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Keystone supporters hit back at Pelosi's export criticism

On Thursday, Nancy Pelosi, the ranking Democrat in the U.S. House of Representatives, said the oil that would flow to the Gulf Coast through Keystone XL ‘is for export.’ Supporters of the project, including major refiner Valero Energy Corp., maintain that’s not true.


The energy industry is lashing out at a senior U.S. Democrat who suggested that oil flowing through the Keystone XL pipeline is destined for export, a criticism that strikes at the heart of the rationale for the controversial project.

On Thursday, Nancy Pelosi, the ranking Democrat in the U.S. House of Representatives, said the oil that would flow to the Gulf Coast through Keystone XL "is for export." It is an argument that echoes recent reports from environmental groups like Oil Change International, which said 60 per cent of gasoline from Texas refineries was exported in 2012. The "Keystone XL pipeline is a pipeline through America not to America," the group charged.

But an official with Valero Energy Corp., a major U.S. refiner and one of the pipeline's most important backers, said those numbers are misstated.

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"Even if she's talking about products, she's completely wrong," said Bill Day, a spokesman with Valero. Oil Change International, he said, "have screwed up more things than I can even count."

Valero has eight refineries in the Gulf Coast region. "Over the past several quarters, Valero has exported less than 10 per cent of the gasoline it makes," Mr. Day said in an e-mail. "The vast majority of what we make in the U.S. stays in the U.S."

And it is unlikely Canadian oil itself will be exported, given the difficulty of exporting unrefined product from the U.S. – an option the U.S. State Department has said "is unlikely to be economically justified."

But the comments from Ms. Pelosi, who also questioned the employment impact of TransCanada Corp.'s proposed Keystone XL project, have stirred up new problems for the Canadian oil patch, which sees the pipeline as a critical new export route for oil sands production. Canadian crude has faced significant discounts as existing pipelines become effectively jammed. The price of heavy Canadian oil has fallen as far as $40 (U.S.) below U.S. crude in recent months, although that "differential" has substantially retreated and now stands at $22.45.

"It's a way of further undermining the project," said TransCanada spokesman James Millar, who pointed to numerous environmental and other criticisms the company has faced in trying to gain approval for Keystone XL.

Energy security – access to a larger, more secure supply of Canadian oil – has been among the key benefits put forward by Keystone XL supporters. That argument may be weakened if many of the fuels refined from its throughput are sent to other countries.

But Mr. Millar called the export criticism a "red herring" that does not pose a danger to a pipeline that "is about energy security for the U.S. based on oil."

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"What we're really saying is what Keystone does, is it gives those refineries on the Gulf Coast secure, stable Canadian oil versus oil from Venezuela."

Even if some of the refined products are exported, the work of refining them will still be done in the U.S., the Canadian Association of Petroleum Producers says. "It's part of the advantage for the American economy to have that happen," said Greg Stringham, a vice-president with CAPP.

It's clear, however, that at least some of the energy travelling through Keystone XL, if it is built, will power vehicles far from the U.S. In its report on Keystone XL, the U.S. State Department refers to 2011 numbers that show only 45 per cent of "finished petroleum products" – fuels like gasoline and diesel – were shipped to U.S. destinations from Gulf Coast refineries. Numbers maintained by the Energy Information Administration show that the U.S. has become a net exporter of refined products, with the most recent figures showing 976,000 barrels per day of net exports – and as much as 1.4-million b/d in late February.

But EIA forecasts suggest that's likely to be a temporary phenomenon, with the country returning to net import status for refined products as soon as next year. Even today, the bulk of what is refined in the Gulf Coast stays inside U.S. borders. The Gulf Coast has 8.5 million barrels per day of refining capacity. In 2012, according to EIA statistics, 2.3-million b/d was exported.

The Harper government, meanwhile, continued on Friday to criticize NDP Leader Thomas Mulcair over reports that he told Ms. Pelosi that Canadians are not in favour of Keystone XL. In a speech in Calgary, Minister of International Trade Ed Fast accused Mr. Mulcair of acting "as a one-man wrecking crew on the Keystone pipeline."

An NDP official acknowledged that Mr. Mulcair spoke about Keystone during his meeting with Ms. Pelosi. But "we are clarifying that in no way did Mr. Mulcair or any member of the delegation say that Canadians don't want the pipeline," the official said. The NDP says Mr. Mulcair did not talk down or badmouth Canada during his U.S. visit, contrary to what the Conservatives are saying. "Mr. Mulcair talked about how amazing Canada is, and how we can make it better," the NDP official said.

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With files from Daniel Leblanc in Ottawa

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About the Author
Asia Bureau Chief

Nathan VanderKlippe is the Asia correspondent for The Globe and Mail. He was previously a print and television correspondent in Western Canada based in Calgary, Vancouver and Yellowknife, where he covered the energy industry, aboriginal issues and Canada’s north.He is the recipient of a National Magazine Award and a Best in Business award from the Society of American Business Editors and Writers. More


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