TransCanada Keystone Pipeline Project Killed By Obama – Decision Taken To Please Environmentalists Hurts US Energy Security – Getting More Oil From Friendly Canada Would Be Smart Policy

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By Paolo von Schirach

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November 12, 2011

WASHINGTON – Well, apparently there are ”good” and “bad” shovel ready major infrastructure projects. The Obama administration has been loudly preaching the need to spend federal money now in order to put unemployed Americans to work, while rebuilding or building US infrastructure, so that America will become more efficient and more competitive internationally. But somehow the White House does not think that the TransCanada Keystone XL pipeline that would bring substantially larger amounts of Canadian oil from Alberta down to Texas refineries is sound infrastructure. Forget that it would create thousands of construction jobs, while providing business opportunities to many US vendors and suppliers. Forget that it would get vital oil supplies into the US originating from a stable and reliable neighbor. This infrastructure project will not be done; at least not before the 2012 elections. And this is because the environmentalists are against it.

Political decision

Indeed, after years of studies, reviews, delays and excuses, finally the US State Department, (the federal agency that has jurisdiction over an international project such as this one), decided to have –you guessed it– more studies and more reviews of the potential environmental impact and risks associated with this new pipeline, essentially guaranteeing that no decision will be taken before the November 2012 presidential elections. I had indicated in a previous piece on this issue, (see link above), that domestic politics worries, rather than energy security concerns, would have determined a “no” decision. And this is exactly what happened.

While it is politically understandable that president Obama does not want to upset the environmentalists in his Democratic Party base by authorizing a project that they abhor, on account of their fears about ruptures and oil spills, (especially in the pipeline section that would run through Nebraska, because of an important aquifer in that state), this is a really dumb decision that shows zero interest in a golden opportunity to substantially increase US energy security by getting more of the oil we need to import from Canada, a stable and friendly neighbor, as opposed to getting it from unstable and unfriendly countries in the Middle East and Africa or from Venezuela.

US needs to import oil

May be we need to restate the obvious. Until we get to a new era of electric vehicles, (or something equivalent), that will require no gasoline, the US will continue to rely on imported oil to fuel millions of cars and trucks, not to mention oil based jet fuel for civilian and military airplanes. True enough, thanks to improved technologies, these days the US is producing more oil. And this is great news. Still, even with increased domestic output, (North Dakota producing over 400,00 barrels a day is a stunning example of new production), America needs to import more than half of what it consumes.

Oil from faraway countries creates supply vulnerabilities

And this creates a variety of problems. The first one affects our balance of payments. At around 90 dollars a barrel, oil is a very expensive commodity. Money to buy millions of barrels of oil leaves America every day. And this is a major, continuous hemorrage. The second one concerns our national security. Our dependence on supplies coming from distant sources in the Persian Gulf, Nigeria or nearer countries, such as unfriendly Venezuela, is a major problem. Dependence on far away and often unstable suppliers puts America at risk. It is not by accident that the US, at considerable cost, keeps the 5th Fleet in Bahrain, in the Persian Gulf . The US Navy is there to safeguard our oil supplies. Add a share of the cost of this ongoing patrolling operation to every gallon of gasoline Americans put in their tanks.

It would be smart to import more oil from nearby Canada

For these reasons, and since the US cannot become energy self-sufficient within a short period of time, it would make sense to get more of the oil we need from friendly and reliable producers –and there is no better one than Canada. As we need to get imported oil, on balance better to depend on Canada than on Saudi Arabia or Angola. Indeed, regarding Canada we have the advantage of geographic proximity and a long history of friendly relations. From the standpoint of secure energy supplies, short of major disasters, the likelihood that Canadian oil flows to the US will be disrupted is really small. No need for a 5th Fleet equivalent at our border with Canada. Whereas the likelihood of conflicts in the Persian Gulf that may stop our supplies is significant.

Besides, as we have to pay for imported oil anyway, better to see our money benefiting a friendly neighbor rather than going to countries that are not fast friends. For all these reasons, the Keystone XL pipeline should have been a high US energy and foreign policy priority, in fact an urgent project. More broadly, authorizing its construction would have also signaled the world that America is seriously looking at its energy vulnerabilities and that it is working to find ways to diminish them.

All in all, more Canadian oil coming into the US would not be a final solution to our energy security problem; but it would be a significant improvement. Every additional million barrel that we get from Canada is a million barrel that we stop importing from the Persian Gulf.

Obama worried about re-election, not energy security for America

But none of this mattered in the US decision to postpone action until after the 2012 elections. The Obama administration looked at the pipeline only as a domestic political problem. ”Would an action taken in the American national interest cost us precious votes in the upcoming November 2012 elections?” Given the vocal opposition on the part of the environmentalist, a key Democratic Party constituency, Obama concluded that approving the project would have been politically damaging, and so he removed it from the agenda. A politically smart but strategically dumb decision.

While the damage caused by something truly important that will not be done is neither immediately visible nor easily quantifiable, this politically motivated decision not to get more oil from Canada hurts the long term energy security of the United States. This is bad policy and really bad leadership.


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