Yesterday, in a nationally televised announcement, President Obama rejected Transcanada's application for the Keystone XL Pipeline, which would have extended the existing Keystone system across the Canadian border in order to transport bitumen (a hydrocarbon product derived by a heat process) south from the oil sands of Alberta to refining capacity on the US Gulf Coast. The rejection revealed not only the gigantic chasm between environmentalists and industry, it also laid bare the ugly side of American politics where common sense often dies a slow, painful death.
To begin, let's look at some data. According to the American Petroleum Institute (API), within the borders of the United States lies almost 200,000 miles of crude and petroleum products pipelines delivering almost 15 billion barrels a year to refineries, distribution centers, and end users. Of that amount, about 8.3 billion barrels is crude. The XL pipeline was projected to move about 800,000 barrels of bitumen per day, or about a 4% increase in crude capacity. In terms of being a gigantic multiplier or gigantic risk, it is neither. Also, if the economics work, the Alberta oil sands are going to be produced whether the US likes it or not. Third, it can be argued that transporting crude in this manner is much safer than by road or rail. The recent explosion (literally) of rail accidents emphasizes this point.
The XL pipeline extension went from obscure energy project winding its way through the tortuous path of local, state, and federal approvals when it came to the attention of the environmental community which brought it to the forefront of public awareness soon after the BP well blowout in the Gulf of Mexico. Hydrocarbons form the basis of amorphous products that are virtually invisible to the American public. They come out of the ground, go to a refineries or plants, then transported to market and burned without anyone every actually seeing them. The public generally never thinks about hydrocarbons until their water is fouled or prices go up. The collective consciousness of the American public is generally oblivious to the issues of energy, environment, cost or safety, except during some gigantic crisis that hits the mass media. And, after said crisis is removed from television screens, energy issues rapidly fade back into the background and Americans go back to their lives, blissfully ignorant of the risks and costs of living in a hydrocarbon based economy.
I supported the XL project for one primary reason: security. I'm old enough to have lived through the oil embargoes of the 1970s and experienced the whipsawing of oil and gas prices caused by geo-political upheaval over the 40 years since. At one point, the US was importing over 60% of its crude oil burn from countries who hate us. The horizontal drilling boom has reduced imports significantly, but that domestic boom, like all other booms, won't last forever, especially when a glut of supply causes prices to fall below break even for development. OPEC countries have some of the lowest production costs in the world, and they are winning the oil price war. In the event of an upset in supply, which has happened before, I would rather the US have access to an additional 800,000 barrels per day of supply than not. Rejecting this project, in my view, was short sighted, and we'll likely regret it some time in the future.
In the case of XL, the project became a political liability to President Obama and the Democrats because a big portion of their base opposed it, while business supported it. That's why it has languished since before the last presidential election. Even after the Clinton state department said the environmental impact was minimal, the Obama administration dragged their feet, studying and restudying, putting off the inevitable result of pissing off one constituency or the other.
Last week after reading the tealeaves, Transcanada asked to pause the permitting process to allow Nebraska to study a re-route plan to deal with objections there. I believe the real reason was that they were betting that a delay could give them an opportunity to get it approved under a new president in 2017. Hillary, the likely candidate for the Dems and leading most all national polls, had a serious political problem...if she supports the project, she'll lose her environmentalist base. If she rejects, she would lose a huge part of her money base, Wall Street and industry. I believe Obama, with little to lose at this point, decided to fall on his sword and reject the pipeline, taking it off the table for the 2016 election. While being couched as a climate change issue, the real reason for the rejection was pure politics. Surprise!
Let's be clear here: climate change is a clear and present danger. Deniers are anti-science idiots who use the issue to whip up their own political bases. However, though, the XL pipeline became the sin-eater in this global debate. Approving or rejecting the pipeline, contrary to hyperbolic howling, is certainly not "lighting the fuse on the carbon bomb" as asserted by some. It's an infrastructure project that would have more safely provided additional energy security to the US, which is not insignificant. Climate change is a global issue to be handled through international comprehensive energy policy, not killing projects through politics and hysteria. XL was a casualty in the climate wars for all the wrong reasons, and killing this project just delays the serious discussion of how we handle our energy needs while protecting the environment.
Politicians today are doing neither.