Demonstrators hold signs next to the Treasury building during a Keystone XL tar sands oil pipeline demonstration in Washington, D.C., on Sunday, Nov. 6, 2011.
Chalk a win up for the environmentalists. On Wednesday, the White House announced that it was rejecting—on the recommendation of the State Department—the proposed Keystone XL pipeline that would have brought 700,000 barrels a day of oil sands crude from western Canada into the U.S. In many ways the announcement—forced by Congressional legislation passed late last year that required an expedited decision on the pipeline—reinforces a move made by Obama in November to essentially kick the final decision on Keystone XL to 2013, after the Presidential election. But Congress forced Obama’s hand, and left him little choice but to stop the pipeline for now, as the President made clear in a statement:
As the State Department made clear last month, the rushed and arbitrary deadline insisted on by Congressional Republicans prevented a full assessment of the pipeline’s impact, especially the health and safety of the American people, as well as our environment. As a result, the Secretary of State has recommended that the application be denied. And after reviewing the State Department’s report, I agree.
So why did Obama and the State Department decide to reject the pipeline? And does this mean the Keystone issue has been settled once and for all?
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While protesters like Bill McKibben have tried to make the case that allowing the pipeline to go forward would be disastrous for the climate because it would speed the development of oil sands, which have a bigger greenhouse gas footprint than conventional crude, there’s little sign in the White House’s public statements that preventing climate change was a main reason behind the decision. From the State Department’s release:
Specifically, the Department called for an assessment of alternative pipeline routes that avoided the uniquely sensitive terrain of the Sand Hills in Nebraska. The Department estimated, based on prior projects of similar length and scope, that it could complete the necessary review to make a decision by the first quarter of 2013. In consultations with the State of Nebraska and TransCanada, they agreed with the estimated timeline.
While McKibben and his allies were able to build an impressive public movement against the pipeline—a project most energy insiders thought was a done deal as recently as the fall—it was concern over the local environmental impact of the pipeline in Nebraska and the upper Midwest that really galvanized opposition, rather than the larger issue of climate change. That’s not a knock on the protest movement—obviously they have concerns about the risk of pipeline safety and spills as well—but it makes the Keystone decision less a climate victory than a victory for traditional environmental politics, as I wrote earlier.
But while building the pipeline would help Canada further develop its oil sands reserves, blocking the pipeline, even temporarily, doesn’t mean Canadians will simply close up shop in Alberta. By some estimates all the crude in the oil sands is worth more than $15 trillion—unless the price of oil suddenly plummets (unlikely) or policies are undertaken to artificially raise the cost of carbon-intensive fuels (also unlikely, at least now), I have a feeling the Canadians will find a way to keep pumping it and keep selling it.
MORE: Bienvenue au Canada: Welcome to Your Friendly Neighborhood Petrostate
Of course, to oil company executives and their allies in Congress, Obama’s decision was a mistake no matter what his justification. Here’s Republican Senator John Barrasso of Wyoming:
His decision today is a victory for the few extreme environmental activists who have lined up to protest Keystone and a defeat for the tens of thousands of Americans who are lining up to find a Keystone job. The president chose to shore up his voting base instead of standing up for unemployed Americans.
A few things here: one, while the number of active protesters against Keystone may not be huge, neither was there overwhelming support for the pipeline. A poll by Rasmussen Reports at the end of 2011 found that 53% of Americans “somewhat favored” building the pipeline—and that’s coming from a polling service that tends to lean conservative. And then there are the job claims—proponents of Keystone have claimed that the pipeline would create 20,000 temporary jobs in the U.S., and lead to hundreds of thousands of new jobs thanks to the lower oil prices that would result from all that Canadian oil sands lowering the price of crude. But Michael Levi of the Council on Foreign Relations shows why those claims are ridiculous:
However, the first number refers to “person-years” of employment — a single job that lasts two years is counted twice; and in any case, it pales compared with the overall U.S. employment challenge. The second number is more impressive but relies on an overly optimistic estimate of how much the pipeline would have reduced global oil prices. The administration’s rejection of the pipeline will probably add less than a dollar a barrel to the long-term price of oil, hardly a decisive factor when prices are already around $100 per barrel.
Of course, there’s little question that more Canadian oil production would trim world oil prices slightly and thus help the U.S. economy. But the net impact of the Keystone XL pipeline would have been smaller than its proponents claim.
One thing that’s worth noting, however, is that even if the Keystone XL pipeline never comes to fruition, there are all sorts of ways for oil to get from Canada down to refineries on the Gulf Coast. Enbridge Inc. recently announced plans to reverse the flow on the Seaway pipeline between Oklahoma and Texas, which would achieve part of what the Keystone XL pipeline would’ve done. There are also a few other pipelines in the works, and oil companies could even start shipping by rail if they found it profitable to do so. As one analysis commissioned for the Energy Department noted, “It would take a total moratorium on new pipeline — and also rail — capacity” to stop the development of Canada’s oil sands.