Obama Punting on Energy Leadership
Punting on Keystone XL is a mistake, but consistent with the President’s record. While touring the country blaming Congress for all his political ills, President Obama is pulling the plug on 13,000 private sector jobs, an infusion of $7 billion into the economy, and a secure supply of future oil.
Let’s start with why Obama punted on Keystone XL. The Ogallala aquifer isn’t exactly a new discovery, and this wouldn’t be the first pipeline to traverse it. The White House is playing the politics of punting not out of concern for the environment, but out of concern for their hide. The pipeline is dividing two of Obama’s key constituencies: unions that are advocating for new construction jobs, and environmentalists arguing against Canadian oil. Unable to please both sides, the president is meeting this latest challenge with his practiced response of political cowardice (see also: healthcare reform, super committee).
If the environmentalists think they’ve won, they’re foolish. Canadian tar sands will be developed, no matter who burns the oil. Instead of a steady supply from a friendly neighbor, we’re challenging Canadian producers to find another buyer. Instead of sending the tar sands oil through a pipeline to some of the most efficient refineries in the world, we’re asking Alberta oil developers to pack up their oil and ship it via freighter to China (funny how China always seems to be there to capitalize on our missed opportunities) and other Asian countries with less stringent environmental regulations. At the Asia Pacific Economic Cooperation forum in Honolulu, Canadian Prime Minister Stephen Harper noted that this delay, “does underscore the necessity of Canada making sure that we’re able to access Asian markets for our energy products.” Is this a better alternative? Instead of focusing on ways to kill the pipeline, the environmental community would have been much better charged with solving the challenges of turning tar sands into a cleaner supply.
The president’s non-decision is a meaningful blow to the energy investment climate in the United States. TransCanada has sunk $1 billion into this pipeline plan and considered – and rejected – over a dozen alternative routes to bring Canadian bitumen to Gulf Coast refineries. The administration is thumbing its nose at TransCanada with this delay in approval. If the investment that TransCanada has made is insufficient to break through the administration’s driving desire to limit fossil fuel development, what effort is enough? This delay will discourage investment in new fossil energy infrastructure as long as Obama is in the White House.
Moreover, while the administration can explore alternative routes for the Keystone XL, there’s no guarantee that TransCanada is going to stick around to see what happens. This delay means refineries may seek other sources of crude and producers may seek other means of transport. With minimal certainty on when or if the Keystone XL project will advance, existing investors are reasonably nervous. Other companies are eager to step into the void – competitor Enbridge, for example, sees this as an opportunity for more customers for its own proposed pipelines – but we have no assurance that approval of these lines would go any better.
President Obama has failed to lead meaningfully on energy and this failure forecasts a bleak future for the energy community. Obama is turning down a significant investment in jobs and energy security in exchange for political points. In the process, the White House is cultivating an environment that discourages investments in energy infrastructure and destroys confidence that major investments will pay off. President Obama is paying the price for failed economic policies and his approach to energy is but one, sorry example.
This article originally appeared in National Journal on November 14, 2011.