The End of Keystone XL

With current political changes, the Keystone XL pipeline is likely to be approved for completion. Much of the opposition to Keystone focuses on environmental risks posed by the segment from the Canadian border across the Great Plains. Property rights are also an issue. Much of the opposition to Keystone centered on heavy-handed use of imminent domain to acquire rights of way for new pipeline construction. The law requires compensation, but many landowners felt like they were being forced to take too great a risk for the proposed forms of compensation. Native American autonomy has also been an issue for a few proposed northern segments of Keystone, though not as much an issue as the current opposition to a pipeline through the Standing Rock Sioux territory.

Many readers probably know a little about the northern end of Keystone in Alberta. I want to talk a little about that end before taking a look at the other end. Oil from the Alberta tar sands is some of the worst oil in the world.  It has to be pre-refined through a high pressure steam process and cut with solvents before it can even be pumped in a pipeline. Much of the environmental concern has focused on these solvents. As far as I can find out, the solvents are mostly naphtha and other light hydrocarbons. There are some risks involved in transporting these compounds, but they are not by themselves a major issue. These solvents act as thinners that make the tar sands oil perform like some natural crude oils and are found in similar proportions in many natural crude oils pumped all over the US. But even if the solvents by themselves aren’t that much of a problem, they make one of the issues with tar sands oil worse. Tar sands are high in aromatics and other toxic and carcinogenic compounds. The use of solvents makes these compounds more likely to seep into water tables in the event of an accident. The risks of the northern segments of Keystone really are a higher than transporting conventional grades of crude oil.

The Southern End of Keystone: 

The tar sands oil from Alberta is planned to run in a direct route from the Canadian border to TransCanada’s storage and distribution center in Nederland, Texas. From there it will be pumped to refineries in adjacent Port Arthur, and to refineries 47 miles away in Houston. There hasn’t been much local opposition to the pipeline, and what opposition there is doesn’t much focus on the pipeline itself. There have only been a few standoffs over property rights and environmental risks because much of the Keystone pipeline in Texas has been built on existing rights of way, and in some cases underused pipeline capacity has simply been set aside to become part of the Keystone system. The only part of the southern end of the system not already completed is the Houston Lateral segment. The Lateral, as we call it around here, is scheduled to open in a few months. TransCanada will be using it to carry other oil besides the Alberta oil. In fact, all the Alberta oil will be diluted with lighter crude throughout all the Texas segments, which is another reason for  lower concern about the pipelines here in Texas.

I assure you however, we are very concerned about the environmental impact of Alberta tar sands oil flowing into this area. Our concerns are just a bit different from what you’ve heard about. I think I can explain this better with some pictures.


This is the Valero Energy refinery in Port Arthur on what looks to me to be a November day from the fog and the leaves on the oak trees. Sure there are pretty pictures of the Valero plant gleaming in the clear twilight, but this is what a refinery area looks like. They are “Dark Satanic Mills” beyond what William Blake was able to imagine, so I chose an image to reflect that. This refinery is planned to process the largest part of the Alberta tar sands oil. Valero has long experience processing Orinoco sands oil from Venezuela and expects to be able to extract large amounts of low-sulfur diesel from the Alberta flow through a similar process.


This is Shell’s refinery in Deer Park, along the Houston Ship channel. Shell plans to buy oil from TransCanada and mix it with their own supplies to offset fluctuations in feedstock costs. Because of this mixing, Shell expects to not have too many problems with the low quality of the oil.

And then there’s this:


ExxonMobil’s Baytown refinery. Click to view full size for a great view of Houston. Oh, wait, the city is almost entirely hidden by a brown haze. This, not pipelines, is what we are worried about at this end of Keystone. Remember those aromatic hydrocarbons? They will have to be cooked out of the oil and burned in gas flares. While these three refineries have a good record of controlling their flares so that almost all dangerous pollutants are completely destroyed, there’s always something that gets through. And as you can see, we already have a problem.

And as I explained a couple of Sundays ago, this area is at a huge risk of sea level rise. It would be better that this oil stay in the ground if at all possible.

“The People’s Oil”, My Pet Peeve:

Just about the strangest objection to Keystone is that the oil might be exported once it reaches the Gulf Coast rather than being used domestically. My answer is simply, So? I find that liberals and conservatives alike engage in magical thinking about oil almost as if the oil business were some state socialist industry. They think that somehow government, or even God Himself, is in control and can make pumps turn on or completely control imports and exports. Did these people fail basic economics? Oil pumps when the money says it will, and flows to the highest bidders wherever they might be. How could anyone expect anything else? God and The State are powerless here, it’s all about the price at the pump.

As it turns out, the oil from Keystone is unlikely to be exported if the Alberta oil flows all the way to Texas, as this article from Bloomberg explains. The Alberta oil is difficult to refine, so no one is likely to want it. Furthermore, the whole point of bringing the oil to the Gulf coast is because this is where there is the capacity expertise to refine it.  The point is to refine the oil and sell the refined products. That’s where the money is and while most refined petroleum products made in the US are sold in the US, a reasonable share is exported from the US.

It blows some people’s minds that to hear that US oil companies export products to the same countries they buy oil from. But isn’t this a good thing? Importing a difficult to manage raw material, applying highly skilled high-wage labor to that material in an industry that relies on intensive capital investment, and then exporting part of the finished product is how a mature capitalist economy is supposed to work. Yes, there are problems, but you’d think at least conservatives could understand this. But so many don’t.

It’s Musical Monday: 

I was thinking of money themed songs and remembered this one from Cyndi Lauper. I recommend listening to the original version, but it’s Cyndi’s cover that will take you back.

Perhaps you should imagine this song is about a tanker leaving port loaded with diesel fuel bound for an oil-exporting nation.




Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s