Click for an enlarged version of the pipeline map (image source: US Department of State)

NRDC Report: Keystone XL Pipeline Will Raise US Gas Prices

Vincent Schilling
6/20/12

During a press conference call on May 21, experts speaking on behalf of the Natural Resources Defense Council (NRDC) said American drivers would face higher gas prices if the proposed Keystone XL Pipeline stretching from Canada to the Gulf of Mexico is built. The NRDC conference also released a report on the group’s analysis, entitled “Keystone XL: A Tar Sands Pipeline to Increase Oil Prices,” which is available online.

In addition to the tele-conference claims made by the NRDC, TransCanada also admitted to Congress and reporters that the pipeline would increase gas prices to the Midwest and that one of the main goals is to ship refined oil from the gulf to the more lucrative overseas market.

Anthony Swift, who authored the NRDC’s report said, “The pipeline’s proponents say it’s the solution to high gas prices. The truth is exactly the opposite—the pipeline would raise gas prices. This is one of the most misunderstood issues surrounding this misguided Canadian project.”

In his report Swift explained that the "Keystone XL Pipeline would transport up to 830,000 barrels per day of the world’s dirtiest oil which is strip mined and drilled from under Canada’s Boreal forests, straight through the heart of America’s breadbasket to refineries on the Texas Gulf Coast. By allowing tar sands access to the lucrative international market, Keystone XL would finance further expansion of tar sands extraction, worsening climate change and undermining efforts to move to clean energy. Pipeline supporters cite high gasoline prices as a reason to build the project. The truth is that Keystone XL is likely to both decrease the amount of gasoline produced in U.S. refineries for domestic markets, and increase the cost of producing it, leading to even higher prices at the pump.”

Swift said that northern Midwestern refineries produce 22 gallons of gasoline from every barrel of crude, while refineries on the Gulf Coast have produced only 17 gallons per barrel—25 percent less yield which would result in an estimated 1.2 billion gallons of gasoline per year.

Ian Goodman of The Goodman Group, an economic research company, and co-author of the report, later explained another reason prices for consumer gasoline prices would rise. “Crude prices in the U.S. Midcontinent are now substantially below prices on the Gulf Coast (which reflect imports from the global oil market). In effect, the U.S. Midcontinent is getting a discount, because it is now close to the source,” he said.

He said that while Alberta tar sands crude going to the Midwest is designated for American consumers in the form of gasoline, the Keystone XL Pipeline is meant to divert crude to the gulf coast for diesel production and an easier ability to export to the global market from the gulf.

“So KXL will reduce gasoline supply, and it will also increase production costs for gasoline,” Goodman said.

TransCanada’s 2008 Permit Application itself states “Existing markets for Canadian heavy crude, principally PADD II [U.S. Midwest], are currently oversupplied, resulting in price discounting for Canadian heavy crude oil. Access to the USGC [U.S. Gulf Coast] via the Keystone XL Pipeline is expected to strengthen Canadian crude oil pricing in [the Midwest] by removing this oversupply. This is expected to increase the price of heavy crude to the equivalent cost of imported crude. The resultant increase in the price of heavy crude is estimated to provide an increase in annual revenue to the Canadian producing industry in 2013 of US $2 billion to US $3.9 billion.”

According to the website www.TarSandsAction.org, an organization that speaks out against the pipeline and StarTribune contributor Philip K. Verleger, independent analysis of the above figures provided by TransCanada, prices will increase by 20 cents/gallon in the Midwest.

Lorne Stockman, director of research at Oil Change International, and co-author of the NRDC report, who also spoke with ICTMN, said the Keystone XL Pipeline will not lower gas prices, “Senators and Representatives who support the Keystone XL Pipeline bear a great responsibility to the American people to come clean about the costs and benefits of the project.”

Oglala Nation Vice-President Tom Poor Bear agrees with the sentiment expressed by Stockman and expressed he did not feel the pipeline would make money or create jobs. In addition to the raising of gas prices, Poor Bear is also concerned that the pipeline, which passes through his reservation, Pine Ridge, raises considerable environmental concerns and a violation of treaty promises.

“First of all, these are treaty lands and the treaties were signed with the promise of undisturbed lands. This was an agreement between the great Sioux Nation and the United States. It is a treaty violation,” said Poor Bear.

“We also have the Mni Wiconi project,” Poor Bear said. “This project is bringing water from the Missouri River not just to the reservation but people outside of the reservation will benefit from the water. The KXL is going to cross over this water three times. If that pipeline leaks, there will be a lot of drinking water for a lot of people contaminated.”

When asked about their stance on the KXL, the National Congress of American Indians responded with a reference to their statement made on August 18, 2011 which demonstrates a fixed stance against the pipelines construction which they assert the proposed pipeline expansion could severely impact Native American communities and “poses grave dangers if it is constructed.”

“The Keystone XL pipeline … would threaten, among other things, water aquifers, water ways, cultural sites, agricultural lands, animal life, public drinking water sources and other resources vital to the peoples of the region in which the pipeline is proposed to be constructed,” NCAI said in its statement.

The proposed expansion of the pipeline would cross through northern Alberta, Saskatchewan, Montana, South Dakota, Nebraska, and Oklahoma with potential devastating impacts on communities in surrounding areas and states.

NCAI’s statement mentioned a study by a University of Nebraska hydrologist that outlined a worst case spill scenario, estimating that Keystone XL Pipeline could spill as much as 7.9 million gallons in Nebraska's Sandhills, polluting 5 billion gallons of groundwater with benzene, contaminating water used for agriculture and drinking drawn from the Ogallala Aquifer, and more than 6.9 million gallons of tar sands crude at the Yellowstone River crossing.

When approached by ICTMN, the White House State Department responded with a press release that had announced the TransCanada application for the construction of the Pipeline.

The report states: “Under Executive Order 13337, it is the Department’s responsibility to determine if granting a permit for the proposed pipeline is in the national interest. We will consider this new application on its merits. Consistent with the Executive Order, this involves consideration of many factors, including energy security, health, environmental, cultural, economic, and foreign policy concerns.”

“We will begin by hiring an independent third-party contractor to assist the Department, including reviewing the existing Environmental Impact Statement (EIS) from the prior Keystone XL Pipeline review process, as well as identifying and assisting with new analysis.”

Several world leaders and media personalities have spoken out against the pipeline including the Dalai Lama, Tantoo Cardinal, Archbishop Desmond Tutu, Al Gore, Robert Redford, Julia Louis-Dreyfus, Nebraska Governor Dave Heineman, Daryl Hannah and others.

Those in support of the Keystone XL Pipeline, including U.S. Sen. John Hoeven (R-N.D.) and Senator Claire McCaskill (D-Mo.), have said the pipeline means good jobs for American workers. Though some supporters of the pipeline have claimed tens of thousands of jobs for the U.S., TransCanada admitted the pipeline’s construction will create, best case scenario, a few thousand temporary jobs.

ICTMN attempted to contact several Senate offices for opinion on the Pipeline, but no calls were returned by press time.

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