Keystone XL Pipeline Fight Renewed

As part of the odd bargaining that goes into must-pass, year end legislation, Republicans just may have successfully “forced” President Obama into making a decision on whether or not to approve permits for the KeystoneXL Pipeline (a good backgrounder on the issue can be read here). House Republicans are still fighting over passing the legislation (which is a temporary 2 month extension of the Social Security payroll tax cut, among other things), though it seems likely that some form of legislation including the KeystoneXL provision will pass prior to the end of the year.

What exactly does the KeystoneXL language require President Obama to do? Some have suggested that this move will force President Obama to veto the pipeline:

The Senate on Saturday passed a two-month extension of the payroll tax holiday with language that would force Obama to make a decision on the pipeline. But House GOP leaders want a tax extension that will last one year, forcing lawmakers to return to Washington on Monday to decide whether to amend the Senate package or begin conference negotiations. In either case, Republicans say they will insist the Keystone language be included in a final deal.

“This is the right thing to do; the American people support it,” Boehner said Sunday on NBC’s “Meet the Press.” He added, “The president shouldn’t continue to put this off for his own election convenience.”

National Economic Council Director Gene Sperling said Sunday on CNN’s “State of the Union” that Obama’s decision on the pipeline is likely to be a no. He pointed to “the experts at the State Department” who warned last week that forcing an answer within 60 days will prevent them from doing “serious environmental and health reviews, that that would [not] be enough time and would make it almost certainly impossible to extend the permit.”

Senate Democrats also have latched onto the State Department’s comments and downplayed the ramifications of accepting a House GOP-sponsored rider that was the price for extending the tax holiday, jobless benefits and Medicare reimbursement rate into February.

Secretary of State Hillary Clinton “has said exactly what they’re going to do,” said Senate Environment and Public Works Committee Chairwoman Barbara Boxer (D-Calif.). “They’re not going to approve it in this tight time frame. So they actually killed the pipeline. Congratulations, Republicans.”

Republicans have argued the opposite, though not completely convincingly. On one hand, construction of the KeystoneXL Pipeline polls favorably with the American people, so delaying its construction would hurt Obama a little bit during an election year with unemployment still over 8.5 percent. On the other, President Obama clearly understands the symbolic importance of the pipeline to the environmental movement, and might very well use this opportunity to secure their support, and blame his veto on Republicans who forced his hand into a “premature” decision.
On the merits? The pipeline is clearly in the national interest, as this extensive blog post outlines:

One should also emphasize that these are temporary jobs, as any construction work by definition must be. Once the infrastructure is constructed, the work of those who were employed in building it is finished. On the other hand, presumably the objective of any stimulus program is precisely to provide temporary employment opportunities. A recent report from Cornell University Global Labor Group came up with much more modest estimates of the short-term employment boost from the spending other than the direct construction would be 33,000 to 44,000 person-years.

In terms of “permanent” employment effects, I did not see either the State Department or the Cornell report mention TransCanada’s claim that the pipeline would generate a present value of $5.2 billion in property tax revenue over its lifetime. Even if the only jobs you counted were government workers, that should be enough loose change to buy you something.

And that brings me to a deeper issue here. The goal in my mind is not to “create jobs” in the sense of paying somebody to do nothing. Instead, the goal is to create new real income and wealth. I think a key measure to look at is not the cost of the project (how much is going to be spent on people and pipes), but instead its value added. And this has been the main reason that Keystone has always looked to me like it should be an easy decision. Light sweet crude in North Dakota is still selling for $20/barrel less that you could get for it if you could find a cheap way to transport it to the Gulf of Mexico. A quick calculation suggests that infrastructure that could move 500,000 barrels a day would generate $3.6 billion in annual value added. That benefit would go to the people who work to build the pipeline, motorists who buy the gasoline, workers and companies that produce the oil, and the government that collects taxes from all the rest.

The author also debunks the idea that the pipeline poses an unmanageable threat to water supplies from the Ogallala Aquifier, and puts the carbon dioxide emissions into perspective. If you’re interested in wonkier information regarding the merits of the pipeline, read the rest of the post.


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