Facing growing political and environmental opposition in the U.S. to the proposed Keystone XL pipeline, Canada's landlocked options for exporting its oil have never appeared more costly.
Not only has deadheaded oil in Cushing Oklahoma, the present terminus of the pipeline, put a crimp on expansion plans in the oil sands, but the ballooning price spread between West Texas Intermediate (WTI) and world oil prices has cost Canadian producers more than $1-billion a month in lost petro-dollars.
It's not U.S. motorists pocketing the difference at the pumps. Midwest refineries have been quick to recognize a gift horse when it is staring them in the face.
The only thing bigger than the gap in oil prices between Cushing (where WTI is priced) and the Gulf Coast is the gap in refinery margins. Refinery margins, or crack spreads as they are known in the oil industry, refer to the price difference between what refineries pay for their feedstock (crude or bitumen) and the price they charge for the products they, in turn, sell such as gasoline or diesel.
While refineries in Cushing pay WTI prices for their feedstock, refineries 400 miles south pay about $20 per barrel more for Light Louisiana Sweet, which like all fuels heading into U.S. ports, trades at or near the Brent-based world oil price. Incidentally, those prices have been in triple digit territory since the beginning of the year.
That is a great deal for the refineries in Cushing that get a crack spread of around $25, compared to a spread of about $5 for those that have to pay Brent-type world oil prices for their fuel.
But for Canada's oil patch, which exports more than two million barrels a day to the U.S., the $20 or more price discount that has prevailed all year amounts to $40 million a day, or about one and a quarter billion dollars a month in lost petro-dollars.
I bet shareholders of Canadian oil producers, not to mention provincial and federal governments in Canada, would like to see their share of the rich crack spread that mid-western refineries are getting on their Canadian feedstock.
Without pipeline access to the Gulf, or to the Pacific to supply Chinese customers, Canadian oil producers get what Midwest refineries will give them. And that's a huge discount to what the rest of the world will pay, including U.S. refineries along the Pacific, Atlantic or Gulf coasts.
It doesn't make sense for Canadian oil to flow to the market that values it the least. Â If Canadian oil exporters can't get to world prices through the proposed Keystone XL pipeline to the Gulf of Mexico, they must find another route for their oil to flow.
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U.S. to Delay Decision on Keystone Oil Pipeline - WSJ.com
Nebraska Celebrates Keystone Pipeline Delay
Keystone Pipeline May Not 'Survive' U.S. Delay, Flaherty Says ...
And when those Chinese Customers get wind of this 11.2 MW Fuel Cell Park that opened in Daegu City, South Korea yesterday with the Fuel Cells built by FuelCell Energy, Inc. in Danbury, Conn as noted here: http://fuelcellsworks.com/news/2011/11/15/fuelcell-energy-announces-worlds-largest-fuel-cell-park-operating-in-south-korea/ .
And the only thing that a pipeline needs to carry is Hydrogen Gas which the Oil Cartel uses behind-the-scenes to connect their oil refineries with Hydrogen Gas pipelines to enable them to reduce pollution in their highly polluting coking process during oil refining. Here is a recent example: http://markets.financialcontent.com/stocks/news/read/17797311/Air_Products_Meets_Increased_Hydrogen_Needs_at_Marathon%27s_Garyville .
The writer is obviously illiterate of the emerging Hydrogen Economy which will replace The Carbon Economy and restore the environment in the process.
http://energytomorrow.org/soae/
Implementing Keystone is an environmental catastrophe, a potent yet silent killer of the viability of living in North America. It must be stopped. PERIOD.
http://en.wikipedia.org/wiki/Steam_assisted_gravity_drainage
http://www.nexeninc.com/en/Operations/OilSands/LongLake/History.aspx
oh yeah...
According to Opti's 2009 year end results and Nexen's update in February 2010, steam comprised of five to six barrels of water was needed for every barrel of bitumen produced. However, the Long Lake Project was initially approved on the basis of a 3:1 ratio of water use to bitumen production,
meaning the Long Lake project has needed almost twice as much water as originally planned.
Between 2007 and 2009, Nexen tripled its annual use of groundwater at this project,(i.e., 28 million m3/year, or the equivalent of 11,000 Olympic swimming pools per year).
http://dirtyoilsands.org/files/drilling-down-july2011.pd
Lake SAGD Project
In 2010, Nexen Inc. applied to amend the water licence that was issued for its Long Lake SAGD oil sands project in northeastern Alberta so it could switch its source of project water from saline groundwater to freshwater from the Clearwater River, which was designated a Canadian Heritage River in 1997.As discussed in the Nexen Case Study, the uncertainty in groundwater quality and long-term availability creates a strong economic incentive for industry to quietly pursue access to fresh water for SAGD projects from surface sources, after receiving approvals based on saline groundwater use.
According to Opti’s 2009 year end results and Nexen’s update in February 2010, steam comprised of five to six barrels of water was needed for every barrel of bitumen produced. However, the Long Lake Project was initially approved on the basis of a 3:1 ratio of water use to bitumen production, meaning the Long Lake
project has needed almost twice as much water as originally planned.
Between 2007 and 2009, Nexen tripled its annual use of groundwater at this project,(i.e., 28 million m3/year, or the equivalent of 11,000 Olympic swimming pools per year).
pg.16
http://dirtyoilsands.org/files/drilling-down-july2011.pd
Stakeholders have agreed that this volume of withdrawal would not be sustainable because the Athabasca River does not have sufficient flows.
http://ess.nrcan.gc.ca/ercc-rrcc/theme1/t7_e.php?p=1
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http://canadians.org/trade/documents/CETA/briefing-CETA-tarsands.pdf
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Jen Grant et al, Clearing the Air on Oil Sands Myths (The Pembina Institute, June 2009), 3, http://www.pembina.org/pub/1839.
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"Post-Stakeholder Comments" at http://www.albertainnovates.ca/media/15768/post%20workshop%20stakeholder%20input.pdf, particularly
the submission from Bergerson, Keith and MacLean.
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see the technical points raised by Simon Mui of the Natural Resources Defense Council at
http://switchboard.nrdc.org/blogs/sclefkowitz/studies_confirm_tar_sands_dirt.html.
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Rick Hyndman, Comments on Proposed Low Carbon Fuel Standard Regulations (April 22, 2009, Via Electronic Submittal),
http://www.capp.ca/getdoc.aspx?DocID=151109.
The Gulf coast has the highest concentration of refining capacity in the world.
There are 60 refineries that process 11 billion barrels per day.
At least 26 of them don't comply with USA environmental laws...sigh
The Environment Canada forecast points to an increase to 62 mega tonnes of carbon dioxide equivalent annually from the oil sands by 2020, tripling 2005 levels.
In comparison electricity emissions are projected to decline by 31 mega tonnes between 2005 and 2020.
Taking into account all pollution, Environment Canada predicts the country's greenhouse gas emissions will increase by 54 mega tonnes.
http://www.ec.gc.ca/Publications/E197D5E7-1AE3-4A06-B4FC-CB74EAAAA60F/CanadasEmissionsTrends.pdf
Sen. Mike Johanns (R-NE), whose state is among those on the proposed pipeline’s path, has predicted it will not move in the Senate and the White House recently said it does not support the bill.The bill itself is legally unworkable says an NWF senior attorney, since it would attempt to bypass existing provisions of cornerstonÂe environmenÂtal laws.
The company proposing to build the pipeline, TransCanadÂa, has endured scrutiny over documents they prepared saying the proposal would boost their profits by $4 billion by causing a Midwest price spike.
Their latest completed pipeline, Keystone I, has leaked 12 times in the last year and was cited by federal regulators as a danger to the public and environmenÂt. The bill also comes as Montana and Michigan continue to clean up massive spills from pipelines that carry corrosive tar sands.
Jeremy Symons, NWF senior vice president said:
“The oil companies behind this bill are playing a high stakes game of hide the ball. They are desperate for Congress and the administraÂtion to rush the approval of this pipeline before its full costs comes to light.
read more:
http://wwwÂ.nwf.org/NÂews-and-MaÂgazines/MeÂdia-CenterÂ/News-by-TÂopic/GlobaÂl-Warming/Â2011/07-26Â-11-US-HouÂse-Vote-RaÂtchets-Up-ÂKeystone-XÂL-PipelineÂ-ControverÂsy.aspx
Bill Summary & Status
112th Congress (2011 - 2012)
H.R.1938
http://thoÂmas.loc.goÂv/cgi-bin/Âbdquery/z?Âd112:h.r.0Â1938:
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Access the full text of the State Department 7/22 briefing including the questions and DOS responses
http://wwwÂ.state.govÂ/g/oes/rlsÂ/remarks/2Â011/168981Â.htm
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Access the State Department Keystone Project website for complete informatioÂn
http://wwwÂ.keystonepÂipeline-xlÂ.state.govÂ/clientsitÂe/keystoneÂxl.nsf?OpeÂn
Fact sheet (290 kb)
Executive Summary of the Final EIS (2.1 MB)
Final EnvironmenÂtal Impact Statement
Notice of Public Meetings (969 kb)
House Pushes Dangerous Keystone XL Pipeline,
ThreateninÂg Endangered Species Habitat and DramaticalÂly Increasing Risk of Oil Spills
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Keystone XL Pipeline Project - Federation of American Scientists
www.fas.org/sgp/crs/misc/R41668.pdf
DEPARTMENT OF STATE RECORD OF DECISION AND NATIONAL ...
www.cardnoentrix.com/keystone/project/SignedROD.pdf
So it's not just Canadian producers who will pay a price.