There Will Be Tar Sand

Tarry Canadian bitumen is barreling its way to Texas via the Keystone XL pipeline. Will it bring energy independence or environmental calamity?

There is an unmoving ocean of oil in the north, the largest in the world outside Saudi Arabia. Canada's oil was always going to find an outlet; it was only a matter of where. By 2011, producers invested nearly $20 billion developing the oil sands, which shipped out 1.6 million barrels per day. In another 25 years, the industry plans to extract 5 million barrels per day from beneath the boreal forest — or roughly the same amount Gulf Coast refiners import from Mexico and South America.

The truth is, there isn't anywhere else it can go right now. Proposed pipelines west, to the British Columbia coast, are tied up by the same NIMBY resistance seen in the Nebraska Sandhills and the Texas pine country against the Keystone XL. Canada's First Nation aboriginal people have vowed to stop Enbridge's Northern Gateway pipeline through their territories. The path south, on the other hand, is already well-beaten.

In 2010, the Keystone XL's predecessor, Keystone I, connected Alberta to Illinois refineries, but its market was already contracting. Recession and improved vehicle fuel economy sapped oil demand. Meanwhile, hydraulic fracturing unleashed a flood of unconventional crude in North Dakota and South Texas. Canada's crude was piling up in the Midwest along with an American glut, driving the price per barrel in the heartland as much as $40 below the global market price. That was a boon for Midwestern refineries, which were running at full tilt, selling their refined gasoline and diesel at roughly the going rate while paying bargain prices for the unrefined feedstock.

For Canadian producers, this was a disaster. Because Western Canada crude is so expensive to extract and refine, the break-even price for a barrel of the stuff can be as high as $100. At the moment, Canadian producers are getting $45. Industry experts use the word "crisis."

Keystone XL is the salvation of the oil sands, able to carry massive volumes of oil and providing access to a vast Gulf Coast refinery complex.

Like other refining regions, gasoline production on the Gulf Coast declined by half since the recession. Yet it was replaced with an even more valuable fuel: diesel exported to Latin America and Asia. Exports of diesel from this region have grown by 60 percent since 2006, according to U.S. Energy Information Administration data. In 2011, for the first time in more than half a century, the United States became a net exporter of petroleum products, largely thanks to the Gulf Coast refineries.

Crude supplies from Mexico, South America and the Middle East, meanwhile, are waning. Valero, the largest refiner in the country, believes Canadian crude will fill the void. It recently installed two $1.5 billion hydrocracker units designed to process the diluted bitumen and extract high diesel yields at its refineries in Port Arthur and Norco, Louisiana. They'll pay less for the heavy Canadian stuff and sell the diesel it produces at a premium in the developing world.

"Other parts of the world, South America and Asia are taking up that distillate [diesel] demand," Valero spokesman Bill Day says. "The Gulf Coast refineries used to ship gasoline to the Northeast and middle parts of the country. Now they can also send products for export to other countries. That's becoming increasingly important. It keeps refineries open, and it keeps workers on the job."

Canada's National Energy Board is betting the pipeline will raise the price of Canadian crude in the United States, netting an additional $4 billion annually for producers. The weight and expectations of a Canadian industry worth trillions is bearing down on a single 36-inch pipeline.

Because the pipeline is international, the State Department was left to determine whether the project serves the national interest. "The indication was that the pipeline was headed toward approval," says former Energy Information Administration chief Richard Newell, who retired in 2011 to take a position at Duke University. "There was some pretty clear signaling that went on at that time," most notably from Secretary of State Hillary Clinton.

The pipeline ran into resistance from the Environmental Protection Agency, however, which characterized the State Department's environmental assessment as "inadequate." The pipeline would cross the Nebraska Sandhills, a 20,000-square-mile sand dune blanketed in native grasses and underlain by the Ogallala aquifer, the source of more than 80 percent of the country's irrigation water. As far as the EPA was concerned, the State Department hadn't weighed the threat to water supplies posed by a large-scale diluted bitumen spill.

Its fears were not without justification. At around 6 p.m., July 25, 2010, a pipeline owned by Enbridge, another Canadian company, shut down automatically because of a sudden drop in pressure. Within hours, callers flooded the Marshall, Michigan, 911 dispatch, complaining of a nauseating petroleum odor. Three times Enbridge stopped and restarted the pipeline because of pressure alarms. It was nearly noon the next day when oil was sighted by a utility worker in Talmadge Creek, which feeds the Kalamazoo River. By then, the operator had pumped diluted bitumen through an 80-inch-long gash in the pipeline for two hours. More than a million gallons of it had gushed into the creek before moving downstream to foul some 30 miles of river. The spill was finally contained 80 miles upriver from Lake Michigan.

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26 comments
rusknative
rusknative

no one living in Douglas has an IQ greater than 54. especially exjarheads.

rusknative
rusknative

not like the USA doesn't have VAST amounts of OUR OWN CRUDE under public land and offshore to develop and provide for our OWN petroleum products without needing to process Canadian stuff or South American stuff....but NO, the EPA and lib obamabots and the treehuggers are too stupid for solutions...they just want to live on borrowed debt money and smoke dope.

rusknative
rusknative

the Hispanics that are moving into and going to dominate all East Texas Love pepper spray...put it on their food...the hippy wannabe protestors are nannyboys.

fernaldus
fernaldus

Actually, Ozarka has sucked up all the good water.

cesar39nt
cesar39nt

how sad the gov. of Texas has no soul, our beloved state soon will be a dump ground for oil waste, and the conservative base sees nothing wrong with poisoning the water, then the food supply chain, and soon enough they will blame anyone for allowing them, to poison their own families? with the toxins from the project the conservatives sponsor, and our governor or his cronies, stand to make a fortune, just for making a few thousand of their very own constituents children mentally retarded, or physically handicapped, or dying, or all the above! shame on the republicans as long as they get paid they care not for any living thing themselves included.

pooua
pooua

Right, because East Texas isn't the birthplace of the modern U.S. oil industry and doesn't have a speck of petroleum product in any of its pristine, like-mountain-water-quality water! East Texans are the soul of Conservatism, representing the intellect and grace for which Conservatives and Libertarians have become famous; that's why they were targeted with this *monstrosity*! 

I lived in Longview for 5 years, with regular trips to Henderson, Kilgore, Gilmer and Marshall. I began filtering my drinking water for the first time in my life while I lived there, because I suspected that some brain-eating something in the water must explain East Texan behavior. When I expressed my suspicion to an industrial water quality worker, I was surprised that he only nodded his head and said, "It's benzine." Incidentally, the only pure water in Longview (and much of East Texas) is sucked up for use by Texas Eastman for use in chemical manufacturing; they couldn't use the Sabine River water, because it's too polluted! That's the water East Texans drink! 

I was so glad when I finally moved out of East Texas!

lobar
lobar

Another great mess rented Perry has gotten us into,,,disgusting and smelly crap,,,hope it all lands inside his drinking water and as he is washing his corrupt body,,may it stick to his horrible hair. GREED, and more GREED, thats what its all about.

kenneth51
kenneth51

What a great article about this horrible pipeline filled with toxic diluted bitumen, deceit and corruption. Thank you so much for spreading the truth. Our public officials should be so ashamed of themselves !!!!

sidewalkastro
sidewalkastro

You would think there would be a much bigger stink about this pipeline. A foreign country forcing its way across the most conservative part of Texas, tearing up the land and major potential for very toxic spillage. Conservatives are so easily bought and sold. Just wait until the first major spill, there be much hand wringing and kiss your drinking water goodbye.

PerryMoore
PerryMoore

Around here, we call them the Land Rapists. You ought to see what they have done to some of the most beautiful parts of Texas, and they shit on the property owners to boot.

bifftannen
bifftannen

This will not lower gas prices one iota. You've been fed a load of crap, and cut your own throat for pennies. Even if it did, this isn't worth it no matter what.

kergo1spaceship
kergo1spaceship

"Cherokee County Sheriff's deputies wearing straw cowboy hat".....you gotta love the deep south!  Betcha none of them "be's" fat either-right?

rusknative
rusknative

@cesar39nt our "beloved state" has had lead smelters, oil wells and slag pits, chemical waste dumps, an army arsenal in Red River filled with unbelievable trash as well as Karnack chemicals, and a Gulf Coast that brought permanent tar balls to the beaches....and the locals infected the water supplies for years with Flourides.


give me a break with the Pristean beloved state of Texas...you live in some kind of la la land.

rusknative
rusknative

@kimfeil thirty people got shot in Chicago yesterday....get rid of guns and bring on oil.

director21
director21

@pak152 Where have you been? We have been expecting you to show up ever since we lambasted Trinity East at the CPC hearing on December 20. Cat get your tongue?

joearpaio
joearpaio

@sidewalkastro It's like the disconnect between the attitude of the crowd who says "don't touch our guns" and who also say "wire tapping American citizens without a warrant in the name of fighting (non-white) terrorists is fine".  Such hypocrisy.  

"TransCanada had "34 eminent domain actions against landowners in Texas"" Nice job, Koch bros.

markzero
markzero

@sidewalkastro I would think true conservatives would be up in arms against this simply because of the "exemption in state law that allows for-profit enterprises to condemn private land if they cannot reach a deal with the landowner," as Brantley put it.

rusknative
rusknative

@PerryMoore most of the property owners are dumb as bricks anyway, and fouled up their own land already....anywhere that hosts the world MUD races is too stupid to need education nor housing.

pak152
pak152

@director21 @pak152 nope busy working. finally realized that the anti-fracking crowd doesnt want to deal with facts that run counter to their beliefs. ad hominem attacks on those who offer a counter view result in shutting down discussion. . anti-frackers are much like the anti-gun crowd.
ttfn

kenneth51
kenneth51

@rusknative LOL - Spoken like a true idiot. So you now know most of the property owners in East Texas. What an ass.

 
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