What 'National Interests' Led Obama To Oppose The Keystone XL Pipeline?

US Army Corps of Engineers/CC BY 2.0

The Obama Administration is opposed to to the Keystone XL Pipeline project; by now we've heard the breaking news. Now, what's next?

First of all, the Administration decision does not mean the project is dead. Keystone XL certainly can come back with changes to the routing, with improved safety measures for both construction and operating phases, with more mitigation measures for unavoidable adverse environmental and economic impacts, and so on. In fact, count on it.

International Trade, Economics May Be More Behind Decision Than Environment & Party Politics
One national interest framing the debate is maintaining a favorable trade relationship with Canada, from which the XL pipeline and contents will both originate from and flow back to—a double line is proposed, with petroleum-distillate pumped back to Alberta, where it will dilute the viscous oil, allowing it to be pumped in winter.

It is because of that relationship, not just a shared border, that the State Department was charged with evaluating the pipeline proposal.

Note: The Environmental Protection Agency is not a cabinet agency.

EPA staff were asked for comments once the proposed design was evaluated by the State Department, Homeland Security, and perhaps Commerce. EPA did not manage the review, nor does it need to delve into what trade and political factors were being considered at the White House. Indeed, I expect that international politics play a much more important role in this call than most expect.

Liquid fuel, a large portion of which is made in refineries along the US Gulf Coast, is now, for the first time ever, the single largest US export commodity. Refining, distribution, and trading companies love being able to sell that liquid fuel to the highest bidders. Their biggest customers are in China, Korea, Japan, Brazil. With the US balance of trade sliding deeper into the red, a problem made worse by the European financial melt down, government economists want to see as much fuel as possible sold to China and Brazil, for example.

Should the Strait of Hormuz become blocked as an unintended consequence of the economic pressures being put on Iran, demand for alternative sources of oil would increase dramatically. Demand for refined oil products would increase, commensurately. Because oil and oil products are globally traded commodities a black swan event in the Middle East would increase fuel prices for everyone, everywhere. And no amount of 'drill baby drill' whining would be able make a difference.

In taking this decision, the White House had to balance more than just the viewpoints of House Republicans, a handful of State governors, State party chairs, Tea Party knuckleheads, and environmental activists. They're looking at the big picture: What can be done to both please pro-environmental voters while making certain that the decision won't drag down the stock market, lower GDP, anger major trade partners and undermine diplomatic strategy, etc. Flexibility is sure to be built in to whatever decision is formally announced. That's why I'm certain Keystone XL will, in some form, be back.

Tags: Clean Energy | Global Climate Change | Oil Spill

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