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Obama, jobs, and the Keystone XL pipeline

By Robert J. Samuelson,November 11, 2011

To those who claim that the Obama administration’s regulatory policies don’t have any effect on jobs, we now have conclusive evidence to the contrary from — you guessed it — the Obama administration. In case you missed it, the administration announced Thursday it is delaying a decision on the $7 billion Keystone XL pipeline, which would transport oil from Canada’s oil-sands deposits to American refineries on the Gulf Coast. Although there’s some disagreement over the number of jobs involved, no one disputes that the project would be a sizable net employer. The Obama administration estimated 5,000 to 6,000 construction jobs. Some other estimates are higher.

The project has been under regulatory review for about three years, which is roughly the administration’s time in office. Because the pipeline crosses international borders, the State Department is charged with assessing the project’s environmental impact and whether it’s in the “national interest.” State had signaled a decision by the end of this year. In its announcement Thursday, it said the new review “could be completed as early as the first quarter of 2013.”

You will note that, somehow, State can’t complete the new review before the November presidential election. You should also note that, had the project been approved, it was scheduled to begin operating in 2013. Finally, you should note that this is one of those large “infrastructure” projects that the administration repeatedly touts as desirable for long-term job growth.

But environmentalists strongly oppose the project on two grounds: They object to oil-sands development that adds to greenhouse-gas emissions; and they argue that a spill from the pipeline might contaminate groundwater, particularly the Ogallala aquifer in Nebraska.

There are two possible explanations for the delay — politics or incompetence in the original review. “This is all about politics and keeping a radical constituency, opposed to any and all oil and gas development, in the president’s camp in 2012,” said Jack N. Gerard, head of the American Petroleum Institute . Kerri-Ann Jones, the State Department official overseeing the review, denied that. “This is not a political decision,” she said. Although President Obama had conspicuously announced that he could overrule State, she said “there was no effort to influence our decision.”

Was the original review deficient? In late summer, State released a voluminous environmental impact statement — running hundreds of pages — that gave a green light to the project. The study concluded that Canada would proceed with oil-sands development even if the pipeline were rejected. It would “seek alternative transportation systems to move oil to markets.” This, in effect, disposed of the greenhouse-gas argument; these emissions will occur anyway.

As for the pipeline’s direct hazards, the review concluded that it “would have a degree of safety greater than any typically constructed domestic oil pipeline.” Inevitably, the report said, there would be some spills. It cited an earlier Keystone oil pipeline that began operating in June 2010. Since then, there had been 14 spills. Of those, seven were 10 gallons or less and four were 100 gallons or less. The largest was 21,000 gallons, but almost all of that was “contained within the pump station” where the spill occurred. The report also found that even severe spills would contaminate only small stretches of local aquifers and that in “no spill incident scenario would the entire (aquifer) system be adversely affected.”

In its decision to delay the project, the State Department cited opposition in Nebraska to the existing route. But the environmental impact statement also reviewed major route alternatives and found that they “would be longer than the proposed route and would disturb more land and cross more water bodies than the proposed route.”

As energy policy, the administration’s decision moves in the wrong direction by tempting Canada to look abroad — probably to Asia — for markets for its oil-sands production. This is hardly the path to improving our energy security by favoring the most reliable suppliers. It’s also an affront to Canada, one of our closest allies.

As economic policy, it shows that regulatory issues do dampen job growth. They aren’t the only source of weak employment — the housing slump, the hangover from the financial crisis, and Europe’s ongoing problems are major causes — but the administration’s argument that they have no effect is refuted by its own actions.