Narrow Interest Blocks Big Pipeline

on January 23, 2012 at 6:00 AM

The Obama Administration, encouraged by environmental groups, has blocked yet another affordable energy project-the Keystone XL Pipeline. Add this to the unconscionable slowdown of leasing and production in the Gulf of Mexico, foot-dragging on production in the Chukchi and Beaufort Seas, blocks on offshore production in the Atlantic and Pacific, and continued prohibitions and impediments to production in non-park, non-wilderness areas of the Western U.S. and ANWR. For each one, the claim is that the production wouldn’t make much difference.

Well, the XL Pipeline would bring 750,000 barrels per day to our energy markets. Just this one pipeline would add nearly as much as the 800,000 to 900,000 barrels per day we import from Venezuela-our fourth-largest foreign supplier. One of the most fundamental and least controversial concepts in economics is that increasing supply reduces price. The impact on petroleum price is compounded by the host of petroleum-producing projects that have been blocked, delayed, and impeded by the Administration. These projects could add millions of barrels per day to the petroleum markets.

The Administration blamed the Republicans and the imposed deadline for its bad decision. This is the wispiest of smokescreens. The State Department already did a thorough, years-long assessment of the pipeline and concluded that there would be no significant environmental impact.

The potential impact on the Ogallala aquifer is the supposed concern of the environmentalists. However, a map of the existing oil and gas pipelines shows that claim to be ludicrous. The Ogallala aquifer is already covered with gas and oil pipelines. The real target is the environmentalists’ obsession with carbon dioxide and global warming. The well-to-wheel carbon footprint of oil-sands gasoline is 10–15 percent higher than for gasoline produced from some other reserves.

Even if you believe that colorless, odorless, non-toxic CO2 does the damage these environmentalists claim, the cost they assign to the 10–15 percent increase in CO2 emissions works out to about 1 percent of the value of the crude. So, what’s the big deal if capitulating on the CO2 hysteria still doesn’t create a case against oil sands?

Unlike the overpriced and unreliable green-energy projects preferred by the Administration, the Keystone XL Pipeline would be funded entirely by private funds and would add to government revenue-a benefit in this time of deficits. In addition, according to union estimates, it would create tens of thousands of construction jobs. It would also boost employment in the high-paying refining industry.

Canada is not a criminal enterprise run by robber barons. It is a first-world country with stringent environmental standards for both the extraction of the oil and the reclamation of the land used. They certainly do not need lectures on carbon footprints from American celebrities who fly in private jets and live in 10,000-square-foot houses.

But that’s what they get, and that’s who seems to be dictating our own energy policy. The Keystone XL Pipeline makes sense for energy affordability, employment, and national income. In spite of all the good economic sense for the vast majority of Americans, it appears that the pipeline makes bad political sense at the White House. Where are the 99 percenters when you need them?

We have dragged this pipeline project through the regulatory wringer enough already. The project passed all the tests other than winning over radical, big-donor environmentalists. For the real 99 percenters-those Americans who want better jobs and cheaper gasoline-it is imperative that the Administration approve the Keystone XL Pipeline without further delay.

David Kreutzer is the Senior Policy Analyst in Energy Economics and Climate Change at The Heritage Foundation’s Center for Data Analysis. In this position, Kreutzer researches how energy and climate change legislation will affect economic activity at the national, local, and industry levels. The original of this post can be found here.

Photo Caption: (L-R) President of Energy and Oil Pipelines of TransCanada Corporation Alex Pourbaix, Director of the Construction Department of Laborers’ International Union of North America Brent Booker, Assistant Director of Department of Legislative and Political Affairs of International Union of Operation Engineers Jeffrey Soth, Special Representative of Pipe Line Division of United Association Journeymen and Apprentices of the Plumbing and Pipe Fitting Industry of the United States and Canada David Barnett, International Representative of International Brotherhood of Electrical Workers Bruce Burton, Chief Business Officer of BARD Holdings Inc. Jerome Ringo, and Executive Director of Bold Nebraska Jane Kleeb testify during a hearing before the Subcommittee on Energy and Power of the House Committee on Energy and Commerce December 2, 2011 on Capitol Hill in Washington, DC. The subcommittee held the hearing on ‘Expediting the Keystone XL Pipeline: Energy Security and Jobs.’