Punting Keystone XL

If you are a follower of foreign affairs, you are likely aware of the Obama Administration’s decision to table the Keystone XL pipeline deal until after the 2012 election. Because the project is an important bilateral commercial deal with implications for American energy security, I thought I’d briefly comment on it here.

This was a fairly predictable result once President Obama announced that he would be responsible for the final decision. Obama’s road to re-election is a very difficult one, and a further fracturing of his electoral coalition would be an unwelcome development for his re-election chances. Environmental groups that went overwhelmingly for Obama in 2008 but felt burned on the cap-and-trade bill made the strategic decision to elevate killing Keystone XL to the top of their agenda. They didn’t get that, but delaying the deal allowed those groups to plausibly claim a key political victory to market for the 2012 fundraising/election cycle while neutralizing a key political problem for the White House and leaving the door open for a possible approval of the project after the election. Neither side can be thrilled with the result, but they can both save face.

That’s the politician’s calculus. But viewed strictly as a policy issue, Keystone XL should be approved. The case has technical dimensions but ultimately is quite straightforward: it is better for the U.S. to get oil from a stable, friendly neighbor instead of some of the world’s dodgier suppliers, and a pipeline from Canada accomplishes that. At a projected 700,000 barrels per day, the pipeline would make a significant contribution to America’s energy supply (the U.S. consumes just under 19 million bpd), and there is no climate upside to killing Keystone XL since the oil is going to be extracted and exported whether the project is built or not. It’s in America’s interest to approve the project, and I’m not exactly sure what national benefit is accrued by rejecting it.

Pipeline owner/operator TransCanada has apparently just agreed to accommodate the wishes of Nebraska officials who wanted the pipeline re-routed around the Ogallala Aquifer; this potentially resolves one of the biggest outstanding issues left. After the Nebraska government approves the new plan, it will head back to the State Department for a final ruling. A far-sighted administration would approve it.