Keystone pipeline veto: politics or real policy?

A depot used to store pipes for Transcanada Corp’s planned Keystone XL oil pipeline. Andrew Cullen/Reuters

Editor’s note: In only his third veto, President Obama this week vetoed a bill approving construction of the Keystone XL, which would bring oil from Canada to Texas. He said in his message to the Senate that he rejected the bill because it “conflicts with established executive branch procedures and cuts short thorough consideration of issues that could bear on our national interest – including our security, safety, and environment.”

But the Keystone XL pipeline is much more than an infrastructure project. Environmental groups have chosen the pipeline, which would transport oil from the tar sands of Canada, as a symbol for taking action to slow greenhouse gas emissions from fossil fuels. Republican lawmakers, in taking control of Congress, made it one of their first orders of business to underscore a commitment to North American oil production and the economy. Meanwhile, the plunging price of oil has significantly changed the economics behind the project, which was first proposed six years ago.

Our experts weigh in on the significance of the Obama veto and the Keystone XL pipeline.


Time to modernize US infrastructure

Mark Barteau, Director of the University of Michigan Energy Institute

President Obama this week vetoed the Keystone Pipeline bill. It’s an action one would expect from a serious Constitutional scholar of any political stripe; the bill is an attempt by the Legislative branch to encroach on the powers of the Executive.

But what should he do next? Approve the pipeline.

Greatly exaggerated claims from both sides of the discussion have prolonged the process to near Dickensian Bleak House lengths. Construction of the Keystone XL pipeline is neither the “Game Over for the Climate” that opponents have contended, nor the jobs bonanza that supporters have touted. While no pipeline operates without risk, Keystone is an important addition to our energy supply infrastructure for the next several decades.

Invisible to most Americans is the vast infrastructure – pipelines, and increasingly, rail transportation – that moves crude oil. That infrastructure becomes far more visible when there are accidents or problems. Accidents such as the major oil pipeline leaks at Marshall, Michigan in 2010 and at Mayflower, Arkansas in 2013 rightfully attract public attention, outrage, and regulatory review.

Almost invisible to the public are the less dramatic – but very real – risks to our ability to take energy supplies for granted because of bottlenecks created by inadequate infrastructure. For example, insufficient natural gas pipelines to New England have pushed up prices, and increasing competition for rail capacity between coal and oil shipments have created coal shortages at power plants in the Midwest.

Oil is going to move into and around the United States whether we build new pipelines or not, but approving Keystone allows this still-necessary energy source to arrive at its destination as efficiently and safely as possible.

Meeting the future energy needs of the US by pursuing an “all of the above” energy strategy while trying to reduce environmental and climate impacts will require significant capital investments in infrastructure, both for traditional energy sources and for vitally important renewable and carbon-free energy sources. Much of this investment must come from the private sector, with government investing in the research, development and deployment of new technologies and encouraging industry to invest in these as well.

It’s time to get going on modernizing our energy infrastructure across the board. With the congressional tug of war now past, President Obama should give approval for Keystone XL to proceed.


Not the end of Keystone debate

David Konisky, Associate Professor of Public Policy at the McCourt School of Public Policy at Georgetown University

President Obama’s veto of legislation to force approval of the Keystone XL pipeline marks the latest development in the now more than six-year effort by TransCanada to gain approval for its project.

The merits and demerits of the Keystone XL pipeline are hotly debated and there remain legitimate questions about both the pipeline’s economic benefits touted by its proponents and the environmental impacts of the pipeline emphasized by its detractors.
Regardless, there is no questioning Keystone XL’s political importance. The project has become one of the key symbols of the environmental community’s efforts to push the Administration on climate change. And, for their part, the fossil fuel industry and its political supporters, including most Republicans and many Democrats, see Keystone XL as integral to energy independence and a test of President Obama’s commitment to an “all of the above” energy strategy.

To this point, President Obama has sided with environmental interests, in what can only objectively be characterized as a major, at least short-term, political victory for the environmental advocacy organizations that have made Keystone XL a legacy issue for the President.

But, this week’s veto is not the end. Keystone XL will remain a front-burner issue for the Republican-controlled Congress and President Obama will continue to face intense pressure from both sides. And, for better or worse, the debate is certain to spill over into the 2016 presidential election.


The economics of the pipeline

Seth Blumsack, Assistant Professor of Energy and Mineral Engineering at Pennsylvania State University

While the latest veto action by President Obama clearly seems a political move (just as political as the bill that landed on his desk, simply begging for a veto), it is worth thinking about the economic claims that have been made by both sides.

Opponents of the pipeline have claimed that it would render the world awash in carbon- and energy-intensive oil produced in Alberta by providing an easy route for the oil-sands production to reach global oil markets (see this recent Conversation article).

The reality is that unlike natural gas, oil is a much easier commodity to transport. If the price on the world market is high enough and if the pipeline is not built, production from the oil sands can be taken to refineries via train, truck or barge – which is basically what happens now.

The Keystone XL would reduce transportation costs. But the global price for oil — whether it’s $50 or $100 a barrel — is what drives more production from the oil sands or any other source, not a single pipeline project.

It is also unlikely, because the US restrict oil exports, that construction of the pipeline would mean that crude from the oil sands would flood the world market. What it would do is allow refineries on the US Gulf Coast to more cheaply import heavy crude oil from Canada instead of other countries – primarily South American and Middle Eastern nations as well as Russia. The US is already the world’s largest exporter of refined petroleum products like gasoline and the Keystone XL pipeline would probably not change that.

Proponents of the pipeline have claimed that it would represent an economic windfall in the form of construction jobs and ancillary benefits to those in other industries, such as trucking or even retail stores. This is a more difficult claim to evaluate since it can be tricky to estimate how the construction jobs directly attributable to the pipeline will eventually spill over to other sectors of the economy or where.

Pipelines themselves do take a lot of people and materials to build. My colleagues and I recently estimated that completion of a natural gas pipeline in Pennsylvania, which is around one-tenth the length of Keystone XL, would directly involve more than 2,000 construction workers and engineers. But the construction process typically does not take that long. And once the pipeline is in the ground, surprisingly little labor is required for pipeline operations and maintenance. In the Pennsylvania gas pipeline, we estimated that the long-term workforce to run the pipeline was around 1% to 2% of the construction workforce.