by Glenn Kessler, Washington Post, March 2, 2015
“I’ve already said I’m happy to look at how we can increase pipeline production for U.S. oil, but Keystone is for Canadian oil to send that down to the Gulf. It bypasses the United States and is estimated to create a little over 250, maybe 300 permanent jobs. We should be focusing more broadly on American infrastructure for American jobs and American producers, and that’s something that we very much support.”
– President Obama, interview with WDAY of Fargo, N.D., Feb. 26, 2015
President Obama, seeking to explain his veto of a bill that would have leapfrogged the approval process for the Keystone XL pipeline, in an interview with a North Dakota station repeated some false claims that had previously earned him Pinocchios. Yet he managed to make his statement even more misleading than before, suggesting the pipeline would have no benefit for American producers at all.
The Fact Checker obviously takes no position on the pipeline, and has repeatedly skewered both sides for overinflated rhetoric. Yet the president’s latest comments especially stand out. Let’s review the facts again.
As we have noted before, when the president says “it bypasses the United States,” he leaves out a very important step. The crude oil would travel to the Gulf Coast, where it would be refined into products such as motor gasoline and diesel fuel (known as a distillate fuel in the trade). Current trends suggest that only about half of that refined product would be exported, and it could easily be lower.
A report released in February by IHS Energy, which consults for energy companies, concluded that “Canadian crude making its way to the USGC [Gulf Coast] will likely be refined there, and most of the refined products are likely to be consumed in the United States.” It added that “for Gulf refineries, heavy bitumen blends from the oil sands are an attractive substitute for declining offshore heavy crude supply from Latin America.” It concluded that 70 percent of the refined product would be consumed in the United States.
Enviromentalists dismiss IHS as a biased source, but the analysis mirrors the conclusions of the State Department’s final environmental impact statement on the Keystone XL project. This is what is especially strange about Obama’s remarks, as he appears to be purposely ignoring the findings of the lead Cabinet agency on the issue.
“Comments were received throughout the review process speculating that WCSB heavy crude oil supplies carried on the proposed Project would pass through the United States and be loaded onto vessels for ultimate sale in markets such as Asia,” the State Department said. “As crude of foreign origin, Canadian crude is eligible for crude export license as long as it is not commingled with domestic crude. However, such an option appears unlikely to be economically justified for any significant durable trade given transport costs and market conditions.”
The report added:
“Once WCSB [Western Canadian Sedimentary Basin] crude oil arrives at the Gulf Coast, Gulf Coast refiners have a significant competitive advantage in processing it compared to foreign refiners because the foreign refiners would have to incur additional transportation charges to have the crude oil delivered from the Gulf Coast to their location….Gulf Coast refineries have the potential to absorb volumes of WCSB crude that go well beyond those that would be delivered via the proposed Project. On this basis, the likelihood that WCSB crudes will be exported in volume from the Gulf Coast is considered low.”
Finally, note that Obama said Keystone was just for Canadian oil, and “we should be focusing on American infrastructure for American jobs and American producers.” But actually, Keystone would help U.S. oil producers in North Dakota and Montana. TransCanada, the builder of the pipeline, has signed contracts to move 65,000 barrels a day from the Bakken area –and hopes to build that to 100,000. That’s nearly 10 percent of the region’s production.
The Congressional Research Service in 2013 estimated that about 12 percent of the pipeline’s capacity had been set aside for crude from the Bakken region. Of course, delays in the Keystone project have sent oil producers in search of other methods of transport, potentially making this link less relevant, but the president can’t argue the project was not proposed without U.S. producers in mind.
Moreover, as we have noted before, U.S. companies control about 30 percent of the production in Canada’s oil sands region. Thus, contrary to Obama’s suggestion, it is not strictly Canadian.
We have poked fun at TransCanada for suggesting the pipeline would reduce reliance on foreign energy — when in fact Canada is a foreign country — but that does not give Obama license to suggest there is no possible American benefit from the pipeline.
(Incidentally, while the president spoke of 250 to 300 permanent jobs, the State Department report actually says 35. But this is a construction project. How many construction projects result in very many permanent jobs?)
The White House declined to provide an on-the-record defense of the president’s statement. That certainly suggests officials are unwilling to make a public case contradicting the State Department findings.
The Pinocchio Test
When Obama first started making the claim that the crude oil in the Keystone pipeline would bypass the United States, we wavered between Three and Four Pinocchios — and strongly suggested he take the time to review the State Department report.
Clearly, the report remains unread.
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