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Pipeline Purchase, Re-Routing Likely to Succeed in Getting Tar Sands Oil to Market

The Beauty of the Albert Tar Sands Extraction (photo: visionshare/flickr)

Enbridge, a competitor to TransCanada, announced plans to purchase a controlling interest in an existing pipeline that runs from the Gulf of Mexico to Cushing, Oklahoma, and to reverse it, in an effort to transport tar sands oil to Gulf Coast refineries.

The plan would do part of what the controversial Keystone XL pipeline would do, easing a bottleneck in Cushing, a hub where the New York Mercantile Exchange prices the benchmark West Texas Intermediate crude oil.

The announcement of the deal Wednesday drove up the price of WTI crude for December delivery to $102.59 a barrel, up 3.2 percent. Because of the glut of crude oil in Cushing, there has been an unusually large gap between U.S. prices for oil and the higher price of Brent crude, the international and more widely used benchmark traded in London.

In addition, the announcement by TransCanada that they would re-route the Keystone XL pipeline appears to have done the trick with the Nebraska legislature. Lawmakers voted unanimously to advance the amended pipeline project, which could reduce the State Department review, which was predicated on exploring a different route. This really ties the hands of the White House, who clearly wanted to hold off on a decision on the pipeline until after the 2012 elections. TransCanada doesn’t believe that the Enbridge move, which could lead to 150,000 barrels a day coming out of Canada by early next year, impacts their bid to build their pipeline.

The larger point here is that as long as the viscous substance in the ground in the tar sands has value, businessmen who want to capitalize on that value are going to make every effort to pull out that substance, ship it, and sell it to willing purchasers. Getting Keystone XL delayed is a worthwhile effort, but until that substance becomes devalued, either through the cost of production and transport being higher than the price for the product, or through other forms of energy with less hassle being sold cheaper, it’s just very hard to stop. We need fair dealing in the environmental impact studies – Friends of the Earth just found that Cardno Entrix, the contractor who authored the study for Keystone XL, met with TransCanada and its lobbyist shortly before writing it. But ultimately, the forces who want this built, and who want the profit that comes with it, are very likely to succeed. It’s going to take a tremendous effort, not just with activism, but with re-imagining the energy structure of the planet, to get it to stop.

CommunityThe Bullpen

Pipeline Purchase, Re-Routing Likely to Succeed in Getting Tar Sands Oil to Market

Enbridge, a competitor to TransCanada, announced plans to purchase a controlling interest in an existing pipeline that runs from the Gulf of Mexico to Cushing, Oklahoma, and to reverse it, in an effort to transport tar sands oil to Gulf Coast refineries.

The plan would do part of what the controversial Keystone XL pipeline would do, easing a bottleneck in Cushing, a hub where the New York Mercantile Exchange prices the benchmark West Texas Intermediate crude oil.

The announcement of the deal Wednesday drove up the price of WTI crude for December delivery to $102.59 a barrel, up 3.2 percent. Because of the glut of crude oil in Cushing, there has been an unusually large gap between U.S. prices for oil and the higher price of Brent crude, the international and more widely used benchmark traded in London.

In addition, the announcement by TransCanada that they would re-route the Keystone XL pipeline appears to have done the trick with the Nebraska legislature. Lawmakers voted unanimously to advance the amended pipeline project, which could reduce the State Department review, which was predicated on exploring a different route. This really ties the hands of the White House, who clearly wanted to hold off on a decision on the pipeline until after the 2012 elections. TransCanada doesn’t believe that the Enbridge move, which could lead to 150,000 barrels a day coming out of Canada by early next year, impacts their bid to build their pipeline.

The larger point here is that as long as the viscous substance in the ground in the tar sands has value, businessmen who want to capitalize on that value are going to make every effort to pull out that substance, ship it, and sell it to willing purchasers. Getting Keystone XL delayed is a worthwhile effort, but until that substance becomes devalued, either through the cost of production and transport being higher than the price for the product, or through other forms of energy with less hassle being sold cheaper, it’s just very hard to stop. We need fair dealing in the environmental impact studies – Friends of the Earth just found that Cardno Entrix, the contractor who authored the study for Keystone XL, met with TransCanada and its lobbyist shortly before writing it. But ultimately, the forces who want this built, and who want the profit that comes with it, are very likely to succeed. It’s going to take a tremendous effort, not just with activism, but with re-imagining the energy structure of the planet, to get it to stop.

UPDATE: I notice Brad Plumer making essentially the same point, and adding that a price on carbon is the answer. I agree.

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David Dayen

David Dayen