While fossil boosters try to advance out-of-date arguments for resurrecting the Keystone XL pipeline, Oil Change International is out with three key factors that make the controversial project as bad a bet for investors as it is for climate and the environment.
“As the debate over whether the Keystone XL zombie pipeline should be built shifts squarely to the state of Nebraska, with a public hearing set for this Wednesday, it is worth looking at how some of the issues surrounding the pipeline have developed since the project was last contested in the court of public opinion,” writes Senior Research Analyst Lorne Stockman. However much TransCanada might tout Keystone as “a critical infrastructure project for the economic strength and energy security of the United States,” Stockman adds, “the only niche the project fills is fueling the export of refined petroleum products, and exacerbating a glut of oil in Oklahoma and Texas.”
The main customers for Keystone bitumen would be the refineries at Houston and Port Arthur, Texas, Stockman explains. But since 2011, multiple Oil Change reports have shown that those facilities mainly serve the export market—which means they have little to do with U.S. energy security. U.S. Energy Information Administration figures show the refineries’ exports at 74% in 2016, up from 51% in 2013.
“It is abundantly clear that these refineries have aggressively switched their focus from serving U.S. energy demand to serving international markets,” Stockman writes. “Given that the refineries operate in a Foreign Trade Zone, this is a strategy that enhances their profits while paying little if anything in taxes.”
The main effect of oil imports via Keystone would be to take a crude oil glut in Oklahoma and Texas and make it worse: Research earlier this year showed that the world’s largest oil storage hub at Cushing, OK already has 850,000 barrels per day more incoming pipeline capacity than outbound. Keystone would add 830,000 barrels per day to that total—even though oil storage at Cushing and along the U.S. Gulf Coast already stood at a record 350 million barrels at the beginning of April.
“Tell me again how this project is a critical piece of infrastructure desperately needed by an underserved market,” Stockman snarks.
The other argument against Keystone is that, on top of the “devastating pollution and climate disruption that tar sands production causes,” the tar sands/oil sands are the “most expensive, capital intensive, and risky energy source just about anywhere on the planet,” he adds. That’s why the region has seen no new projects announced since oil prices began their sustained crash in 2014, and multiple multinational fossils have abandoned their tar sands/oil sands holdings.
“The vulnerability of expensive tar sands production to the vagaries of the global oil market make it laughable that anyone would depend on the tar sands for a secure energy supply,” Stockman concludes. “As we move forward, security will come from greater gains in efficiency, the switch to electricity for transport, and the opportunities to generate that electricity from clean renewable energy, built and produced close to where it is used.”