Obama Okays Keystone XL

File under "half pipe pipeline". In a move that defies the rules of Corynomics, the Obama administration has signaled that it will support the construction of part of the Keystone XL pipeline. From The Hill:

TransCanada said Monday that it will begin construction on a section of the pipeline that runs from Cushing, Okla., to Texas. It would carry crude oil pumped from land in the Midwest and surrounding areas to refineries in Texas…

The Oklahoma-to-Texas project "will help address the bottleneck of oil in Cushing that has resulted in large part from increased domestic oil production, currently at an eight year high," White House press secretary Jay Carney said in a statement, echoing Obama's previous endorsement of the pipeline segment.

In a departure from the Administrations usual procedure, Carney failed to blame Bush for the increase in oil production. He might well have, since almost all of the increased production is the result of permits extended before Obama took office.

"Today on federal land, the area where the president has control, production in the Gulf of Mexico is down 30 percent. Lease sales in Rocky Mountains on federal lands are down 70 percent," Jack Gerard, head of the American Petroleum Institute said.

He says the president has put 85 percent of the outer continental shelf off limits and overall, is only making 3 percent of the areas under his control available for development.

Numbers from think tanks and the federal Energy Information Administration confirm those numbers.

Let us sum this up: the Administration says that increasing our domestic oil production is a very good idea and takes credit for the increase. It has also done everything in its power (minus three percent) to block any increase in domestic oil production.

It is difficult to see how the Administration's various decisions add up to a policy. Why did the Administration suddenly decide that part of the Keystone XL pipeline might be a good idea? Were the benefits of removing bottlenecks not just as evident months or decades before now? The Hill has a suggestion:

By supporting the southern portion of the pipeline, the White House was able to blunt Republican criticism of the administration's energy policies. But the move quickly re-opened a rift with the president's environmental base, which condemned the project.

That is the only thing that makes sense. The Administration didn't pull the plug on KXL because of any new information or arguments that came to light. The review process had been going on for three years, about twice as long as such a review usually takes. Obama nixed KXL because he was worried about soft support on the environmental left. Why did he check the box next to "partial Keystone construction" on one of those forms by means of which he conducts the nation's business alone, in the dead of night? Right now his campaign is worried about the effect of rising gas prices. Of course Keystone light won't affect energy prices until 2013, but perhaps it will "blunt Republican criticism."

This may be good campaign rhetoric but it is incoherent as policy. The same economic principles that Carney appeals to in order to justify Keystone light also indicate bringing Canadian oil down.

A big part of the opposition to KXL was motivated by an opposition to harvesting the Canadian oil sands. Blocking the pipeline won't stop oil sands exploitation, however. It will just mean that the oil will go west rather than south. It will cut through a lot more wilderness. It will be loaded onto freighters and shipped across some of the most perilous sea lanes on the planet. It will be refined in China where, to put it mildly, environmental scruples are not stronger than they are in the US. Not only will oil be exported to China, so will a lot of American jobs.

This makes no sense economically. It is far more risky for the environment than shipping the oil south. It makes no sense as foreign policy, as it decouples Canadian energy from the US and ties Canada more closely to China.

It makes sense only in terms of campaign strategy, which is apparently all that is important to the Administration at this stage. Even on those grounds, the recent decision looks dubious. If it blunts "Republican criticisms," it also numbs the tingle in the legs of the environmental lobby.

Sierra Club Executive Director Michael Brune blasted the TransCanada plan to build the pipeline segment. "TransCanada is hell bent on bringing tar sands, the world's dirtiest oil, through America to reach foreign markets," Brune said in a statement.

If we could just hook some cables up to Obama himself, alternative energy might deliver on its promise. He's spinning faster than any wind turbine ever could.

Comments

[Bill Fleming]

You make a lot of assumptions about running the pipeline west without much evidence, KB. I remember working with Homestake PR guys "back in the day" and hearing them explain that "ore is not ore unless you can make money on it." There is gold all over the Black Hills. But unless you can get the ore to a mill and extract it for less than the market price, there's no sense mining it. Seems like if there was a way to get the tar sands oil to the Canadian west coast efficiently, there would already be a pipeline there, no?

[A.I.]

Profit margins are absolutely at the heart of efforts to build XL II. The pipeline allows tar sands oil to be refined in a duty-free zone in Texas and then exported meaning more profit than would be achieved with a pipeline going west for those invested in its production as well as its processing.

There are a lot of reasons the project may not be good for America (with the exception of a few investors). This link explains why: http://www.tarsandsaction.org/spread-the-word/key-facts-keystone-xl/

[larry kurtz]

Cushing, OK hit with 5.6 earthquake last November, now targeted by fire weather and severe thunderstorms: time, the avenger.

[duggersd]

AI, exporting oil or anything else a good thing. Even President Obama said we want to have Made in the USA on manufactured items being used all over the world. The refined oil will either be exported or used at home. That is what the market will do. Profits are what businesses are in business for. I don't care whether it is an oil company or the widget industry. And if there are profits, there are taxes. I would think you would like that idea.
Ken, I thought President Obama did not have any say about this since it does not cross an international border. Or was that a different story I read about Keystone?

[Donald Pay]

Duggersd: "Exporting oil or anything else [is] a good thing." This sort of ideology is simply not based on reality. First, should we export nuclear weapons to, say, Iran?

Now consider a simple case that plays out every year. The price of tomatoes at farmers' markets and grocery stores goes down every summer starting about the time that local tomatoes are harvested. Why is that? There is a local glut of tomatoes that can't be exported. The consumer reaps the reward.

Similarly, the Midwest experiences a local glut of oil at times due to the fact that some refineries can't export all the oil out as fast as they refine it. The Midwest consumer benefits when that glut occurs and can't be cleared by export because local prices drop or don't go up as fast.

Conservatives like to wail about how oil is key to our economy, yet they have somehow convinced themselves that exporting this resource to "Communist China" isn't treason.

For myself, I'd like to see our oil exported and prices skyrocket. That's the surest way to transition to a green economy.

[Stan Gibilisco]

The surest way to cure my headaches would be to chop off my head.

[A.I.]

From your response dugger, I assume you didn't read my link. It notes the Mid-west could see a 20% increase in fuel prices because of XL II with much of the brunt felt by farmers. So their profits would go down perhaps offsetting any gains made by the oil industry. But heck, if a few oil barons make more money, it's all good I guess.

[duggersd]

Donald, obviously exporting nuclear weapons to say Iran is not a good thing. Last time I checked, nuclear weapons were not a commodity to be sold on the open market. Your point about exporting oil to China is not really valid, either. Oil, as a commodity is sold on the open market. If there is demand at home at the market price, it will be sold at home. If it makes economic sense to sell it to another country, even China, then that is what will happen. If the local people are willing to meet the price and purchase the oil, then it will not go away. To expect it will only be sold in our country limits the market and tends to either increase the price or lower the production.
AI, I do not really need to read your link. The Mid-west could see a 20% in fuel prices. It could see a 20% decrease as well. I do not know what planet you are living on, but farmers have already seen a 90% increase in prices since January, 2009. The market will decide what the price is and any attempt to mess with it causes other consequences. We know restricting exploration and drilling leads to a constricting of supply and an increase in price. That is a much bigger effect than an oil pipeline.

[larry kurtz]

My guess is that you drive a Buick, Barnes...and a Barcalounger. Higher gas prices mean conservation but hardships for the poorest Americans.

http://mediamatters.org/blog/201202230006

[larry kurtz]

President Obama is protecting his party just as is Montana Governor Schweitzer:

http://missoulanews.bigskypress.com/IndyBlog/archives/2012/02/29/my-bet-with-gov-schweitzer?utm_source=twitterfeed&utm_medium=twitter

[larry kurtz]

Saying is not doing. We have an election to win. Our party is unified: President Clinton is protecting his party, too.

http://www.politico.com/news/stories/0212/73445.html

[Donald Pay]

OK, duggersd, you draw the line of your ideological hypocrisy at nukes. Certainly, though, you support our country allowing anyone who wants to to import oil from Iran, since oil is just a commodity traded on the world market. Further, you certainly must stand against those war mongers in the Republican Party who want to keep Iran from exporting oil to China. What say you?

[Ken Blanchard]

Bill: plan B is what you try after plan A has failed. If the tar sands oil couldn't be profitably extracted, no one would be trying to build a pipeline.

A.I.: see above about profit margins. Oil shipped through the US and refined in the US will support jobs and increase the GDP. It will be another secure source of petroleum and it will reduce pressure on the world oil supply. If that isn't in the national interest, then nothing is.

Donald: You say "I'd like to see our oil exported and prices skyrocket. That's the surest way to transition to a green economy." I suspect that that is the view of the Obama Administration. I very dearly hope that they are as honest as you in saying it. I wouldn't hold my breath.

[Donald Pay]

KB,

My position has been that the best option is not to use the tar sands, period. It is your side that says to develop the resource and export it to China. Either way, prices go up. Since tar sands are very expensive to produce and refine, they won't be produced if oil prices go down. The Republican wet dream is impossible, but it makes some people vote for you. If your goal is misrule, you've found the right issue.

[duggersd]

Donald, personally I believe it is none of our business whether Iran exports to China unless we are at war. As for US companies importing oil from Iran, I really do not know whether you can say from what country you are getting the oil. I know there are different grades, but if there is a middleman who then sells oil, I would think it is difficult to buy Saudi rather than Iranian oil. As for the tar sands oil, it is up to the refiners to decide whether they want to go through the expense. Tar sands oil probably costs less in order to make the final product competitive. It is up to the consumer to decide whether to purchase gasoline or another commodity.

[D.E. Bishop]

The Ed Sullivan Show often had plate-spinners. In my 10 year old world, they were wonderful!!!

[Ken Blanchard]

Donald: dugger is right. If the tar sands were not worth more than they cost to harvest, then no one would be trying to build a pipeline.

D.E.Bishop: Yes! I remember them as well. I once attended a jugglers convention (a friend of mine is a juggler). At the finale show I saw some things that defy the imagination.

[larry kurtz]

Canada is being sued over their tar sands ecocide: "harvest" is to Blanchard what slut is to Limbaugh.