The tar-sands boom has the united states poised to become a top player in the global-export market for gasoline and diesel. And Obama's top trade ambassador has been working behind the scenes to make sure that our climate-conscious European allies don't shutter their markets to fuels refined from the filthy Canadian crude.
The U.S. trade representative, Ambassador Michael Froman, is a protégé of former Treasury Secretary Robert Rubin and a top member of the president's inner circle. Froman was confirmed last June to his current trade post, where he's under direct orders from the president to "open new markets for American businesses." His nomination was opposed by only four senators – chiefly Massachusetts Democrat Elizabeth Warren, who faulted Froman for refusing to commit to even the paltry standard for transparency in trade talks set by the George W. Bush administration. Warren was right to be concerned. In backroom negotiations, Froman has worked to undermine new European Union fuel standards intended to lower the continent's carbon emissions. The European standards would work, in part, by grading the carbon toxicity of various crude oils. They logically propose placing polluting tar-sands oil in a carbon class all by itself; on its path from a pit mine to the filling station, a gallon of tar-sands gas is responsible for 81 percent more climate pollution than the average gallon of regular. But instead of respecting the EU's commitment to slow global warming, Froman has worked to force North America's dirtiest petrol into the tanks of Europe's Volkswagens, Peugeots and lorries.
His hardball tactics were revealed in obscure written congressional testimony last year. In a question to Froman, Rep. Kevin Brady, an oil-friendly Texas Republican, slammed the European proposal as a "discriminatory, environmentally unjustified" trade barrier. Froman responded, "I share your concerns," and described his work to "press the Commission to take the views of . . . U.S. refiners under consideration." He explained how he had turned the standards into a point of contention in negotiations of the Transatlantic Trade and Investment Partnership – a major free-trade pact being hammered out between the U.S. and the EU. Last October, Froman's team even went before the World Trade Organization to demand that all globally traded petroleum products be treated "without discrimination."
Froman's dirty-energy advocacy provoked an angry letter last December from the Bicameral Climate Change Task Force – prominently co-signed by Warren. It blasted the ambassador's efforts to "undercut" the EU's climate goals as well as his "shortsighted view of the United States' economic interests." Citing the projected $70 billion in adverse climate effects from exploitation of tar-sands crude, the task force demanded Froman justify his "troubling" actions in the context of the United States' "long-term economic well-being." The ambassador's office has not responded.
"We're telling the world on the one hand that it's time for leadership from us on facing up to carbon pollution," says Whitehouse, a Democrat from Rhode Island. "While on the other we're saying, 'Hey, here, buy our high-carbon-pollution fuels.'"
[UPDATE: The office of the U.S. Trade Representative reached out to Rolling Stone with a statement from Ambassador Froman expressing support for European efforts to reduce "harmful" greenhouse emissions, insisting that his staff is "not pressing the European Commission for any particular treatment of crude oil" but has "raised concerns" over transparency – specifically, "the lack of public participation in the development of the regulations." Regarding the transatlantic trade pact, Froman adds that his office will do nothing to "undermine" environmental protections and is only "seeking regulatory practices that will ensure that all stakeholders – including civil society, labor, the environmental community and businesses—have a meaningful opportunity to provide input." The trade representative's office says it is "still drafting" a response to the December 20th, 2013 letter from the Bicameral Climate Change Task Force.]
If Big Oil has its way, the United States could soon return to the business of exporting not only refined petroleum products but crude oil itself – a practice that's been illegal since the oil shocks of the 1970s. The crude-oil-export ban has been the linchpin of U.S. energy security for more than a generation. With narrow exceptions for Alaskan crude and exports to Canada, the law requires that oil drilled here must be refined here – helping to insulate American drivers from disruptions in oil fields of the Middle East. But the unexpected boom in fracked crude from North Dakota and Texas has transformed this long-uncontroversial law into a bugbear for domestic drillers – who now see American energy independence as a threat to their profit margins.
When the Keystone XL pipeline was first proposed in 2007, the accepted notion was that Gulf Coast refineries would be able to process all the crude that the pipeline could carry. But the nation's energy picture has since changed dramatically. Thanks to advances in fracking technology, North Dakota and Texas are bringing millions of barrels of "sweet" – low-sulfur, easily refined – crude to the market every day.
In this new reality, the fixed flow from a pipeline like Keystone XL, carrying more than 1.5 million barrels of Canadian crude to the Gulf Coast every day, is going to create excess supply. The surplus tar-sands crude, as much as 400,000 barrels per day, will have to be shipped out of the Gulf to the global market. "There is a limit to how much the Gulf Coast refiners can soak up," said Esa Ramasamy, of the energy-information service Platts, in a recent presentation. "The Canadian crudes cannot go back up into Canada again. They will have to go out."
An export ban or not, it will likely happen: As long as it's not "commingled" with American crude, Canadian crude, despite its transit through the United States, remains Canadian.
The new flood of domestic crude, meanwhile, is straining U.S. refining capacity, producing a nearly $10-per-barrel discount for U.S. oil compared to the global average for sweet crude. America's domestic drillers are desperate to fetch higher prices on the global market. (Exxon, the Chamber of Commerce and key senators like Alaska Republican Lisa Murkowski have just launched a media offensive to kill the export ban altogether.)
In addition to promoting energy independence, the export ban now has the virtue of limiting the pace at which American drillers exploit the continent's newfound climate-toxic oil riches. Ending the ban would not only hurt U.S. consumers by wiping out the home-oil discount, it would also boost the profits of domestic-oil companies and hasten exploration of now-marginal deposits. "Lifting the oil-export ban is simply climate denial in a new, and very dangerous, form," says Steve Kretzmann, Oil Change International's executive director.
Nonetheless, Obama's new energy secretary, Ernest Moniz, told reporters at a recent energy conference that the ban is a relic and ought to be re-examined "in the context of what is now an energy world that is no longer like the 1970s."
The greatest success story in the greening of American energy is the market-driven collapse of coal. Last year, American power plants burned 181 million fewer tons of coal than in the final year of the Bush administration, as power companies shifted to burning cheaper natural gas. And after years of delay, the administration finally appears to be committed to driving some regulatory nails into Big Coal's coffin: In January, the EPA published a draft rule that's likely to end the construction of new coal plants by requiring cost-prohibitive carbon-capture technology. This summer, the agency is expected to introduce climate-pollution rules for existing plants that should hasten the adoption of natural gas.
With the freefall in domestic demand, industry giants like Peabody are desperate to turn American coal into a global export – targeting booming Asian economies that are powering their growth with dirty fuel. China now consumes nearly as much coal as the rest of the world combined, and its demand is projected to grow by nearly 40 percent by the end of the decade. "China's demand," according to William Durbin, head of global markets for the energy consultancy Wood Mackenzie, "will almost single-handedly propel the growth of coal."
Since Obama took office, American coal exports are up more than 50 percent. And Big Coal has designs to more than double that tonnage by opening a direct export route to Asia, shipping coal strip-mined from the Powder River Basin, in Wyoming and Montana, by rail to a network of planned export terminals in the Pacific Northwest, and then by sea to China. These new coal exports have received far less attention than Keystone XL, but would unleash a carbon bomb nearly identical to the greenhouse pollution attributed to the pipeline.
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