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Proposed Keystone Export Ban Fraught With Pitfalls Proposed Keystone Export Ban Fraught With Pitfalls

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Proposed Keystone Export Ban Fraught With Pitfalls

Congress would be stepping into a legal and logistical minefield—and risk running afoul of the World Trade Organization—if it banned exports of oil shipped into the United States through the proposed Keystone XL pipeline, according to independent energy and economic experts.

There are so many problems related to an export ban that some analysts dismiss the idea as posturing. But a measure has already been introduced in the House, and the proposal is being considered in the Senate.


“All forms of protectionism are politically appealing, especially in an election year,” said former Rep. James Bacchus, D-Fla., who was a chairman of the WTO’s appellate body. “But that doesn’t mean they make economic sense, and it doesn’t mean they’re legal under international law.”

Legislation introduced on Friday by House Natural Resources ranking member Edward Markey, D-Mass., would ban the export of crude oil shipped via the proposed 1,700-mile, $7 billion pipeline as well as refined products made from that oil. Negotiations are under way in the Senate on similar legislation, but it’s unclear whether the measure being drafted in the upper chamber would also ban exports of refined products.

Bacchus added that recent action taken by the United States against China for similar export restrictions makes any legislation banning exports of oil or refined products a bit hypocritical. Last week, the appeals board of the WTO ruled that China broke free-trade laws with its system of export taxes and quotas for raw materials.


“Why would we impose export restrictions on a basic commodity such as oil when we are opposing export restrictions of basic commodities so vigorously in the WTO?” asked Bacchus. The proposed pipeline would send 700,000 barrels a day of crude from Canada’s tar sands and from shale-oil sites in the northern United States to Gulf Coast refineries. The Gulf Coast currently refines 7.6 million barrels of oil a day, according to 2011 figures from the Energy Information Administration. Experts say that exporting Keystone crude oil is unlikely, making a ban somewhat superfluous.

But an export ban on refined products derived from the pipeline’s oil would have more complicated repercussions, since products such as gasoline are already being exported from the Gulf Coast in growing quantities. A ban on exporting some refined products could hurt oil companies’ bottom lines because refineries might run at less than full capacity. And that could subsequently raise U.S. gasoline prices, experts say.

“If this was somehow effective at trapping product in the United States that otherwise would be exported, the ultimate impact on gasoline prices could very well be bad rather than good,” said Michael Levi, energy-security expert at the Council on Foreign Relations.

Steve Kretzmann, executive director of Oil Change International, an organization opposed to the proposed pipeline, said companies shipping oil via the Keystone XL would seek to capitalize on the existing export market for refined products from the Gulf. His organization has published two reports that sought to expose companies’ plans to export products refined from Keystone-shipped oil.


But Kretzmann said he doesn’t support a congressional ban on exports; rather, he is fundamentally opposed to the pipeline being built at all.

This article appears in the February 7, 2012 edition of NJ Daily.

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