Just Get On With It Already

As many of you know, the first real order of business for the new Congress last week was to address the building of the Keystone XL pipeline.  This is the project that will bring Canadian shale oil from Canada to the Gulf of Mexico down the middle of the United States.  The project is 1200 miles of pipeline from the Canadian border to Nebraska where it will meet up with existing pipelines.

As I’ve written before, to me this is a tempest in a tea pot (and I do not mean Teapot Dome).  Let’s just get on with it and build the thing.  Too much time, energy, money and political capital have been spent on an issue that has not really been addressed on the merits, or lack thereof, of the issue, but rather on the symbolism attached to it by both those that support the project and those that oppose it.

Last week the House voted 266-153 on a measure that pushes the project forward.  The Senate is preparing to debate their version of the bill and it is likely to be a long and contentious session because in addition to the emotion surrounding the issue, there is a long list of proposed amendments to the bill ranging from the science behind climate change to the requirement to use United States produced steel in the construction of the pipes used.

President Obama has already threatened to veto any bill requiring its construction.  Primarily, the stated reason is that it violates the Constitutional powers awarded to the Executive Branch of our government. The argument is that the State Department makes the final recommendation to the president because it involves foreign nations and treaty obligations.  Perhaps.  Primarily, in my view, the president threatened a veto of an as yet unpassed bill in order mollify his supporters that have decided this pipeline is an affront to our national goals regarding the environment.

To this writer, the emotion surrounding the issue has taken over any modicum of common sense. Those that support the pipeline claim that it will rejuvenate the economy, create tens of thousands of new jobs, and support a renewed infrastructure.  Those that oppose it argue that it will be environmentally destructive and create Green House Gas (GHG) emissions of biblical proportions (well, maybe a slight exaggeration on my part).  As usual, the truth is somewhere else.

Both supporters and opponents point to the same impact study conducted by the State Department. The report, known as the Final Supplemental Environmental Impact Statement for the Keystone XL Project  analyzes the “environment” in the largest sense — that is both the natural environment and the economic environment and the impacts the project probably will and will not have on the United States. (You can find the Executive Summary that contains the most pertinent facts here.)  Not surprisingly, supporters and opponents have cherry picked the facts that best support their argument.

In looking at some of the numbers bandied about, keep in mind that the Canadian shale oil deposits are already being used and that oil from them is already being transported to sites around North America. Not building the pipeline will not keep the Canadians from developing those sites.  There is also a fly in the ointment as I write this and that is the fact that the price of oil plummeted over the last few months. Good news for those of us at the gas pumps, but it may have an impact on the development of the oil shale deposits as estimates project that oil needs to be in the $65-$75 range in order to make a profit. However, such projects are not started and stopped in short order.  Currently experts do not believe that oil will stay at such low prices forever, and they are planning two to three years out when the price of oil is likely to be profitable again for these, and other similar deposits.

One of the most disputed facts thrown about is the number of jobs created with this project. Proponents argue that the State Department study says that 42,100 jobs will be created.  Opponents say that the study says that it will only be about 50 jobs.  They are both right.  The study says that while building the pipeline, 42,100 “direct, indirect and induced” jobs are created of which 3900 would be as a result of actual construction and last for about a year (or, the report says, half that number for two years, depending on how fast it gets built).  The 3900 would be “direct” jobs. The “indirect” are things such as the folks that manufacture the pipes for the line, or trucks to move dirt and the like.  The “induced” are things like restaurants, movie theaters and other businesses where people with money in their pockets from working on the line will spend their hard-earned cash. Note that they do not say that these will all be “new” jobs as is often argued.  The report actually says that there will be about 50 new jobs when construction finishes (45 permanent workers and 15 contractors). But for argument’s sake let’s use the 42,100 figure.  That equates to an increase of 0.02% to the annual economic activity of the country.  For one year.  Not exactly the savior of the economy it is made out to be.  For further comparison, there have been approximately 250,000 new jobs created each month for seven of the last nine months.  The Keystone pipeline is, at best, a drop in the bucket.

Likewise those predicting an environmental disaster use the State Department report to their advantage. But they also leave out some key data.  Remember, the oil is going to go to market. Regardless of U.S. environmental wishes, the Canadians are going to move that oil.  Currently, much of it goes by trucks and rail cars.  This is the “no action alternative” referred to in the report.  In other words, if the pipeline is not built.  According to the report, Green House Gas (GHG) emissions will increase by 28-42% if the pipeline is not built.  Likewise, it seems that moving the oil by pipe is safer to the community than having trucks and rail cars that are subject to accidents move it.  The report also addresses the possibility of oil spills via a leak in the pipeline, and while agreeing that it could have significant local effects, the overall chance of it is very small and the overall environmental impact would be small.  There is a lot of experience gained in building the tens of thousands of miles of current pipelines and the technology today is significantly enhanced.

To be clear, I think that our country must move to develop non-fossil fuel alternatives as quickly as possible.  I am not for pollution and I believe that we have significant work to do to clean up our environment, to which fossil fuels are a major contributor of pollution.  The reality, unfortunately, is that we are not there yet.  Perhaps some day, but not yet.  Building this pipeline will have little to no impact on cleaning up the environment as it will exist over the near future.  Likewise, building or not building this pipeline will have little impact on jobs in the economy.

Thus my point.  To me, this is indicative of the way the House and Senate operate today.  Little real progress occurs while litmus tests of purity on emotional issues take priority and pose as substantive measures supporting the “American people.”  The reality is that the arguments for and against the Keystone pipeline have little to do with the good of the country and a whole lot more to do with the well-being and financial gains of the members of political parties that take one side or the other and exploit it for their gain.

President Obama can move past this by announcing tomorrow that he has accepted the State Department’s report and approved the building of the pipeline.  No legislation necessary.  Maybe then we can move on to the issues confronting our country that have true bipartisan support such as tax reform and rebuilding our roads, bridges and other infrastructure that is the real lifeline of our economy.

Time To Get On With It, Already

The controversy over the Keystone Pipeline System continues.  Adding to the controversy is the continued effort by President Obama’s administration to kick the can down the road.  Essentially, they keep moving a decision on the building of Phase IV (the “XL” or “eXport Limited” you see in the news as the source of so much contention between various factions) until after the next election. In a political sense this may be a good thing for those arguing on both sides of the issue as it gives them both continued fodder to use against the other in elections. Lots of people making lots of money to support their cause. In a real sense, however, it is at best ridiculous to continue to delay a decision and in a worse sense it could have an impact on the economy to continue to delay it. There is an old saying that “a bad decision is better than no decision” meaning that some action, which can be modified as the event unfolds, is better than dithering and having events unfold without direction.

I am hardly an expert on this subject, but in my opinion, it is time for the Obama administration to approve the new pipeline and to get on with it.  In truth, the arguments for and against it are exaggerated by all involved.  It will not significantly increase jobs in the United States and it will not significantly impact the environment in this country either given that our reliance on carbon based fuels will be a fact of life for years to come.  (This does not mean that we should give up on alternative methods of producing energy.  Quite the contrary.  To be viable into the future we need to learn to wean ourselves off fossil fuels.  However, the reality is that while those systems are being developed and coming on line, we will need to use what we have.)

In particular, since we now have to move fuel via train and truck tankers which, as has been proven dramatically in recent months, are prone to accidents that can have horrific results.  It seems to me that the use of a pipeline, while hardly fool-proof, is in any case safer than moving volatile liquids by rail or road.

For those that may not have followed this closely, I will try to summarize the issue.  (A more in-depth explanation of the issue may be found here.  A map of the current and proposed systems may be found here.)

In sum, the Keystone Pipeline System is designed to carry oil from Alberta Canada to the Gulf Coast of the United States and will run through the middle of the country.  The economic viability of the project is based on the relatively new technology that makes it possible to recover oil from shale and sand.  It is owned by the TransCanada Corporation.  Since that is a foreign company, and the pipeline crosses an international boundary, it was left to the State Department to study its impact and to recommend to the president whether it should or should not be approved.  Among the factors that impact the decision, and the primary source of much of the emotional debate, is the impact on the environment.  Arguments from both side of the aisle in Congress tends to be divided by which states perceive that they will benefit from the project, and those that use the project as a symbol of the fight to reverse the impact of fossil fuels on climate change. Besides the policy implications, I never forget that large amounts of money are involved on both sides of the issue and that they are playing for high stakes.

Those that politically support the expanded pipeline — parts of it are already in operation — primarily argue that it will lessen the need for the United States to import oil from outside North America, with Canada as a reliable and stable trading partner, and that it will create jobs for the economy.  Those that politically oppose its construction primarily argue that it will impact the environment in several ways: the possibility of oil spills in environmentally sensitive areas it crosses; the method used to extract the oil is not really akin to drilling but rather is closer to strip mining; and the biggest factor, they argue, is that it will add to climate change by adding more greenhouse gases to the environment, both by the burning of the oil, and because of the process used to extract it from the ground.

Lost in the argument, of course, is the fact that oil is a fungible commodity.  The price and availability is dependent on market forces and when converted to fuel it does not matter where it came from in the first place. While piping is cheaper than shipping it overseas (TransCanada has threatened to ship it to China if the United States does not build the pipeline), in the end the impact on the worldwide oil market is not significantly affected — it is driven mostly by availability rather than source.

Studies delineating the economic impact of the pipeline and the promised number of jobs created vary greatly with the groups presenting the information.  Most of the numbers have been grossly inflated by the proponents. The official State Department study indicates that somewhere around 2,000 jobs would be created while the pipeline was being built (about a two year process) with less than a hundred permanent new jobs.  The effect on the gross domestic product (GDP) would be almost nothing — a few billion dollars or a fraction of one percent.

Currently, the Senate is considering legislation requiring that the pipeline by built.  This would be a binding resolution, expected to pass easily in the House of Representatives. This follows in the wake of a non-binding resolution from last year that passed with 62 votes in favor.  There is some question as to whether the proposed legislation is Constitutionally legal as the Executive Branch is tasked with decisions relating to foreign powers.  Unknown is whether such legislation could survive a presidential veto which might be likely be it for environmental reasons or to prevent the Constitutional issues from setting a precedent. No one knows for sure if the president would veto it, but it is thought that a Senate override would fall short of the needed 67 votes to do so.

The Obama Administration has been reviewing the issue for approximately five years.  The State Department initially rejected the project in 2011 because the pipeline crossed aquifers in Nebraska that were a significant source of water in the Mid-West.  Since then the route was changed to avoid the most environmentally vulnerable locations.  The State Department deferred another decision in April of this year in order to continue to study its impact as expressed in what was considered an “unprecedented” number of inputs from the public.  However, the study is complete and seems to indicate that the environmental impact of building it or not building it will be nearly the same.

It is an emotional issue and is believed by those concerned to have ramifications beyond the actual facts of the case. I understand that.  However, it is time for the president to make a decision and get on with it.  The reality is that whatever his official decision, the issue will not die and is surely going to result in more lawsuits in addition to those that are already in the courts. It is time to resolve the issue and to stop trying to delay it again until after the next set of elections.  That in my mind, is poor leadership.  The issue has been studied to death.  It is time to act.  I consider myself to be an advocate of setting standards to limit or reverse climate change (whether or not you believe in climate change, how can one be for pollution?).  However, in this case, I see little reason to delay the completion of a pipeline that is already partially built and results in ever-increasing numbers of truck and train tankers on our roads and rail lines, especially when predictions are that those numbers will quadruple in 2014.

Just do it Mr. President.