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Wrong move on Keystone XL

A picture of the current Keystone pipeline

On Wednesday, President Obama made the decision to reject the Keystone XL Pipeline project.  The 2,000 mile project would bring oil from the tar sands in Canada to refineries in the Gulf coast.  Supporters of the project argue that this project could be one big step of putting more Americans back to work.  TransCanada, which had been proposing to build the pipeline extension cites these statistics in support of the project:

  • 13,000 direct jobs would be created(pipe-fitters, welders,electricians, and other trades).
  • 7,000 manufacturing jobs will be created .
  • Local retail and service businesses near the pipeline will see an increase of 118,000 jobs because of increased business for goods and services.
  • Would increases capacity of pumping oil to 1.1 million barrels per day.

Many have also stated that acquiring oil from our North American neighbors instead of some countries in the Middle East that despise us makes lots of sense.  It seems though, that the opposition to building Keystone XL is just as passionate as the support.

Scores of environmentalist groups, and citizens living in states that may be affected have united in opposition to the pipeline. Reasoning for their opposition includes:

  • Increased green house gases and gas emissions will contribute to global warming and other environmental issues
  • The risk of contaminating the Ogalla Aquifier if the pipe breaks is of serious concern.  This aquifer spans, and provides clean drinking water for 2 million people, as well as supporting $20 billion in agriculture

Tim Parker of Investopedia pointed out some of the arguments people against the pipeline have made:

Critics of the pipeline have two main problems with the project. First, The National Wildlife Foundation published a report that claimed that the pipeline will run through or near water tables, wildlife refuges, aquifers, fisheries and crop land. Any breach in the pipeline could cause a catastrophic spill that would ruin the local habitat and endanger citizens if the water table is compromised.

Second, the NWF claims that TransCanada doesn’t have a good track record of safety. In one report, they list 12 TransCanada spills in 12 months, including a 21,000 gallon oil spill, and it’s not only TransCanada. From 1990 to 2005 there were more than 4,700 oil spills according to the same report.

To TransCanada’s credit, they have made some significant compromises with all parties concerned.  They finally agreed to even re-route the part of the pipeline that was to go through the Sandhills of Nebraska.  This allayed many of the concerns of many of the citizens of Nebraska, but the opposition continued by others.

A protest organized by people who oppose the Keystone XL project

The risk, proponents say, is that TransCanada may just end up attempting to just build a pipeline within Canada to the coast.  They would then just ship the oil to China.  Noted oilman T.Boone Pickens said as much when asked about his comments on the Obama Administrations decision.  TransCanada has invested quite alot in this project, and has the most to lose if the plan never comes to fruition.  Bloomberg Business Weekly’s Brad Olson sums up the challenges facing TransCanada now that the pipeline project has been rejected:

The price of gas has dropped 44 percent in the past 12 months as producers used hydraulic fracturing and horizontal drilling to tap oil and gas locked in shale rock formations across the country. Interest meanwhile has waned in expansions of nuclear power plants, in which TransCanada has invested, after reactors in Fukushima melted down after a March 2011 earthquake and tsunami in Japan.

Limited Growth

As a new application awaits approval, TransCanada will face limited growth prospects from the few projects it has pursued alongside the Keystone XL in nuclear power and renewable energy, said BMO’s Kirst.

The Obama Administration should have approved the Keystone XL project.  I do understand that Republicans put him in a tough spot by including a provision in the payroll tax cut bill that forced him to fast track a decision on the project by February 21st.  As expected, the President rejected the project on the grounds that a deadline so soon did not give his administration adequate time to vet the project.  He was very direct in why he had to make this decision, saying that, “The rushed and arbitrary deadline insisted on by Congressional Republicans prevented a full assessment of the pipeline’s impact, especially the health and safety of the American people, as well as our environment,”.

I feel that even with these arguments for why the decision was made,I feel a huge mistake has been made in this case.  Safety should be priority number 1, especially after the gulf coast oil spill disaster.  Safety concerns have been adequately addressed…so much so that the state of Nebraska has compromised and found a solution most of their citizens will be comfortable with it.  From a political perspective, I also understand that he was under immense political pressure from his left flank(environmentalists). They have legitimate concerns, and also big pockets to assist in fundraising for the general election.  He could have bucked them on this one decision though, because many unions were actually in support of the bill as a way to put many of their unemployed members to work.  They would have given him a bit of political cover on this decision.

Lastly, from  jobs perspective, this was a poor decision.  I’m sure we could argue back and forth about whether the “13,000 jobs created” number is accurate.  You could also argue that many activists dispute jobs created numbers with a wide array of individuals seeking to develop property or relocate businesses just about anywhere.  At the end of the day, a job is a job.  There are over four million Americans who have been unemployed for over a year.  These individuals are looking for work not later, but now!

We must all keep in mind that President Obama said that he would not completely scrap the project, but that he would make a decision on new applications after the election.  He will come to his senses in January of 2013, and the project will begin.  That is my prediction.


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