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A new report out today from Oil Change International exposes an important truth in the Keystone XL: the State Department's analysis relies on an out-of-date understanding of a rapidly shifting North American oil and refining market. While we've long known Keystone XL would be a pipeline fueling oil exports, it's now clear that this pipeline will be a CRUDE export pipeline and provide Canadian tar sands producers a key outlet to the global market in order to drive further expansion of tar sands production.

This new analysis provides yet another way in which it is clear that the Keystone XL pipeline fails President Obama's own test regarding substantially increasing greenhouse gas emissions.  

Here's more from my colleague, Lorne Stockman, Research Director of Oil Change International and author of the new report:

Proponents of the Keystone XL pipeline regularly claim that the pipeline will replace heavy oil from Venezuela and elsewhere if it is built.

In fact just this week, Rep. Lee Terry (R-NE) claimed that Venezuela’s recent offer of asylum for whistleblower Edward Snowden is somehow a reason to approve the pipeline.

The reality is that crude delivered by Keystone XL will not replace anything.

- Read the Full Report Here. -

Venezuela, Mexico, and Saudi Arabia own roughly half of the heavy oil refining capacity on the U.S. Gulf Coast.  These refineries will largely continue to refine their own oil, and Canada’s tar sands crude will have to compete with other suppliers of heavy oil for what’s left of the market.

As the Gulf Coast transitions to a buyer’s market, a result of the U.S. oil boom and increased pipeline capacity, refiners will have their choice of crude suppliers vying for a piece of the market.

In short, tar sands producers plan to exploit a loophole in U.S. crude oil export regulations and export tar sands crude oil into the global market from U.S. ports.  The Keystone XL pipeline unlocks this loophole.

This is the conclusion of our latest briefing released today. The briefing draws from analysis submitted to the State Department in June, in which we dismantled the market analysis in State’s draft environmental impact statement published in March. The 50-page letter submitted by Oil Change International, Sierra Club, NRDC and other partners, requested State to rewrite the market analysis.

This updated analysis of how Gulf Coast crude oil markets really function is in complete contrast to everything the Department of State, TransCanada and various Keystone XL pipeline proponents have been telling the public.

They say there is a shortage of heavy oil supply on the Gulf Coast and that Keystone XL will bridge the gap. The truth is that Keystone XL will create a surplus.

They say that Keystone XL will “replace” heavy oil supply from Latin American and Middle Eastern suppliers.  The truth is Canadian tar sands producers will export their dirty crude to the world market.

As leading oil market analyst, Esa Ramaswamy of Platts recently stated:

“There is a limit to how much (heavy crude) the Gulf Coast refiners can soak up. (…) Bear in mind that U.S. Gulf Coast refiners, it takes them only three to five days to ship crudes from Colombia, Venezuela into the U.S. Gulf Coast and less than 3 days from Mexico (…) When the Canadian crudes rise in price they will look at other alternatives, and force the Canadian crudes to move out of the Gulf Coast. The Canadian crudes cannot go back up into Canada again. They will have to go out.”

This is the complex reality of the Gulf Coast oil market, in stark contrast to the simplified analysis of the State Department and rhetoric of KXL proponents. That analysis was substantively criticized in a letter to State from Rep. Waxman (D-CA) and Senator Whitehouse (D-RI) this week.

U.S. crude oil export regulations restrict exports of American crude oil to Canada only. But Canadian oil can be exported around the world from the U.S. provided it has not been blended with any U.S. crude.

The U.S. crude export restrictions make America’s new light oil production a bargain for U.S. refiners as it can be bought at a discount. Gulf Coast refiners are actually reducing their processing of heavy oil and increasing their intake of cheap domestic light oil — something the State department said would not happen. Heavy oil imports are down over 20% on 2011 figures.

There is no reason to believe that Venezuela, Mexico, and Saudi Arabia have any intention of using Canadian heavy oil when they can run their own heavy oil and thus maximize their profits. In many cases their production and transport costs are lower than those for tar sands producers, and they are thus more likely to aggressively compete in the rest of the Gulf Coast market than retreat from it.

The U.S. oil market, particularly in the Gulf Coast, has changed fundamentally since Keystone XL was first proposed six years ago. The tight oil boom combined with the prospect of massive pipelines from Canada to the Gulf Coast are at the heart of these changes.

The idea that refiners will choose to buy Canadian oil because Canada is a friendly neighbor is not supported by any data or analysis – it is simply a talking point. Refiners will do as they have always done and buy the crude that will afford them the most profit, which will clearly not always be Canada’s dirty oil.

Building Keystone XL will actually create a surplus of heavy oil on the Gulf Coast and force Canadian producers to regularly export their dirty oil into the world market. It is therefore clearer than ever that Keystone XL will facilitate more tar sands production and the increased Greenhouse Gas pollution that goes with it. Building the pipeline will clearly not meet the criteria of no significant increase in carbon emissions set by President Obama.

The sooner that Democrats and Republicans wake up to the fact that Big Oil works only in its own interest and not in the national interest, the sooner we may start to move towards the clean energy future we so desperately need.

Read the Full Report Here.

But, don't take our word for it. Listen to The Dude:

Originally posted to dturnbull on Thu Jul 11, 2013 at 02:22 PM PDT.

Also republished by Climate Change SOS and DK GreenRoots.

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Comment Preferences

  •  One hopes KXL is DOA. (2+ / 0-)
    Recommended by:
    cotterperson, Glen The Plumber

    However, Harold Ford was on Morning Schmoe this week talking as if KXL was inevitable and imperative. I detest his totally owned subsidiary self.

    •  Certainly not inevitable... (2+ / 0-)
      Recommended by:
      cotterperson, Glen The Plumber

      I don't know what Harold Ford has been reading, but I know of over 1 million reasons to suggest Keystone XL is by no means inevitable.

    •  I was appalled when I saw him and his story in The (1+ / 0-)
      Recommended by:
      WheninRome

      Hill.  Pretty much every point he made has been refuted as inaccurate and untrue.

      I was surprised that MSNBC let him present this BS without wondering what that would do to their credibility with their own audience.

      He's a Wall Street insider.  They need to check his investments and ask why he was saying this project would provide "millions of jobs" back in 2012.

      I have read that the pipeline would only produce about 35 permanent jobs and under 4000 temporary position, most of which would be filled with non-citizens.  The pipeline will be run from Canada by Canadians.  The refineries that process the oil, already process similar oil from Venezuela.  The people hired to build the sections of it for about 6 weeks at a time would be mostly international contractors.  The people that ship the products overseas are mostly all foreigners as well.

      But, building the pipeline will lock us into a dirty fuel source for another 50 years, which will be game over from a climate change perspective.

  •  All Reports are "Out of Date" (0+ / 0-)

    Show me one, just one report by a governmental agency or advocate of a particular position that is not out of date. Data must be gathered, synthesized, manipulated to generate the desired outcome, written, edited, re-written, sent to printer, released. Give me a break.

    •  This report is out of date...and wrong (0+ / 0-)

      It may be the case that reports are always months behind, but the point is that in this case the outdated analysis is so wrong that it fundamentally undermines key assertions that the State Department's analysis has put forward.

      The State Department analysis suggests that tar sands oil flowing through KXL would back out other heavy oil coming from other regions of the world...which would in essence mean that there might be no net increase in emissions from KXL (wrong for many reasons). But a more up-to-date analysis of the oil market and refinery market in the Gulf Coast -- such as the one we put out today -- makes it clear that this is simply not the case.

      Now that Barack Obama has made it clear that the Keystone XL pipeline won't be approved if it were to cause a net increase in greenhouse gas emissions, it's vitally important that our understanding of the market in which Keystone XL will be a part of is clear. Our analysis today points out major flaws in the State Department's understanding of that market as reflected in their draft impact statement.

      I don't think this is something we should just throw our hands up about and say "oh well, all reports are going to be out of date by the time they are produced." We need to hold our government to a higher standard than that, don't you think?  Especially when it comes to something that could have such a major impact on the climate and future we live in.

      •  Can we hold Canada to a higher standard? (0+ / 0-)

        The natural resource belongs to Canada and is theirs to produce, sell (exploit) to whom ever they choose. I choose the United States over China. China adheres so no standards of environmental concern such as coal fired electric generation facilities with somewhere between zero and none pollution scrubbers. At least  we (United States) are willing to impose some controls over the production, transportation and refining of the Canadian natural resource which can assist North America (Canada, United States & Mexico) in being energy independent from the rest of the world. No more involvement in  wars in the Middle East over oil.

        •  Read our report(s) (1+ / 0-)
          Recommended by:
          WheninRome

          I encourage you to read the report I've linked to above, as well as many other reports that are out there (you can find a lot of them here: http://priceofoil.org/...) that essentially debunk all of the arguments you've made regarding the Keystone pipeline.

          First: Keystone XL is vital to expansion of the tar sands. Canada won't be able to develop the tar sands at the levels they'd like, without Keystone XL.

          Second: Keystone XL is an export pipeline. It won't increase energy security, independence, or whatever other term you want to use for increased domestic oil supply. We can't drill our way to energy security, and we certainly can't drill our way to a safe climate.

          If you want to ensure that China doesn't get this oil, you might consider opposing Keystone XL, not supporting it.

  •  bilge to/nowhere. (0+ / 0-)

    Don Benedetto was murdered.-IgnazioSilone(BreadAndWine)

    by renzo capetti on Thu Jul 11, 2013 at 04:47:30 PM PDT

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