U.S. oil boom threat to tar sands much greater than State acknowledges

From:  Change 

Lorne Stockman, May 16, 2013 

 

 The State Department’s March 2013 Draft Supplementary Environmental Impact Statement (DSEIS) of the Keystone XL pipeline concluded that America’s tight oil boom would not threaten the U.S. Gulf Coast market for tar sands.

There is increasing evidence that they got it wrong.

In the Market Analysis section of the DSEIS, State concluded:

The increase in domestic production of light crude is expected to result in a substantial reduction in imports of light crude oils rather than a reduction in demand for heavy, sour crude oils, including from Canada.

State’s conclusion was primarily based on analysis from the EIA’s Annual Energy Outlook 2013 Early Release. The EIA has since released analysis that contradicts that initial assessment. However, there were plenty of signs that State should have seen that the tight oil boom poses an increasing threat to the tar sands market, some dating back to before the State Department was tasked with conducting a new analysis of the project.

First some background: Refineries on the Gulf Coast have a high concentration of specialized refining equipment designed to refine low quality heavy sour oil, into high quality petroleum products such as low sulfur diesel and gasoline. Gulf Coast refiners have imported heavy sour oil from Mexico, Venezuela, Kuwait and other distant sources for years, but the prospect of increasing tar sands production, the primary product of which is a heavy sour blend known as dilbit (diluted bitumen), triggered a new wave of investments in specialized refining equipment over the past five years. Refineries in Port Arthur and Houston, Texas in particular invested heavily in this equipment in anticipation of the arrival of Keystone XL, the terminus of which is planned nearby.  MORE