Blocking the Keystone Pipeline: Who Benefits?

As President Obama deliberates whether to continue blocking the Keystone Pipeline–or pretends to, anyway–environmentalists have gotten more passionate. Last week, 48 climate activists were arrested at the White House as they urged Obama to stop the pipeline. Notables who were arrested included the head of the Sierra Club, Robert Kennedy, Jr., Bill McKibben and Julian Bond.

The activists’ sign said that blocking Keystone constitutes “leading on climate.” But does it? Apart from the question whether burning fossil fuels has any material relationship to the Earth’s climate–I think it is at most a minor factor–do they seriously think that if there is no pipeline to the Gulf, the Canadian tar sands and the Bakken shale will be abandoned? You are probably aware of the Canadian government’s threat that if Keystone isn’t built, Canada will authorize a pipeline to Vancouver and export the oil to China.

But, like me, you may not have been aware that American refineries are not waiting for Keystone to be built. Oil doesn’t need to be transported by pipeline, after all; railroads are in significant respects preferable. In Slate, Robert Bryce describes what is happening:

[I]f opponents of the Keystone pipeline are going to stop the flow of crude, they are going to have to do more than just get arrested or hold a rally—they are going to have block nearly every north-south rail line in North America.

When it comes to the flow of northern crude to U.S. refineries, here’s the reality: No Keystone XL? No problem.

While opponents of the pipeline have been rallying their supporters, U.S. and Canadian railroads have been hauling record amounts of oil. Last year, the volume of oil delivered by rail in the United States jumped by about 46 percent compared with 2011. According to the Association of American Railroads, oil-related rail traffic increased in Canada by 30 percent. In December, U.S. and Canadian railroads were hauling about 1.9 million barrels of oil and refined products per day, double the volume moved in 2009. Of that total, about 1 million barrels per day is being railed in the United States.

The Keystone XL is designed to transport 830,000 barrels per day. Over the past two years or so, domestic railroads have increased their transport capacity by an amount equal to about 55 percent of what Keystone is supposed to provide.

These are some specific instances of how northern oil is making its way to American refineries:

In North Dakota alone, oil producers have built rail terminals capable of handling nearly 1 million barrels of oil per day.

Refineries are also building rail terminals. Last month, Delek U.S. Holdings, a subsidiary of the Israeli energy company Delek Group, announced that it will begin refining 15,000 barrels of Canadian crude at its El Dorado, Ark., refinery. All of that oil is being shipped in by rail. A refinery in Delaware, owned by PBF Energy, recently completed a rail terminal that will allow it to take up to 110,000 barrels of crude oil per day. The Sunoco refinery in South Philadelphia as well as a Phillips 66 refinery in Bayway, N.J., are also ramping up their ability to accept more crude by rail.

If the Obama administration holds firm on blocking Keystone, the big loser will be TransCanada Corporation. But who will the big winners be? American railroads:

And of them, the biggest winner might just be the Burlington Northern Santa Fe, which is owned by Berkshire Hathaway, the conglomerate controlled by Obama supporter and Omaha billionaire Warren Buffett. In December, the CEO of BNSF, Matthew Rose, said that his railroad was shipping about 500,000 barrels of oil per day out of the Bakken Shale in North Dakota and that it was seeking a permit to send “crude by rail to the Pacific Northwest.” He also said the railroad expects to “eventually” be shipping 1 million barrels of oil per day.

There is a real irony here. It has been an article of faith on the Left that the Keystone Pipeline is intended to benefit their beta noire, Koch Industries, even though Koch has no interest in, or use for, the pipeline, and has not even taken a position on whether it should be built. In fact, however, one of the principal parties in interest–albeit on the other side–is the supposedly saintly Warren Buffett, who earned that reputation by arguing for higher tax rates on ordinary income, a tax he doesn’t pay. Once again, it is hard to escape the conclusion that the environmentalists are dupes.

Notice: All comments are subject to moderation. Our comments are intended to be a forum for civil discourse bearing on the subject under discussion. Commenters who stray beyond the bounds of civility or employ what we deem gratuitous vulgarity in a comment — including, but not limited to, “s***,” “f***,” “a*******,” or one of their many variants — will be banned without further notice in the sole discretion of the site moderator.