Some Keystone XL oil could end up in foreign markets, report warns

By   /   April 20, 2012  /   1 Comment

By Phil Drake | Montana Watchdog

HELENA — Some of the proposed Keystone XL pipeline crude oil flowing from Canada through Montana on its way down to the Texas Gulf Coast could end up in one form or another in foreign markets, a recent government report finds. An April 4 report from the Congressional Research Service (CRS), “U.S. Oil Imports and Exports” by Neelesh Nerurkar, a specialist in energy policy, reports that: “Canadian crude oil traveling through the United States via a pipeline such as Keystone XL may receive a license to be exported from the United States.”

The report notes that since 2005, net oil imports have fallen by 33 percent to an average of 8.4 million barrels per day. The figure represents 45 percent of domestic consumption, down from 60 percent in 2005, the CRS reported. However, despite the decline in net imports, the cost has increased due to rising oil prices, the report finds.

An official with a Montana non-profit trade association — whose members include oil and natural gas producers, pipeline companies, petroleum refineries, service providers and consultants — said allowing exports would not water down enthusiasm for the project.

“Why limit the ability to export if the market allows that?” said Dave Galt, executive director of the Montana Petroleum Association.

He added he did not think anyone thought that Keystone would reduce U.S. dependency on imported oil. He said the lure of Keystone for Montana has been the on-ramp the company agreed to build that would provide access for Montana-made oil, jobs and longtime tax revenues for the counties the pipeline traversed.

TransCanada wants to build the 36-inch pipeline to carry oil from tar sands in Alberta to refineries on the Texas Gulf Coast. The $7 billion pipeline would stretch 1,661 miles from Canada through Montana, South Dakota, Nebraska, Kansas, Oklahoma and Texas. Keystone at maximum capacity could carry 800,000 barrels a day, which is about 1 percent of the 89 million barrels per day global oil market. TransCanada did not return calls seeking comment on this article.

The Canadian Energy Research Institute claims Keystone would create 343,000 new U.S. jobs during 2011-2015. And it would add $34 billion to the U.S. Gross Domestic Product in 2015 and $42 billion by 2025. Montana’s portion will help create 1,200 construction jobs and bring nearly $60 million annually in new tax revenue to the state, officials said.

On Dec. 15, Gov. Brian Schweitzer said Keystone will receive a permit from the state of Montana to install the pipeline. The 36-inch pipeline would extend through 281 miles of the eastern Montana counties of Phillips, Valley, McCone, Dawson, Prairie and Fallon. Schweitzer said that in addition to a $100 million access on-ramp for Montana-produced oil that the company previously agreed to, TransCanada must post a $100 million bond to cover potential problems that might occur with the pipeline in Montana.

Federal law allows regulators to seize assets of the company to pay for problems, if necessary. Earlier this year, Congress approved the Keystone pipeline, but environmental delays in Nebraska stalled the northern portion of the project.

In January the president refused to grant a permit to TransCanada, which needed federal approval because it crossed an international border. In March, President Barack Obama ordered his administration “to cut through the red tape” and “break through bureaucratic hurdles” to start construction of a southern portion of the pipeline from Cushing, Okla., to Gulf Coast refineries. Continue reading at Montana Watchdog.

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