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Can Obama Punt Keystone into 2016?

Tuesday, February 4, 2014

The proposed Keystone XL oil pipeline has taken more than five years to approve and Washington bureaucracy will likely delay it for months if not years to come, at the expense of real, market-driven job creation.

The release of the State Department’s thrillingly titled Final Supplemental Environmental Impact Statement on Keystone XL — on a Friday afternoon before Super Bowl Sunday — was business as usual for controversial reports. At least it’s not the Wednesday before Thanksgiving.

The proposed Keystone XL oil pipeline, which would bring oil from Canada’s oil sands to refineries in the U.S. Gulf Coast, has taken more than five years to approve and Washington bureaucracy will likely delay it for months if not years to come, at the expense of real, market-driven job creation in both the United States and Canada.

The report finds that building Keystone XL will not aggravate climate change because even if the pipeline is not built, the Canadian oil sands will be developed.

Few people will have read the 11-volume report by now (including myself), and the executive summary alone is 38 pages long, but the general consensus in the media seems to go like this: the report finds that building Keystone XL will not aggravate climate change because even if the pipeline is not built, the Canadian oil sands will be developed, and the oil produced will be shipped somewhere by rail, highways, or alternative pipelines and burned, so, either way, the greenhouse gases emitted will be the same.

Anti-Keystone activists, however, are already criticizing the State Department report. The Center for American Progress has cued up talking points. The assumption that Canadian oil will move by rail (or other means) if Keystone XL isn’t built is squarely in their crosshairs:

The final EIS [report] says that “rail will likely be able to accommodate new production if new pipelines are delayed or not constructed.” This argument is also put forward by supporters, and essentially says that if the tar sands oil will not be exported via this pipeline, it will just be shipped away via railway — meaning approval of the project will not result in significant carbon pollution increases. Yet an analysis by Reuters’ Patrick Rucker found that rail transport is too expensive and just is not feasible. Industry officials were very skeptical about adopting crude-by-rail as an alternative, meaning that oil companies with a stake in the dirty tar sands deposits see Keystone XL as essential to getting that oil to market.

And the State Department has hedged its bet as well:

The report “is not a decision document,” said Kerri-Ann Jones, assistant secretary of state for oceans and international environmental and scientific affairs. “This document is only one factor that will be coming into the review process for this permit” sought by TransCanada, an energy giant based in Calgary, Alberta.

As usual in Washington, there’s no such thing as a final report — the public has 30 days to comment, federal agencies have another 60 days, and after a final final report is released, the agencies have another 15 days to object.

Judging from his State of the Union Address last week, President Obama would rather avoid the topic altogether. What is conspicuously not seen in this year’s SOTU? The words “Canada,” “pipeline,” and “Keystone.” Even when Obama discussed U.S. infrastructure, pipeline infrastructure is conspicuous by its absence. Similarly, when Obama mentioned trade, he focused on trade agreements with Europe and the Asia-Pacific, while America’s largest trading partner didn’t merit a mention.

From Obama’s comments on energy in his speech, it’s clear that he envisions a future where transportation fuels are shifted from foreign oil to “American natural gas,” and oil consumption is to be further reduced through higher fuel efficiency standards on cars.

He notes that “America is closer to energy independence than we’ve been in decades,” with “more oil produced at home than we buy from the rest of the world — the first time that’s happened in nearly 20 years.” This is what I call the Ferris Bueller technique: where you see a passing parade, jump on the lead float, and pretend you’re the grand marshal. The reality is that production of oil and gas has slowed on federally controlled lands, and only increased on private and state-controlled lands.

Also in his speech, Obama lauds the fact that energy development under his administration has created domestic jobs, yet he is dismissive (and derisive) of any job-creation claims attached to Keystone XL, lowballing job estimates and labeling them a “blip.” Obama says in his address that, “Every four minutes, another American home or business goes solar; every panel pounded into place by a worker whose job can’t be outsourced.” He adds: “Businesses plan to invest almost $100 billion in new factories that use natural gas. I’ll cut red tape to help states get those factories built, and this Congress can help by putting people to work building fueling stations that shift more cars and trucks from foreign oil to American natural gas."

The president can invoke any number of excuses not to approve the pipeline ahead of the 2014 mid-term elections: one likely excuse is the first-ever U.S. quadrennial energy review.

Obama reiterated his concerns about climate change, insisting that the United States must do more to control “carbon pollution.” It’s that same “carbon pollution” that is at the core of Obama’s criteria for permitting Keystone XL.

The president will likely invoke any number of excuses not to approve the pipeline ahead of the 2014 mid-term elections: one potential delay justification is the first-ever U.S. quadrennial energy review, launched (conveniently) last month. The review will be written with input from 24 separate government and quasi-governmental entities, and possibly more. Its mission?

The initial focus for the Quadrennial Energy Review will be our nation's infrastructure for transporting, transmitting, and delivering energy. Our current infrastructure is increasingly challenged by transformations in energy supply, markets, and patterns of end use; issues of aging and capacity; impacts of climate change; and cyber and physical threats. Any vulnerability in this infrastructure may be exacerbated by the increasing interdependencies of energy systems with water, telecommunications, transportation, and emergency response systems. The first Quadrennial Energy Review Report will serve as a roadmap to help address these challenges.

And when is the new Quadrennial Energy Review supposed to issue a report? January 31, 2015. So do the math on that one. Report comes out in 2015, public comment, agency comment, revisions, revisions to the revisions, and … voila — Keystone is once again entangled in a presidential election.

Kenneth P. Green is the senior director of Natural Resource Studies at Canada’s Fraser Institute, and was formerly a resident scholar at the American Enterprise Institute.

FURTHER READING: Green also writes "More Pipelines in the Pipeline." Steven F. Hayward asks "Unconventional Energy Meets Conventional Politics: Which Will Win?" Benjamin Zycher contributes "The Efficiency of a Carbon Tax: Broadly Accepted and Broadly Wrong" and "'Cleantech' Gets Clocked By 60 Minutes, and the Usual Suspects Try to Make Lemonade"

Image by Dianna Ingram / Bergman Group


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