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View related content: Environmental and Energy Economics
In a move that should surprise absolutely no one, the Obama administration has once again placed the interests of the president’s environmental supporters ahead of the interests of the country as a whole. On November 10, the Obama State Department hit the pause-button on approving the Keystone XL pipeline, which would have brought oil from Canada’s oil-sands down to the U.S. Gulf Coast. Despite an extensive environmental review process that suggested the proposed pipeline posed very low risks to the environment, State concluded that it “needs to undertake an in-depth assessment of potential alternative routes in Nebraska.” The president was quick to embrace the delay to 2013, as it will spare him the need to either approve the pipeline, infuriating environmentalists, or kill it, infuriating everyone else. Whether one views such a move as cowardly or as pragmatic, it’s indisputably foolish.
One reason it’s foolish is that it’s entirely symbolic environmentalism: No one who has ever studied Canada believes the Canadians are going to leave vast reserves of oil-sand oil in the ground. In case there were people with such delusions, Canadian Prime Minister Stephen Harper put the kibosh on that idea within days of the U.S. announcement. At a summit in Hawaii (hosted by the Obama administration!), Harper reacted to the Keystone decision by observing, “This does underscore the necessity of Canada making sure that we are able to access Asian markets for our energy products … I indicated that [Saturday] to President Hu of China.” Anyone knowing anything about Canada would have seen this coming miles away: Canada is a massive natural resource exporter, and its oil-sand oil is an increasingly important source of economic growth and government revenue.
“Even the government acknowledges that construction of the Keystone pipeline would have created thousands—possibly many thousands—of jobs here in the United States.”— Kenneth Green
So whether the U.S. buys it or Canada ships it to China or other countries, the oil will be extracted, transported, refined and burned. And whether it’s greenhouse gases you’re concerned about, particulate matter or any other sort of pollution related to oil production and consumption, they’re going to enter the atmosphere whether they do so here or elsewhere. In fact, given North America’s extremely tight environmental standards, the impact of producing, transporting and refining Canada’s oil would probably be less here than elsewhere. As for the local risks to aquifers and the like, existing analyses show low risks from the Keystone XL, even to fragile ecosystems that it may traverse — certainly far less risk than moving oil across that same region by truck or train. And considering that far more oil enters the environment from tanker accidents than from pipelines, importing oil from the Middle East is probably worse for the environment than importing it from Canada through the Keystone pipeline would be.
As for the economic ramifications of the Punt Keystone decision, they’re significant, and we can expect them to feature prominently in the upcoming presidential campaign. Even the government acknowledges that construction of the Keystone pipeline would have created thousands—possibly many thousands—of jobs here in the United States. These are jobs suited for people in the trades: people who are out of work and severely stressed in the current economy. The Keystone pipeline would also have benefits in terms of where we send our oil dollars and what we get from them. Canada is America’s largest trading partner, and the two countries benefit massively from our innumerable trade links. When we buy oil from Canada, we have a reasonable expectation that Canada will take some of that money and turn it right around, buying goods from the United States. When we send money off to Venezuela or Saudi Arabia, we have no such expectations. We also have good reason to suspect that Canada would use its oil profits in ways that benefit both Canada and the United States: compared to many other potential sources of oil, Canada’s oil is ethical oil.
The White House, of course, tells us not to worry. With his usual Orwellian dishonesty, President Obama assures us that “my administration will build on the unprecedented progress we’ve made towards strengthening our nation’s energy security, from responsibly expanding domestic oil and gas production to nearly doubling the fuel efficiency of our cars and trucks, to continued progress in the development of a clean energy economy.” But the Keystone decision shows the reality of the Obama energy agenda: stifling all forms of fossil fuel production, acquisition and use in favor of replacing a small fraction of that energy with expensive, intermittent renewables constructed by crony corporations like Solyndra, General Motors and General Electric.
Kenneth P. Green is a resident scholar at AEI
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