According to the IRS memo, tar sands oil is not considered “crude oil.” Tar sands oil is in the category of dlibit (shale oil, liquids from coal, tar sands, or biomass) What does this mean? It means the legal definition of dilbit has exempted Exxon from paying into the Oil Spill Liability Trust Fund, (OSLTF) which will be the national fund used to clean up the Arkansas tar sands oil spill.
This isn’t a new issue. In a discussion last July, Esa Ramasamy, an editorial director at Platts, a global energy, petrochemicals and metals information provider, said the 1980 definition of crude oil dates back to a time when it wasn’t financially feasible to produce tar sands oil on a large scale. The first sizeable shipments of dilbit into the U.S. didn’t occur until 1999.
“Tar sands production is now a huge industry,” he said, and Congress didn’t expect that when the tax was created.
Other environmental watchdogs, including Anthony Swift, have debated the crude oil definition and exemption.
“The key issue is, is tar sands crude oil?…When it comes to taxes, the industry gets to make the argument that tar sands isn’t crude oil,” said Swift, an attorney for the Natural Resources Defense Council who has spent years advocating for better pipeline safety. “But when it comes to the safety of moving tar sands in pipelines, they say it’s just like crude oil.”
Swift said the exemption is particularly galling because dilbit is more corrosive to pipelines than conventional crude—something that the industry disputes. He believes it would probably take an act of Congress to remove the current exemption.
“Congress could certainly amend the definition of crude oil for the purposes of the excise tax to include tar sands and synthetic crude. It’s surprising that the definition has remained unchanged since 1980, he said. “I think … it’s one of these issues that has fallen under the radar, just as the expansion of tar sands in the U.S. [did] until recently. Until a couple of years ago, people had no idea what was running through [pipelines].”
Though they did not pay into the national fund that will be used for the Arkansas oil spill clean up, Exxon will be required to fix the pipeline. An order from the Pipeline and Hazardous Materials Safety Administration has halted any flow through the pipeline until the agency approves the repairs. A small victory to be sure.