Keystone XL pipeline madness

By his own admission President Obama’s rejection of the Keystone XL pipeline project is political rather than scientific.

Two environmental concerns have been raised. The first is that the emissions of greenhouse gases are about 17% higher for oil from oil sands compared to conventional sources. However, the rejection of the pipeline proposal will not materially change the production and consumption of Canada’s oil shale crude, which will now be transported to market by more expensive means. “Rail transport has expanded to carry oil sands to the United States, soaring from just 16,000 barrels in 2010 to 51.2 million barrels in 2014 before dropping somewhat this year. But rail transport is more expensive than pipeline transport…. Royal Dutch Shell’s chief executive, Ben van Beurden, said last year that the company had bid for space on another pipeline to move its oil-sands crude to Canada’s east coast and from there to world markets, including Gulf Coast refiners. ‘We’re covered. I’m good,’ he said in an interview. He said that ‘the argument that Keystone is a bad idea because it will somehow enable development of resources in Canada is to some extent flawed,’ adding that other alternatives would emerge.” (This and other quotes are from today’s Washington Post in the article linked below)

The second environmental concern arises from the possibility of oil spills from breaks in the pipeline. This possibility needs to be compared with the possibility of spills from rail accidents or breaks in alternative pipelines.

Because the pipeline would cross international boundaries it must be approved by the State Department. As the application was being reviewed, then Secretary of State Hillary Clinton stated on October 15, 2010 that the department was “inclined” to approve project. “We’re either going to be dependent on dirty oil from the Gulf or dirty oil from Canada,” she said. On August 26, 2011 the State Department issued its final environmental impact statement determining “there would be no significant impacts to most resources along the proposed project corridor.” And again on March 1, 2013 the State Department issued another environmental review that raised no major objections to the Keystone XL oil pipeline saying that other options to get the oil from Canada to Gulf Coast refineries were worse for climate change.

Canada’s new liberal Prime Minister, Justin Trudeau, supported the project. “TransCanada’s president and chief executive, Russ Girling, issued a statement saying his company was ‘disappointed. Today, misplaced symbolism was chosen over merit and science — rhetoric won out over reason,’ Girling said…. Terry O’Sullivan, general president of the Laborers’ International Union of North America, said Friday that ‘Obama has also solidified a legacy as a pompous, pandering job killer.’” (same Post article).

“As Obama rode from the White House to the campus [Georgetown on June 25, 2013, he], said he would approve Keystone XL only ‘if it does not significantly exacerbate the climate problem.’” But his own State Department found that it does not. So what is going on?

“By late 2013, Obama and Kerry had concluded that the pipeline failed their climate test — not because blocking it would guarantee that Canada’s fossil fuels would remain in the ground, but because denying the permit would strengthen America’s position in international climate negotiations…. ‘The reality is that this decision could not be made solely on the numbers — jobs that would be created, dirty fuel that would be transported here, or carbon pollution that would ultimately be unleashed,’ Kerry said in a statement. ‘The United States cannot ask other nations to make tough choices to address climate change if we are unwilling to make them ourselves.’”

In short the President lied (not an uncommon practice among politicians, but we might hope for a higher standard from American Presidents). But apparently not. The Obama administration has authorized the selling of coal owned by the U.S. government that would not meet our C02 emission standards to third world countries, which helps our emission record but not the world’s. https://www.washingtonpost.com/world/us-exports-its-greenhouse-gas-emissions–as-coal-profitable-coal/2015/10/08/05711c92-65fc-11e5-bdb6-6861f4521205_story.html

“The Washington Post’s editorial on the pipeline today began: “President Obama rejected the Keystone XL oil pipeline on Friday, ending an unseemly political dispute marked by activist hysteria, GOP hyperbole, presidential weakness and a general incapability of various sides to see the policy question for what it was: a mundane infrastructure approval that didn’t pose a high threat to the environment but also didn’t promise much economic development. The politicization of this regulatory decision, and the consequent warping of the issue to the point that it was described in existential terms, was a national embarrassment, reflecting poorly on the United States’ capability to treat parties equitably under law and regulation.”

https://www.washingtonpost.com/blogs/post-partisan/wp/2015/11/06/obama-ditches-evidence-to-capitulate-on-keystone-xl/

https://www.washingtonpost.com/news/post-politics/wp/2015/11/06/obama-set-to-reject-keystone-xl-project-citing-climate-concerns/

About wcoats

Dr. Warren L. Coats specializes in advising central banks on monetary policy, and in the development of their capacity to formulate and implement monetary policy. He is retired from the International Monetary Fund, where, as Assistant Director of the Monetary and Financial Systems Department, he led missions to over twenty countries. Before then, he served as Visiting Economist to the Board of Governors of the Federal Reserve System, and to the World Bank, and was Assistant Prof of Economics at the Univ. of Virginia from 1970-75. Most recently he was Senior Monetary Policy Advisor to the Central Bank of Iraq; an IMF consultant to the central banks of Afghanistan, Kenya and Zimbabwe; and a Deloitte/USAID advisor to the Government of South Sudan. He is currently a member of the Editorial Board of the Cayman Financial Review and until the end of 2013 was a member of the IMF program team for Afghanistan. His most recent book is entitled "One Currency for Bosnia: Creating the Central Bank of Bosnia and Herzegovina."
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2 Responses to Keystone XL pipeline madness

  1. Brian says:

    Of course I agree with you, Warren.

  2. James Roumasset says:

    Just as lower oil prices have postponed some extraction of oil resources, the pipeline would accelerate it. But extracting incrementally more a little bit sooner is not necessarily bad for climate change. It could even be good, inasmuch as the earth’s absorptive capacity of carbon is falling. But the President is apparently not interested in the assessment of these issues. He just doesn’t want to be seen to be doing something that looks bad to a few.
    The Secretary Clinton (as opposed to candidate Clinton) was correct that the pipeline would have been good for national security.

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