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Due to a thirty-year-old law, Exxon will not be paying into the federal fund that will pay for the cleanup of 12,000 barrels of crude oil that leaked from its Pegasus Pipeline in Arkansas. The pipeline, which transports oil from the tar sands region of Canada, ruptured in Mayflower, Arkansas, where cleanup crews have been finding evidence of harm to local wildlife. The loophole that enables Exxon to avoid paying an eight cents per gallon tax into the cleanup fund? Technically the pipeline was not transporting—and did not leak—oil.
Photo via Shutterstock
As Think Progress reports, oil companies are required to pay a tax of eight-cents-per-gallon into the federal Oil Spill Liability Trust Fund, which in turn pays for the cleanup of the 54,000 barrels that leak each year from the 175,000 miles or so of pipelines that transport oil across the US. But a law passed in 1980 states that “diluted bitumen,” or dilbit, does not classify as oil. And that’s exactly what Exxon was transporting along the pipeline from Canada’s tar sands (specifically “low-quality Wabasca Heavy crude”). The all-too subtle difference between this diluted bitumen and oil is that the mined oil from the tar sands is thick and full of bitumen, so diluted for transport—and so for the purposes of oil industry taxes, not technically oil.
Exxon has responded to reports of this loophole with efforts to reassure the public that they will pay the full costs of the cleanup, though they appear a little vague on the details. Speaking to RT, Exxon stated that they would be “paying all valid claims relating to the spill and providing interim housing for people from the homes which the city of Mayflower recommended be evacuated following Friday’s spill,” while not detailing if or how much the company contributes to the Oil Spill Liability Trust Fund.
But if tar sands oil, in its transported form, is not oil, where would that leave liability for the accidents that would inevitably occur along Keystone XL? With Keystone projected to transport 590,000 barrels per day, and with the liklihood that it would be similarly exempt from cleanup taxes, funds for restoration could be stretched even further. Campaign Director for Oil Change International stated to RT “Tar sands oil spills, or bitumen spills, are indeed more dangerous than ‘conventional oil’ spills… As these sorts of heavy oils that are exempt from this tax continue to make up a larger percentage of oil transported in the US, it will only serve to stretch the fund even further, while putting families, communities, and ecosystems at greater risk.”