Snap Fact #150

President Obama Carefully Evaluates And Appropriately Deals With The Complex Keystone XL Pipeline Issues!
This is important to know: The Keystone Pipeline has been up and running in the United States since 2010! The 2150 mile long pipeline carries tar-like crude oil (aka bitumen) from Alberta, Canada's tar sands to refineries, storage tanks, and distribution facilities in Patoka, Illinois, and Cushing, Oklahoma. The stuff is so thick, that it has to first be diluted with very toxic solvents (hence "dil-bit" for short) before pumping it, under very high pressure, into the 30 inch wide Keystone pipeline. The pipeline capacity is nearly 600,000 barrels/day. The safety record, over two operational years, has been dismal. TransCanada predicted that the Keystone pipeline would see one spill in 7 years. In fact, there have been 12 spills in 1 year. The company was ordered to dig up 10 sections of pipe after government-ordered tests indicated that defective steel may have been used. Keystone XL will also use steel from the same Indian manufacturer.

The proposed Keystone XL is 2000 mile upgrade to the existing Keystone pipeline (note: XL stands for "extra large" i.e. 36 inch width pipe). It comprises three XL pipeline segments, as shown here: 
  • An XL run from Hardisty, Alberta to Steel City, Nebraska 
  • A pipeline run from Steel City to Cushing, Oklahoma, using the only 36 inch wide segment of the existing Keystone pipeline
  • An XL run from Cushing to the Port Arthur and Houston, Texas refineries.  
  • XL completes the pathway from Alberta to deepwater ports and refineries on the Gulf Coast
Figure 1 
The upgraded capacity to the Gulf refineries is 1,300,000 barrels/day.

Thankfully, presidential permits are required for the construction, connection, operation, or maintenance of certain facilities at the borders of the United States with Canada and Mexico. President Obama denied this key permit for the Keystone XL pipeline in January, 2012. He said the decision was not based on the merits of the project, but on a GOP-backed demand for quick permit approval before completion of an important environmental study. Previously, the Republican leadership threatened to filibuster a two-month extension of the payroll tax cut, backed by the President, unless he approved the pipeline permit.

In March, the Republicans again tried to rush the XL pipeline permit via an amendment to a highway funding bill. Obama lobbied wavering Senate Democrats in the days before the vote. He urged them to reject the Republican amendment to Democratic legislation funding transportation projects. The amendment would have overturned his administration’s decision to deny a permit for the pipeline until an alternative route was proposed and accepted to bypass an environmentally sensitive area in Nebraska.
President Barack Obama's effort paid off on March 8th. The Senate defeated the Republican amendment on a vote of 56-42, four short of the 60 needed to pass, that would have authorized the building of the TransCanada Corp. Keystone XL oil pipeline. 

Many citizens, environmental groups, and politicians have raised concerns about the potential impact of the Keystone XL extension. One concern is that the pipeline could pollute air and water supplies and harm migratory birds and other wildlife. Its original route crosses the Sandhills in Nebraska, the large wetland ecosystem, and the Ogallala Aquifer, one of the largest reserves of fresh water in the world. The Ogallala Aquifer spans eight states, provides drinking water for two million people, and supports $20 billion in agriculture. A major leak could ruin drinking water and devastate the mid-western U.S. economy. Due to the opposition for laying the pipeline in this area, TransCanada agreed to change the route and skip the Sand Hills. The alternates suggested have yet to be evaluated by independent experts. Past experience with the original Keystone pipe line is not forgotten.

The oil market has changed markedly under President Obama's watch. In the last several years U.S. demand has been decreasing and U.S. production has been increasing for the first time in 40 years. Higher fuel economy standards and slow economic growth have led to a decline in U.S. gasoline demand, while technological advances have opened up new sources in the United States. We supply 50% of our own oil requirements. Our major foreign suppliers are Canada, Saudi Arabia and Mexico, in that order (30% total). Only 10% comes from the Middle East (not including Saudi Arabia). Increasingly, U.S. refiners are turning to export. The oil market is fundamentally global, but the best way to reduce dependence on foreign oil is to reduce dependence on all oil. 

Clearly, Keystone XL is an export pipeline. Gulf Coast refiners plan to refine the cheap Canadian crude supplied by the pipeline into diesel and other products for export. Valero Energy Corp., the largest U.S. exporter of refined petroleum products, is a major lobbyist for Keystone XL. Along with Motiva (an oil refiner jointly owned by Shell and Saudi Aramco) and Total (a French refinery), Valero has signed long-term contracts with Keystone's owner (TransCanada Corp.) and several tar sands oil producers to bring this crude to Port Arthur, Texas. All three have upgraded their refineries there to process diesel for export. Adding to Big Oil's excitement is the fact that the Port Arthur refineries of Valero, Motiva, and Total are within a Foreign Trade Zone, giving them special tax breaks for shipping gasoline and diesel out of our country. 

So, here's the deal: The American people's environment would be put at risk, foreign nations would get the fuel, pipeline and oil investors would get the tax-subsidized profits, and we'd all stay hooked on deadly polluting oil… again postponing the necessary investments in conservation, alternative fuels, and mass transit that would actually solve the gas-gouging problem.

Republicans have nonetheless pummeled Obama for rejecting the pipeline, arguing he is turning his back on tens of thousands of new jobs. Actual expectation is several thousand temporary positions. The GOP has also attacked President Obama in recent months over high gas prices, arguing that the administration has not done enough to expand domestic drilling. Republicans will continue hammering the White House on drilling during debate on an amendment authored by Sen. David Vitter (R-La.) that would dramatically expand offshore oil-and-gas leasing. 

This is a complicated issue that is still under open consideration. Rather than being pushed into a quick and rash decision to approve the pipeline, the President is still evaluating both the pros and cons of it's installation as well as safer environmental alternatives that might more reasonably mitigate for its erection. However this turns out, many people will be unhappy with the President's ultimate decision. As always, President Obama will continue on his path to get the facts, fully evaluate, and then decide how to craft what is best for America without regard for the possible political risks involved in his making the best decision.