OPAL Pipeline To Connect To Baltic SeaThe big news today was an announcement that President Obama will not sign Keystone XL oil pipeline legislation currently working its way through congress.

Interestingly, the announcement was made at the same time major oil and gas industry trade group American Petroleum Institute President Jack Gerard delivered the annual State of American Energy address, in which he said the country was poised “to usher in an enduring era of cooperation and forward-looking energy policy for America – a true all-of-the-above approach – and to create within the American political landscape a more productive approach to national energy policy.”

During Gerard’s speech, White House press secretary Josh Earnest said:

“I can confirm that the president would not sign this bill,” …”We indicated that the president would veto similar legislation considered by the previous congress and our position on this hasn’t changed. I would not anticipate that the president would sign this piece of legislation.” – As reported by the National Journal

The Keystone XL pipeline has become a prime example of why it’s impossible to forge a comprehensive US energy policy. The energy Holy Grail is clean, reliable and affordable. Unfortunately, that three-pronged goal is unattainable given current technical and economic realities. As a result, policies designed to satisfy each of those criteria will be debated in perpetuity until the need for some degree of compromise is recognized.

Whether or not you view KXL as a global climate change issue, the pipeline has come to symbolize the negative attributes associated with industrial-scale fossil energy production. Canadian oil sands development with existing technology has a considerable environmental footprint and the primary extraction techniques – in situ and surface mining – are often labeled dirty. But the world needs energy and there is a limit to how much it can pay for it.

Gerard said in his speech that markets should decide whether the project gets built, not politics. And given the current oil price environment, the market makes it more difficult to justify investment in the massive project. Historically, when oil prices dip below a certain threshold, oil sands projects are some of the first to get shelved due to their comparatively higher cost. TransCanada has dealt with significant political uncertainty over the past 6 years, but a sustained period of lower oil prices could send an even more powerful signal to delay construction.

Clearly there are many reasons why it’s difficult to craft comprehensive US energy policy and it will be interesting to see how things shake out over the next 2 years. But if cleanliness, reliability and affordability are pursued without compromise, we won’t get far.

And wow, talk about not having a functional energy policy in the US, energy is not one of the “issues” listed on the White House’s official website.