Keystone -- why not put refinery at the site of the tar sands

In view of the difficulty in politically getting the pipeline through, and in view of the shortage of refineries in North America, why not build a refinery near the site of the tar sands and refine it to gas, diesel and other products right on site?

Why would they? Pipelines are extremely efficient. Trucks are not. If Americans won’t let them sell to us, they’ll just sell to someone else.

Sure, they could. But that would mean breaking the bulk product at the site, far from a useful transportation network.

You think getting pipeline enviromental approval is fun, try getting one for a giant refinery.

The refinery already exists in Texas, and expanding capacity if necessary is probably simpler than building a greenfields refinery. Try getting those refinery experts to move to the middle of nowhere. Fort McMurray is already reknowned for its high wages and complete lack of housing. (there’s the story that Tim Hortons drive thru donut shops were paying drive thru window clerks $16/hr. and anyone who moved there better have a relative’s couch to sleep on, because hosuing prices are still out of this world and backlog of housing demand is through the roof. Simply expanding the tar sands plants is enough strain.)

Refineries produce a lot of stuff - gas (3 grades), diesel, heating oil, lubricants, miscellaneous industrial chemicals and plastics feedstocks, etc. It’s easier to pipe just crude to where the rest of the distribution network is already established, and probably much closer to the chemical industries that use that product.

I’ve wondered that myself. I’d love to keep more profits in Alberta (and by extension Canada).

By the way, to be nitpicky, they’re more commonly called oil sands rather than tar sands.

This. You would multiply the scale of your transportion problem because you have to ship gas separate from jet fuel, diesel, lubricating oil, kerosene, etc.

I’ve always heard them called tar sands. Oil sands sounds like a marketing term invented by the people with projects in the tar sands.

Interesting Program last night on NPR about the price of gasoline going up in the US when the amount of oil available is at an all time high, and the consumption of gasoline in the US at a ten year low.

The important thing in the sound bite was that, with the incredible decrease in the cost of natural gas in the US due to fracking and other factors, the cost of refining gasoline in the US is at an all time low, and the US is exporting gasoline to other countries because we can produce it so cheaply.

Therefore, the question is, can you produce gasoline in a new refinery in Canada and deliver it to the US as cheaply as you can produce it at an existing US refinery.

I heard that NPR story. I wonder why more isn’t being made politically about the U.S. exporting gasoline?

Because that’s how free trade works? People (rightly) bashed Bush when he imposed steel tariffs to “save jobs” and resulted in us paying billions in WTO sanctions.

Gasoline and oil are fungible commodities, the idea that it’s wise economic policy to craft some law which would make it illegal for refiners to export their product until the government felt the American people were getting their fair “first dibs” is asinine. It’s so asinine that not even Barack Obama would agree with it. The Republicans aren’t going to make a political point about it because we support free trade. Barack Obama isn’t going to make a political point about it because, aside from some random quibbling about eliminating tax benefits for outsourcing employees and ludicrous concepts like “fair trade” Barack Obama and the mainstream Democrats are all in favor of free trade as well. Remember it was Bill Clinton that signed NAFTA, and Barack’s economic philosophy isn’t terribly different from Clinton’s.

I think you’re missing the point, MH. It’s not that the fact of export means we should keep it for ourselves, but that the fact of export has meaning for the cause of high prices. It is, of course, the cause of high prices that is the political issue.

The NPR piece said:

As **treis **said, tar sands is a more accurate term, or if you want to be technical, bitumen, since the “oil” has been heavily degraded and exists as a thick semisolid mass mixed with sand (think of tar balls which wash up during an offshore spill), which needs to be converted to crude oil (also called syncrude/synthetic crude). Here is the description from Wikipedia:

They do refine it to a lighter form that can be easily shipped by pipeline and used be refineries.

Googlefight says “Tar sands” is a little more common than “Oil sands”.

“Oil sands”: 475,000 results, “Tar sands”: 554,000 results.

The North American refining capacity and distribution infrastructure is largely concentrated in the Gulf Coast region and it is probably more cost-effective to ship the raw product there than to build new plants from scratch at the source. Also, it is likely that American refiners are promoting the Keystone pipeline as a means to lock in their supply of crude and control transportation costs. This is not to say that a long-distance pipeline furnishes the lowest cost for moving the material - it does not - but that as single-purpose transport mode dedicated to moving one commodity in one direction it is the easiest to control.

The late John G. Kneiling, a well-known transportation engineer published a series of books and articles 30 years ago in which he posited that existing railroad infrastructure can move bulk crude commodities more efficiently than pipelines. Kneiling’s work dealt with unit coal trains vs. slurry pipelines, but the same principles would seem to hold for crude oil transport.

I happen to believe the efficiency issue is one of the strongest arguments against building the Keystone project and the point on which the oil industry is most vulnerable. From the refiners’ POV however, a pipeline is preferable. The additional costs can easily be passed on to the public wheras if rail transport was used they’d be dealing with a third party with independent rate-setting ability and operational control outside the oil cartel.

Well, the answer to the OP was touched upon by other posters, in that the prodcuts refined from the tar sands and carried by Keystone XL were more or less destined for export - this link sums it up, but unfortunately that site approaches conspiracy theory terrority.
I do understand that the current Keystone pipeline is currently dumping Canadian crude into the midwest markets, and apparently depressing gas prices in that area - unfortunately again, all I can find on a quick search is a nice summary on yet another borderline crackpot site - blah. However, they quote this paragraph from what they claim is the “Keystone XL Pipeline Section 52 Application”

PADD II is indeed the MidWest US and USGC is the US Gulf Coast. You can decide what that means.

Not to take a slight nitpick too far, but my bottom line is usually what the locals call something - I’m living in the province with the oil sands, and that’s what we call them here. :slight_smile:

One point that they seem to have overlooked is

(From the Canadian Association of Petroleum Producers website.) It’s not like it’s just Canadian companies raping the land of its bitumen and hosing US Americans by selling it to them at outrageous prices - there are a lot of US American companies heavily involved in it too.

…This would be an example of pipelines being the most efficient method.

?

Pipelines by nature are the cheapest per unit method of shipping something, barring heroic feats like trying to pipe across the sea. It’s because it ensures a constant flow, resulting is effectively nil variable cost.

I can think of several reasons why coal slurry would be a pain. However, to your main point: I’m not sure this is actually true because of flat economics. Coal has a very different supply chain, because it doesn’t usually need or want to go directly from source to a refiner. It just goes to the end user immediately - which might be any of dozens of power plants across the U.S.

Likewise, Knieling is known as a brilliant man, but also a crank, who he had (and never did have) any experience actually running a railroad. He’s mostly known for running a series of articles which helped persuade the government to change some old regulations. I’m not exactly what his non-experience has to offer in a completely separate discussion.

What “additional costs”? What “oil cartel”? You claim there is an “efficiency issue,” but in no way do you explain why we should think there is one.

A pipeline may, under some circumstances offer a lower unit cost but a short-term lower pricing does not necessarily equal maximum efficiency. Minimization of a single function - in this case moving one commodity in one direction - is a common economic fallacy. When one compares the first cost of pipeline construction (one of the additional costs I mentioned) versus the cost of shipping via an existing transportation network the keystone project looks less likely. And the North American rail system can serve a variety of functions, some of which may be capable of cross-subsidizing others which makes it inherently a much more efficient system than a single-purpose pipeline. Moreover, the recovery of maintenance costs can be spread out over several different commodities rather than being dependent on a single product.

Got that right. I am surprised, even in this august group, to find someone actually familiar with Kneiling’s work. He was so controversial and outspoken that even those who should have been listening tuned him out. Back when he was publishing I could hardly stand to read him…his utter contempt for labor and dismissal of environmental concerns turned me off. Lately, I’ve been re-reading a number of his articles, and with the benefit of 30+ years hindsight he makes a lot more sense. Still an unloveable character though. A quick search for “John G. Kneiling” turns up only one usable hit…a discussion group wherin someone asks “whatever became of Kneiling”. Someone purporting to be his son or daughter answers as follows:

Apparently, his kids had a more well-developed sense of humor than he did.
SS

Actually, like Cat Whisperer, I live in Alberta and pretty much everyone here calls them oil sands. And I’ve heard plenty of people opine that rather than oil sands being a marketing term, it’s more common that tar sands is a marketing term which is often used by those who are opposed to developing the oil sands. When this became an international issue in the last few years, there were lots of news articles, and “tar sands” was often used as a pejorative to emphasize their “dirtiness”.

Personally, I usually use the term oil sands, since that’s what’s most commonly used here. I’m a pretty environmentally conscious person, but I’m not really pro- or anti- oil sands development - I know there are environmental impacts but the relative environmental impact of different source of energy is not necessarily any better, and the oil producers have invested a lot in developing much cleaner technology. IRL, I know it’s inevitable that the oil sands will continue to be developed, so I’m in favoring of developing cleaner technology to lessen the environmental impact.

I would point out that the Wikipedia article you are linking to is entitled “Oil Sands”, and in a part of the article you didn’t quote it states:

Hmmm, well I live in the ***country ***where the tar sands are, and everyone that I recall has called them the “Tar Sands” since, IIRC, Pierre Trudeau brought them to everyone’s attention when he promised money to develop them during his reviled energy policy. I suppose they’ve been called “oil sands” a lot, but this is the first time I’ve noticed them not being called tar sands, and I do read the news. Maybe it’s an Alberta/Marketing thing to call them oil.

Considering that the two terms have relatively even numbers of Google hits (“oil sands” has 5.3 million hits, “oilsands” has 3 million hits; “tar sands” has 4.47 million and “tarsands” has 0.97 million), I think both terms are pretty widespread and oil sands is not just used in Alberta or by petroleum producers, although I’m sure it’s much more common here.

The Wikipedia article says that they were misleading termed tar sands early on, but I’m not sure exactly when oil sands started to be used. The Wikipedia article says that the first development of them in Alberta was with the Great Canadian Oil Sands (now Suncor), which started operation of its mine in 1967. Whereas Trudeau’s National Energy Program was circa 1980.

I googled a little and found this link from the CAPP (so they have their own biases), but they cite an article from 1939 that says:

The article has a comment at the bottom from someone who says he is a historian and states that “oil sands” and “tar sands” were used pretty much interchangeably and without negative connotations up until about ten years ago, and then it became more politicized.
I found this website, which states: