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Four Pinocchios for an over-the-top ad attacking the Keystone XL pipeline

“Chinese government-backed interests have invested thirty billion dollars in Canadian tar sands development. And China just bought one of Canada’s largest producers. They’re counting on the U.S. to approve TransCanada’s pipeline to ship oil through America’s heartland and out to foreign countries like theirs.”

— voiceover of ad that aired before and after the State of the Union address, sponsored by NextGen Climate Action

This hard-hitting ad from climate activist Tom Steyer opposing the TransCanada Keystone XL pipeline caught The Fact Checker’s attention, in part because it features excerpts from a TransCanada ad promoting the pipeline that previously had earned Three Pinocchios. The  TransCanada ad claimed that the proposed pipeline, which if approved will carry heavy crude oil from Canada’s Alberta province to the Gulf Coast, would reduce the U.S. reliance on foreign energy—when in fact the oil is Canadian.

The NextGen ad attacks the controversial project from the other angle—that it would leave the United States beholden to China in what it calls a “sucker punch to America’s heartland.”

The southern leg of the pipeline recently opened, but all eyes are on the State Department, which must decide whether to issue a permit for the 1,179-mile northern leg that would carry predominantly heavy oil from Canada’s oil sands, cross the border in Montana and run to the small town of Steele City, Neb.  (This map has the details.) The oil would then be processed in refineries on the Gulf Coast, which depending on market conditions, could be transported overseas.

The NextGen ad leaves the impression that crude oil in the pipeline simply would traverse the United States as a sort of way station—that foreign countries such as China want “to ship oil through America’s heartland and out to foreign countries like theirs.” It then claims that “under oath, TransCanada won’t commit to selling us one single barrel.” Suddenly there’s an image of TransCanada executive Alexander Pourbaix and a headline of a quote: “I can’t do that.”

These tit-for-tat ads are all part of a campaign to sway American opinion in advance of the decision. So how factual is the NextGen ad?

The Facts

The list of Chinese investments in the ad, totaling $30 billion, might seem impressive, but it requires context. Investment in Canadian oil sands have averaged $20 to $27 billion a year for the past decade—and a big chunk of the Chinese investment in Canadian energy has little to do with the oil sands.

More than half of the $30 billion relates to a deal to acquire Nexen Energy Inc., but 70 percent of  Nexen’s assets are outside Canada, which was likely a major factor in the Canadian government’s approval of the deal.

Even so, the Canadian government recently issued guidelines that analysts say will make it less likely that any other state-owned companies will be permitted to invest in Canadian oil sands. The new rules make it especially suspicious that the ad literally turns a Canadian flag into a Chinese one.

The ad cites as a source a Globe and Mail graphic, but the chart actually undercuts the ad’s argument, as it makes clear that the oil sands production of  Chinese-owned companies currently is relatively puny.

Here’s how the oil production breaks down, according to Greg Stringham, vice president of markets at the Canadian Association of Petroleum Producers:

Canadian-owned companies: 54 percent

U.S.-owned companies: 29 percent

European-owned companies (Royal Dutch Shell; Total): 10 percent

Asian-owned companies (China, Japan, Thailand, etc): 7 percent

In other words, for all the jingoistic images, China at the moment is actually a small player in this game. The Globe and Mail chart shows that Royal Dutch Shell currently has three times as much production in the oils sands as Nexen. Perhaps the ad should have turned Canadian flag into the Dutch flag?

Mike Casey, a spokesman for NextGen, argued that the current production statistics shed little light on the potential production once oil starts going through the pipeline. He noted that the current report on Alberta oil sand projects shows Chinese companies have a number of  projects that are approved but have not even started construction.

Casey clarified that the ad is saying that the “vast majority” of the potential exports will be refined products, but he said that crude oil exports are also possible. The State Department has dismissed crude-oil exports as not economically feasible because of transportation costs but Casey says that state-owned companies “often act without regard to economic factors.”

The climax of the ad is the claim that Pourbaix, TransCanada’s president of energy and oil pipelines, “under oath…won’t commit to selling us one single barrel.” Here’s a clip of the 2011 exchange in question:

But the ad turns the question that Pourbaix was asked on its head, as he was not asked to promise to sell at least one single barrel. Here’s the context: Pourbaix had explained that the refiners sometimes export refined products such as diesel, and then will import “incremental volumes” of refined products. So a lawmaker asked him to ensure that any volume exported was met with an equal volume of imported products, so there was no net difference.

“I can’t do that because I am merely the shipper of this oil,” he replied, adding that long-term contracts had already been signed.  The ad simply highlights “I can’t do that”–and then invents a question he was not asked.

The clip demonstrates that the working assumption during the exchange was that millions of barrels would be sold to the United States. Pourbaix merely was asked to make sure that exports and imports were equalized, not whether a single barrel would be sold.

Casey said that such ads are “more compressed” but the ad was a “fair representation of the exchange.” Pourbaix should have volunteered the commitment, even if he was not asked, Casey said, adding: “We’re calling them with the ad: If you say with such certainty that this is going to boost American energy security, then you surely can say that the oil will stay in the country.”

The Pinocchio Test

The Fact Checker takes no position on whether the Keystone pipeline would be good or bad, but this ad does not even meet the minimal standards for such political attack ads. It relies on speculation, not facts, to make insinuations and assertions not justified by the reality.

Chinese state investment in the Canadian oil sands is an interesting development, but not worthy of the jingoistic treatment given here. While depending on market conditions some refined products may be exported, there is no evidence that every single barrel of oil would simply pass through the pipeline on the way to overseas shores. The twisting of Pourbaix’s remarks is especially disturbing, even by the standards of attack ads.

Four Pinocchios

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(Disclosure: Glenn Kessler owns shares of Royal Dutch Shell)