energy Information Administration, corporate disclosures to investors and oil market analyst reports, the non-profit advocacy group Oil Change International argues that the pipeline would not enhance U.S. energy security.

U.S. oil demand is down due to a combination of increasing fuel efficiency and slow economic growth, and for the first time since 1970 domestic oil production is up thanks to shale oil production in North Dakota and Texas.

As a result of these factors, there is now a glut of oil in the U.S. and so refiners are looking for other markets. There is demand for diesel in Europe and not enough refineries in Latin America.

“The construction of the Keystone XL will not lessen dependence on foreign oil — rather, it will feed the growing trend of exporting refined products out of the United States, thereby doing nothing to stabilize oil prices or gasoline prices at the pump.”

It’s clear that Keystone XL is an export pipeline, the report says, because TransCanada already has contracts with companies that are openly planning to export oil.

The report says that TransCanada told the National Energy Board of Canada that it has secured long term contracts with six customers — Valero, Motiva, Total, Canadian Natural Resources, Cenovus/Enconaand Trafigura.

Valero, the report says, has agreed to use the pipeline to ship 100,000 barrels a day, 20 percent of the pipeline’s capacity until 2030.

At its Port Arthur refinery Valero is in the process of building a hydrocracker that will be able to convert tar sands oil into diesel and jet fuel for the global market.

“The growth market for the global trade in petroleum products is dominated by diesel,” the report says. “Valero’s strategy of converting its Port Arthur refinery to maximize diesel production through the processing of cheap, heavy sour crude from the Canadian tar sands is entirely focused on exporting the diesel into the global market.”

Refining the tar sands in Port Arthur, Texas will pollute the surrounding communities but it won’t bring much money in, the group says:

“… the Motiva, Total and Valero refineries in Port Arthur are within a Foreign Trade Zone, meaning they are exempt from customs duties on imports and exports as well as various state and local taxes,” the report says. “This amounts to a sizable subsidy to the oil industry to export refined oil products.”

Tar sands oil production creates far more greenhouse gas emissions than other types of oil and recent pipeline spills in the Midwest have underscored the hazards of transporting the Canadian crude. So for environmental concerns about the pipeline have dominated public debate over the project.

Oil Change International says in deciding whether to permit the pipeline the Obama Administration should focus on where the Keystone XL pipeline oil will go, saying, “An honest assessment of the Keystone XL project will show that the oil will be exported and will not benefit U.S. consumers or any reasonable definition of the nation’s interest.

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