Refineries in Port Arthur, Texas, the southern terminus of the proposed Keystone XL pipeline.

While the Keystone XL pipeline may not receive direct payments from the U.S. government, an analysis by two environmental groups finds that taxpayers could be on the hook for more than $1 billion in tax breaks for the refiners that will process the oil.

The report by Oil Change International and Earth Track looks at capacity upgrades made to three Gulf Coast refineries that will process the crude shipped via Keystone XL. Under Title 179C of the U.S. tax code, oil refineries can deduct depreciation from such investments at an accelerated rate. The tax break, the groups say, is unique to the refining industry and an amendment last year extend the rule specifically to equipment used to process crude from the oil sands.

All told, the analysis [PDF] finds taxpayers will spend $1 billion to $1.8 billion subsidizing these upgrades. The report’s authors characterize their estimate as “conservative.”

And the upgrades to one of these refineries, Valero Port Arthur, is being described to investors as enabling the processing of Canadian crude into diesel and jet fuel for export.

From Oil Change International’s blog post on the report:

The public has the right to both know how our money supports Big Oil and see a thorough evaluation of any proposal the oil industry has for expanding its infrastructure. Such an examination would throw light on the true costs of expanding fossil fuel infrastructure at a time when we need to reduce our dependence on oil, rather than simply trumpeting the short term benefits to companies involved.

Photo by jczart via Creative Commons

Ken is the director of the Energy News Network at Fresh Energy and is a founding editor of both Midwest Energy News and Southeast Energy News. Prior to joining Fresh Energy, he was the managing editor for online news at Minnesota Public Radio. He started his journalism career in 2002 as a copy editor for the Duluth News Tribune before spending five years at the Spokesman-Review in Spokane, Washington, where he worked as a copy editor, online producer, features editor and night city editor. A Nebraska native, Ken has a bachelor's degree from the University of Nebraska-Lincoln and a master's degree from the University of Oregon. He is a member of the Society of Professional Journalists and Investigative Reporters and Editors.

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