The Cost of President Obama's Keystone XL Dithering

Politics gets in the way of the TransCanada project that would have brought jobs and energy.

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[See a collection of political cartoons on energy policy.]

Keystone XL became a political issue only after the environmental lobby focused on a modest adjustment to the route involving about 100 miles of the pipeline, which would carry some 800,000 barrels of oil south each day. The state of Nebraska was unhappy about even this modest adjustment, given that its own exhaustive studies in three environmental impact statements over three years concluded that there would be "no significant impact" from the pipeline. The environmentalists argued that the state's ecologically sensitive Sand Hills region might be threatened by this minor change, but TransCanada had already said it would be willing to adjust the route in consultation with Nebraska officials. This did not suffice, because the more leftist environmentalists are just dead set against the development of Canada's oil-rich tar sands, which they wish to stifle by cutting off the export route to get the oil to market.

This is not quite 1812 again, with big bully USA intimidating the Canadians, but the fury of the Canadians is justified. Their minister of natural resources said the green movement's "goal is to stop any major project no matter what the cost to Canadian families in lost jobs and economic growth," and that these groups are willing to "sue everyone and anyone to delay the project even further."

The Canadian prime minister, with the full support of his cabinet, may seek to redirect this oil to export markets in Asia, "based on what's happened with Keystone XL." He said recently, "This does underscore the necessity of Canada making sure that we're able to access Asian markets for our energy products." This is diplomatic language for making it clear that, without progress on Keystone XL, Canada would build a pipeline across Canada to the Pacific and ship the energy to Asia. The Canadians see the U.S. inaction as a direct rebuff, taken despite the fact that Canada is the largest U.S. oil supplier at about 2.67 million barrels a day, compared with 970 thousand barrels a day from Venezuela, and that this is the biggest infrastructure project on the continent and would enhance America's oil independence.

[Washington Whispers: Most Want Keystone Pipeline Built]

Congressional Republicans are also furious, and in this instance they, too, are right in their rebuttals of the administration's half-baked case for still more dither, sacrificing thousands of American jobs and energy security to the Chinese. The business community is also up in arms. As the U.S. Chamber of Commerce put it, "The president's decision sends a strong message to the business community and to investors: Keep your money on the sidelines, America is not open for business." The president's Council on Jobs and Competitiveness restated the concern that if the United States is going to have inexpensive and reliable energy, it needs "to optimize all of its natural resources and construct pathways (pipelines, transmission and distribution) to deliver electricity and fuel."

Furthermore, legislation passed by Congress late last year, setting a 60-day deadline for granting the Keystone XL permit absent a determination by the president that the pipeline was not in the "national interest," stated clearly that Obama could not consider any new environmental impact study. "The final environmental impact statement issued by the Secretary of State on August 26, 2011, satisfies all requirements of the National Environmental Policy Act of 1969 ... and section 106 of the National Historic Preservation Act," it said. And to make it crystal clear: "No further Federal environmental review shall be required."

[Read Michael Lynch: Keystone XL's Rewards Outweigh Its Potential Risks]

The fight is not over. The outspoken Sen. Manchin has allies in the Democratic Party. They should coordinate their approach with the Nebraskans. The only question is how the battle will be waged. Clearly there is a national interest in securing an energy supply independent of the Middle East. No project of this scale avoids marginal costs, but the incremental benefits are such as to undermine the confidence that this administration has acted appropriately to balance the national interest with what it considers its own political interest. As Will Rogers said, "Be thankful we're not getting all the government we're paying for."