Obama Is Losing the Keystone Pipeline Battle

The president finds himself between an environmentalist rock and a labor union hard place


The Keystone XL pipeline is roiling U.S. electoral politics again. TransCanada refiled its application for a permit to build the pipeline with the State Department last week. Presumptive Republican presidential nominee Mitt Romney has vowed, "I will build that pipeline if I have to do it myself." In April, the House of Representatives passed a transportation bill that mandates the construction of the Keystone pipeline. The vote was 293 to 127, the majority vote was minus 14 Republicans, but included 69 Democrats. President Barack Obama threatened to veto the bill if it includes the pipeline construction mandate. Today, the House and Senate are conferring on the transportation bill that would spend more than $100 billion on highway, rail, air, and mass transit projects over the next two years. It is not known if the Keystone pipeline provision will emerge in the final version.

Reviewing the state of play: The crude oil pipeline would be built by TransCanada at a cost $7 billion and stretch nearly 1,700-miles from Alberta, Canada, to the Gulf Coast of the United States. The 36-inch pipeline would bring as much as 830,000 barrels of synthetic oil per day produced from Canadian oilsands to U.S. refineries. However, since it crosses an international border, President Barack Obama has the authority to refuse permission for construction to begin if he determines that the pipeline is not in the national interest. In August 2011, the Department of State issued its Final Environmental Impact Statement [PDF], which concluded that the pipeline could be built and operated safely. Once the State Department report was issued, Obama had 90 days to make his national interest determination.

The Keystone pipeline became a defining issue for political environmentalists who dramatized their opposition during protests outside the White House by getting themselves arrested. The activists claimed that pipeline leaks could threaten the Ogallala aquifer in the Sand Hills region of Nebraska and would exacerbate man-made global warming by enabling consumers to burn fuel produced from Canada's oilsands.

Meanwhile the labor union wing of the Democratic Party was eagerly lobbying the Obama administration on behalf of the jobs that constructing and operating the pipeline would create. In November, Obama bravely announced that he was putting off any decision on allowing the construction of the pipeline until after the 2012 presidential election. That's real leadership! Clearly in his electoral calculations, the Green faction won out over the union vote.

After the president's decision to delay approval, Nebraska legislators, spooked by environmentalist scaremongering, voted to require that the pipeline be re-routed around the Sand Hills.

Vexed Republicans on Capitol Hill tried to force the president's hand in December by attaching a provision setting a February deadline for a decision on the pipeline to the bill that extended the payroll tax cut. In January, Obama called the Republicans' bluff by denouncing the Republican deadline as "rushed and arbitrary" and had the State Department issue a determination that the pipeline was not in the national interest.

Meanwhile TransCanada announced in late February that it would seek to begin construction of the 485-mile southern leg of the Keystone pipeline from Oklahoma to the Gulf Coast. Since this portion of the pipeline does not cross any international borders it does not require presidential approval. Nevertheless, the Obama administration hastened to issue a White House statement declaring that it was committed to taking "every step possible to expedite the necessary Federal permits."

In April, the Nebraska legislature shifted toward backing pipeline construction by passing a bill that authorizes the governor to approve a new route that avoids the Sand Hills region. On May 4, TransCanada submitted a new application [PDF] for a presidential permit for pipeline construction to the State Department.

The new application was widely denounced [PDF] by environmental lobbyists. For example, Susan Casey-Lefkowitz, director Natural Resources Defense Council's international program declared, "The company's 'new' application is nothing but a rehash, riddled with the same environmental risks that raise the same unanswered questions while providing no new rationale for why it should be built."

So let's take up Casey-Lefkowitz's invitation to rehash the chief arguments deployed by the environmentalist lobby against building the pipeline. Opponents highlight the environmental risks of increased global warming and the possibility of damage to the Ogallala aquifer. The concern over global warming is that producing fuel from oilsands boosts greenhouse gas emissions, adding further damage to the climate. It is true that producing crude from oilsands emits more greenhouse gases than conventional petroleum production. How much more? Estimates vary from 6 percent more [PDF] calculated by the oil consultancy IHS CERA to an estimate of 20 percent higher [PDF] in a 2010 Royal Society of Canada report. Keep in mind that oilsands emissions currently account for 0.15 percent of global greenhouse gas emissions, so even if production triples as projected, they would amount to less than one half of a percent of global greenhouse gas emissions.

Worries that oil leaks from the pipeline might severely damage the Ogallala aquifer have been greatly exaggerated by activists. Decades of research on an oil spill in Bemidji Minnesota finds [PDF] that hydrocarbons from the spill migrated in groundwater a bit more than 600 feet downhill and then stabilized. U.S. Geological Survey researcher Geoffrey Delin told InsideClimateNews that he thinks any dissolved hydrocarbons from a Keystone XL pipeline break that percolates into groundwater would probably remain within 1,000 feet of the spill point. Oil spills on land are nasty but not apocalyptic events. In any case, TransCanada has agreed to change the route of the pipeline so that it no longer goes through the area that most concerns the activists.

Opponents also assert, "Keystone XL will not lessen U.S. dependence on foreign oil, but transport Canadian oil to American refineries for export to overseas markets." To prevent this from happening Rep. Ed Markey (D-Mass.) wants "it written in stone that Keystone oil will stay here in the United States and give American consumers some of the benefits, not just all of the costs." He has proposed legislation that would block the export of any products refined from Canadian crude transported by the pipeline.

As analyst Marlo Lewis from the free-market think tank the Competitive Enterprise Institute points out such a ban on exports would violate World Trade Organization rules requiring that imported and locally-produced goods to be treated the same once foreign goods have entered the market. In this case, one way to get around this rule would be to also ban the export of refined products made using domestically produced crude oil. Let's hope that Rep. Markey doesn't decide that this is a good idea. In addition, Deputy Assistant Secretary for Policy Analysis at the Department of Energy (DOE) Carmine Difiglio noted [PDF] in a June 2011 memorandum that since crude oil imports from Venezuela and Mexico are declining Canadian crude would help make Gulf Coast refiners less dependent on imports from countries with less savory regimes.

Another argument made by opponents and reprised by Markey is that building the Keystone pipeline "would increase gasoline prices for Midwest U.S. consumers." Not so says DOE's Difiglio who points out that while it is true that Midwest refineries pay less for crude oil because of a current pipeline transportation bottleneck that prevents supplies from flowing to competing East and Gulf Coast refiners, the wholesale price of gasoline is actually set in the national market. Difiglio argues that on balance relieving the oil transportation bottleneck means that "gasoline prices in all markets … would decrease, including the Midwest."

Opponents argue that building the pipeline won't create all that many jobs anyway. Estimates range from 6,000 direct jobs up to an implausible 250,000 direct and indirect jobs touted by the U.S. Chamber of Commerce. While some opponents downplay [PDF] the thousands of jobs created by building the pipeline as being "temporary," they fail to apply the same job creation logic to green energy projects, e.g., the Ivanpah Solar Power Complex that will "create 950 union construction jobs, [and] 90 union permanent positions upon completion." With an unemployment rate over 8 percent, it's hard to argue against even "temporary" jobs.

One troubling aspect of the building the Keystone pipeline is the use of eminent domain to force landowners to allow it to pass through their property. Eminent domain is defined as the legal right of a government or its agents to expropriate private property for public use, with payment of just compensation. The New York Times is reporting today a story about how Texas landowner Julia Trigg Crawford is fighting TransCanada's use of eminent domain to build a section of the southern leg of the Keystone pipeline through her property. Unfortunately for landowners pipelines are generally considered to be common carriers [PDF], usually defined as companies that agree to publicly transport people or goods at a fixed fee. The U.S. government and most states have delegated the power of eminent domain to common carriers.

In a March during a trip to oil country, Obama reiterated his support for building the southern leg of the Keystone pipeline, assuring audiences that it is a "priority" for his administration. Perhaps recent poll numbers showing that 57 percent of Americans approve of the pipeline and that only 29 percent oppose it is prompting the president to do a bit of recalculating with regard to his electoral math. Meanwhile the clock is ticking because TransCanada's February southern leg application triggered a 45-day deadline by which the Army Corps of Engineers must deny construction permits, or they are automatically approved by default. We will soon find out just how expeditiously helpful the Obama administration means to be.

And if that isn't bad enough for Obama, TransCanada's new application is raising tensions among the interest groups that generally support the Democratic Party. Over the weekend, AFL-CIO President Richard Trumka told C-SPAN that labor unions favor building the pipeline. On the other hand, environmental activists who thought they had succeeded in killing off the pipeline only to see it rise from the grave are near apoplectic. Finally, if the transportation bill emerges from Congress with a provision mandating the construction of the Keystone pipeline, will the president really risk vetoing a bill that promises to create a total of three million jobs in order to satisfy the demands of the environmentalists? It's not like they are going to vote for Romney anyway.

Ronald Bailey is Reason's science correspondent. His book Liberation Biology: The Scientific and Moral Case for the Biotech Revolution is now available from Prometheus Books. 

Disclosure: Last fall I took a reporting trip to visit Alberta's oilsands. My travel expenses were covered by the American Petroleum Institute. The API did not ask for nor does it have any editorial control over any of my reporting, period.