Oil Change International: The Coal Hiding in the Tar Sands

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Thanks to Alberta’s tar sands, coal-powered energy production just got cheaper, andย dirtier.

That is largely due to an often overlooked byproduct of bitumen upgrading: petroleum coke. The byproduct, commonly referred to as petcoke, is derived from the excess heavy hydrocarbons necessarily processed out of bitumen in the production of lighter liquid fuels like gasoline and diesel. The leftover condensed byproduct, petcoke, bears a striking resemblance to coal, and is being integrated into coal power plants across the US and internationally, contributing a tremendous amount of carbon emissions to the tar sands price tag that has been previously unaccountedย for.

That is, until the research group Oil Change International released aย research reportย that calculates the use of petcoke in American energy generation increases the proposed Keystone XL Pipeline’s emissions by a staggering 13ย percent.ย 

The report, Petroleum Coke: The Coal Hiding in the Tar Sands, suggests that while groups like the European Commission use specific inputs to determine a ‘well-to-wheels’ analysis of tar sands emissions – which figures the unconventional fuel emits emissions 23 percent greater than conventional crude – such calculations do not account for petcoke and so only tell a portion of theย story.

โ€œPetcoke,โ€ states the Oil Change website, โ€œhas even higher carbon emissions than already carbon-intensive coal, emitting between 5 to 10 percent more CO2 than coal per unit of energy produced. A ton of petcoke yields on average 53.6 percent more CO2 than a ton ofย coal.โ€

What is worse, as a byproduct petcoke is sold at a โ€œto moveโ€ price, pushing the dirty fuel source into the market at a 25 percent discount to coal. Because petcoke undercuts the price of coal so significantly, the coal industry has begun to incorporate petcoke into its powerย generation.

โ€œAt the end of 2011 nearly 80 million tons (72.3 million metric tons of petcoke was stockpiled in Alberta. The stockpile is growing at the rate of about 4 million tons (4.4 million metric tons) a year.โ€ Image located on page 20 of theย report.

โ€œIndeed industry analysts have shown that a typical 1 gigawatt coal plant can save around $120 million per year in fuel costs by blending petcoke with coal in their boilers. That sounds to us like a boon for coal-fired generators and a bad deal for cleaner fuels competing with coal in a tightย market.โ€

The Petcokeย Craze

The report’s introductory blog post by Lorne Stockman highlights some significant statistics on the relationship between tar sands production andย petcoke.ย 

โ€ข There is 24 percent more CO2 embedded in a barrel of tar sands bitumen than in a barrel of lightย oil.

โ€ข 15 to 30 percent of a barrel of tar sands bitumen can end up as petcoke depending on the upgrading and refining processย used.

โ€ข Of 134 operating U.S. refineries in 2012, 59 are equipped to produceย petcoke.

โ€ข U.S. refineries produced over 61.5 million tons of petcoke in 2011 โ€“ enough to fuel 50 average U.S. coal plants eachย year.

โ€ข In 2011, over 60 percent of U.S petcoke production wasย exported.

โ€œPetcoke in the tar sands is turning American refineries into coalย factories.โ€

โ€œKeystone XL refineries are among the biggest petcoke factories in the world,โ€ is the caption to this image, figure 3, found on page 17 of theย report.

The Keystone XL refineries have a petcoke production capacity of 50,375 tons perย day.ย 

Because of this, the โ€œKeystone XL will fuel five coal plants and thus emit 13 percent more CO2 that the U.S. State Departmet has previously considered.โ€ The five coal plants would produce โ€œ16.6 million metric tons of CO2 eachย year.โ€

ย The โ€œPetKochโ€ย Connection

Oxbow Corporation, owned by lesser-known Koch brother William Koch (sibling of oil and gas magnates Charles and David Koch), is the largest petcoke trader in the world. The corporation is one of the largest donors to Republican Super PACs, with political contributions tallying at $4.25ย million.ย 

The company also spent $1.3 million on lobbyists in 2012ย alone.

Oxbow ships โ€œ11 million tons of petcoke annually around the world primarily from the Gulf Coast to Asian, Latin American and Europeanย markets.โ€

The report states that โ€œOxbow’s biggest facility and primary laboratory and testing facility are located in Port Arthur, Texas, where the Keystone XL pipeline would terminate and where some of the biggest petcoke producing refineries in the world areย located.โ€

Industry’sย Downplay

Last week, TransCanada, the company currently building the southern leg of the Keystone XL pipeline, announced the pipeline’s construction was proceeding smoothly and without delay. This despite a prominent and ongoing protest along the route, with future sit-ins scheduled for Washington DC.ย 

โ€œWe factor things like that into our planning,โ€ Shawn Howard, a spokesman for the company told Reuters. โ€œWe’ve got a pipeline route that’s hundreds of miles long so if there are activities that take place on one property, our crews still have plenty of work toย do.โ€

According to The Washington Post, the oil industry was quick to dismiss the findings of Oil Change International’sย report.ย 

TransCanadaย said the report contained โ€œnothing newโ€ and was merely โ€œthe latest attempt by professional activists who opposed Keystone XL to change theย discussion.โ€ย 

A statement issued by the company read, โ€œLetโ€™s be frank: this is not about the Keystone XL Pipeline, diluted bitumen, emissions or a substance that is in a particular blend of oil. Itโ€™s about a group that wants to end the use of fossil fuelsย entirely.โ€

Jack Gerard, president of the American Petroleum Institute, one of the most power oil and gas lobby groups in the U.S., had this to say:ย โ€œIt once again boils down to a political decision by the White House: will they follow whatโ€™s in the best interest of the country, or will they follow other politicalย pressures?โ€

โ€œIt clearly is in the national interest, and thatโ€™s the only decision the president needs to make,โ€ Gerard told The Washington Post, adding he saw carbon emissions as one of theย โ€œtangential issues to theย conversation.โ€

The Keystoneย Conundrum

The Keystone XL pipeline will introduce a consistent stream of tar sands bitumen into the United States. The bitumen boom is creating a petcoke boom that is โ€œan insidious aspect of tar sands production that is, until now,ย undocumented.โ€

The report adds, โ€œto date, petcoke has been hidden in most discussions about the Greenhouse Gas (GHG) intensity of the tar sands.โ€ That, crucially, includes discussions surrounding the Keystone XL.

If the pipeline is approved, โ€œaround 15,000 tons of petcoke per day will be produced from the bitumen in the dilbit it will deliverโ€ฆThat is over 50,000 tons of CO2 every day or over 18.3 million tons (16.6 metric tons) of CO2 aย year.โ€

The reality of the rise of petcoke means that the tar sands are significantly worse for the environment than previously thought. And the growing dependence on petcoke-generated energy will only increase that carbon-burden for the forseeableย future.

At the very least, these are not numbers we can afford to ignore anyย longer.

โ€œWith more than 300 billion barrels of recoverable tar sands bitumen still in the ground in Alberta and hundreds of billions of barrels of extra-heavy and heavy oils in reserves around the world, it is time we understood the full impact of exploiting these low quality, high impactย hydrocarbons.โ€

The report traces the rise of petcoke energy and emissions through investments that have โ€œtransformed North America into the petcoke production center of the world.โ€ Pgย 18.

The Consumptionย Quandary

Petcoke use, in comparison to coal-generated energy production, is small at this stage, although the overall effect of discounted petcoke in the energy market is unknown at thisย point.ย 

A number of negative consequences of increased petcoke consumption are likely, however, such as the lengthened life-span of coal-fired power power plants enabled by a steady stream of cheap petcoke. This in turn willย assist in the continued suppression of large-scale investments in cleaner sources of energy in the U.S. andย internationally.ย 

While an in-depth consequential life-cycle analysis of tar sands productionย may enable us to make more precise estimations of the greenhouseย gas impact of opening up this vast resource, it seems clear the impactย is subject to the basic laws of economics. More supply lowers prices,ย increases demand and competes with cleaner alternatives that are fightingย to achieve the economics ofย scale.ย 

in addition, we must not forget that even if petcoke did replace coalย consumption one-to-one and did not represent an increase in coalย demand, which seems unlikely, its emissions are five to ten percent higherย on a unit of energy basis. Petcoke is making coal-fired power generationย more carbon intensive and cheaper at exactly the time that we urgentlyย need low carbon solutions to energyย production.ย 

The reportย concludes:

considering tar sands emissions in their entirety must surely lead to theย conclusion that we cannot possibly exploit all the recoverable tar sandsย bitumen. this in turn should highlight the urgent need for society toย grapple with one of the most crucial and challenging questions of our time:ย Which fossil fuels should we leave in the ground and how do we manageย theย process?ย 

Be sure to take a look through the entire report, which is thorough, informative and full of interesting visuals, graphs and images that bring this formerly obscure subject toย light.

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