Obama's Disappointing Keystone Rejection
President Barack Obama's rejection of Keystone XL is far from surprising. That doesn't stop it from being extremely disappointing.
Debate over the pipeline morphed over time into a completely political conversation, devoid of reference to the actual costs and benefits of building this one discrete piece of infrastructure. Rejection was the only possible response from an administration beholden to the interests of the environmental left.
The pipeline represents a much more humble investment than the discourse has made it seem. Capable of carrying up to 830,000 barrels per day, it would provide one option for the secure transport of oil to American refineries built to process the resource. In fact, in a nod to the value of new pipeline infrastructure, the president gave the southern leg of the pipeline the go-ahead in 2012. The northern portion of the pipeline was contentious only because it would ease access to Canadian oil sands.
Without Keystone, oil companies have been relying on trucking and rail infrastructure, alternatives that are more expensive, polluting, and dangerous. Since the pipeline was proposed in 2008, these alternatives have contributed an additional 8.8 million tons of CO2 emissions to the atmosphere and raised the risks of spills and fatal accidents.
The environmental movement and the Environmental Protection Agency contend that, given low current oil prices, the oil sands will be too expensive to develop without the pipeline and the resource will stay in the ground. Like all doom and gloom predictions about oil trends, this is being proven wrong. The price to develop the oil sands continues to fall, thanks to advancements in technology and efficiency.
The administration's choice is thus purely a matter of optics. Canadian oil sands will continue to be developed and will continue to bolster North American energy security. The oil will continue to flow into the United States via less secure and riskier infrastructure. Worse, it may find alternative markets overseas, further increasing the emissions profile that so concerns environmentalists. Today's rejection is a Pyrrhic victory paving the way for more emissions and other negative consequences.
It also costs Americans in real ways. The pipeline could have brought in billions in private investment, 42,100 jobs, and $2 billion in earnings over the past seven years, including during the depths of the recession. Instead of investing in the economy, TransCanada was forced to invest in an overwrought regulatory and political process, spending millions seeking approval.
The biggest cost is yet to come. In 17,000 pages of review documents, the president's own State Department found time and again that the pipeline would be in the country's national interest. Instead of relying on those studies, the administration let the political process win out. Future investment in cross-border infrastructure likely faces the same fate: exhaustive study, convincing benefits, and no sure way forward.
This is the wrong time to chill the investment climate. The North American oil boom has upended the global oil trade, brought down prices, challenged OPEC and Russian energy hegemony, and made the continent more diplomatically potent. Energy cooperation would help the United States, Canada, and Mexico achieve more security, still-lower prices, and more rapid achievement of environmental targets. That cooperation will be far more difficult if private interests have deteriorating confidence in our regulatory system.
Our productive natural-gas industry has found consumer markets in Canada and Mexico, even as the middling export-approval process crawls along. Northern Canadian hydropower is a huge and untapped resource of carbon-free baseload, dispatchable power. Mexican investments in geothermal power are advancing technological progress and making that resource cheaper to access. Intermittent American wind and solar deliver power at incredibly low prices during optimal conditions. Stronger cross-border infrastructure would benefit and secure as the energy economy continues to change at a rapid pace.
The president rejected the pipeline saying, "It became a symbol too often used as a campaign cudgel used by both parties rather than a serious policy matter." He's right. Keystone XL was always just one pipeline, forced to carry vapid debate and politics instead of oil. His rejection perpetuates the political contamination of a broken regulatory approval process and dims the prospects for future ambitious investment in the North American energy system.
Catrina Rorke is the energy policy director and a senior fellow of the R Street Institute.