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Obama’s Magic Kingdom of Joblessness
President Barack Obama’s decision yesterday to reject a permit for TransCanada Corp.’s Keystone XL oil pipeline may prompt Canada to turn to China for oil exports.
Prime Minister Stephen Harper, in a telephone call yesterday, told Obama “Canada will continue to work to diversify its energy exports,” according to details provided by Harper’s office. Canadian Natural Resource Minister Joe Oliver said relying less on the U.S. would help strengthen the country’s “financial security.”
The “decision by the Obama administration underlines the importance of diversifying and expanding our markets, including the growing Asian market,” Oliver told reporters in Ottawa.
Currently, 99 percent of Canada’s crude exports go to the U.S., a figure that Harper wants to reduce in his bid to make Canada a “superpower” in global energy markets.
Canada accounts for more than 90 percent of all proven reserves outside the Organization of Petroleum Exporting Countries, according to data compiled in the BP Statistical Review of World Energy. Most of Canada’s crude is produced from oil-sands deposits in the landlocked province of Alberta, where output is expected to double over the next eight years, according to the Canadian Association of Petroleum Producers.
“I am sure that if the oil sands production is not used in the United States, they will be used in other countries,” Fatih Birol, chief economist at the International Energy Agency, said in an interview before a speech at Imperial College in London today.
Harper “expressed his profound disappointment with the news,” according to the statement, which added that Obama told Harper the rejection was not based on the project’s merit and that the company is free to re-apply.
Canada this month began hearings on a proposed pipeline by Enbridge Inc. to move crude from Alberta’s oil sands to British Columbia’s coast, where it could be shipped to Asian markets.
Environmentalists and Canadian opposition lawmakers welcomed the Obama administration’s decision. Megan Leslie, a lawmaker for the opposition New Democratic Party, said the Keystone pipeline project was harmful to Canada’s energy security.
“What I’m opposed to is continuing the unchecked expansion of the oil sands,” Leslie said by telephone.
Enbridge’s pipeline may now become the new flashpoint between Harper and the opposition. Harper has said building the capacity to sell the country’s oil to Asian markets is in the national interest, and the government will review regulatory- approval rules for new energy projects so they can be done more quickly. Harper has also said he will look more closely into complaints that “foreign money” is being used to overload the regulatory process.
“We have to have processes in Canada that come to a decision in a reasonable amount of time, and processes that cannot be hijacked,” Harper said at a press conference Jan. 6 in Edmonton.
The Keystone decision is the latest of several U.S. moves that have irked Canadian policy makers. Canada objected to “Buy American” provisions in the Obama administration’s $447 billion jobs bill that was blocked by Republicans in Congress, as well as the restoration of a $5.50 fee on Canadian travelers arriving in the U.S. by plane or ship.
Approval of Keystone is a “no-brainer,” Harper said in a Sept. 21 interview with Bloomberg.
Cornerstone of Development
Yesterday’s rejection “certainly introduces new uncertainties into the economic relationship,” said David Pumphrey, deputy director of the energy and national security program at the Center for Strategic and International Studies in Washington. “This is a cornerstone of economic development for the country.”
The denial came before a Feb. 21 deadline set by Congress after Obama postponed a decision in November. TransCanada said the 1,661-mile (2,673-kilometer) project would carry 700,000 barrels of crude a day from Alberta’s oil sands to refineries on the U.S. Gulf coast, crossing six U.S. states and creating 20,000 jobs.
“I’m disappointed that Republicans in Congress forced this decision, but it does not change my administration’s commitment to American-made energy,” Obama said today in a statement. “We will continue to look for new ways to partner with the oil and gas industry to increase our energy security.”
Canadian policy makers said they remain optimistic TransCanada will eventually be able to proceed.
Alberta Premier Alison Redford said in a press conference in Edmonton that it is still “entirely possible” the pipeline will be built and said it was good news that TransCanada planned to apply again.
Canada will continue to support TransCanada Corp. (TRP)’s plans to build the Keystone XL pipeline, Canadian Foreign Minister John Baird said, adding that it is in the best interests of both Canada and the United States.
“We strongly believe that Keystone’s in the best interests of both countries,” he said. “We’ll continue to be an active supporter of the project.”
To contact the reporters on this story: Theophilos Argitis in Ottawa at firstname.lastname@example.org; Jeremy van Loon in Calgary at email@example.com
To contact the editors responsible for this story: Chris Wellisz at firstname.lastname@example.org; David Scanlan at email@example.com
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Rejecting the Keystone pipeline is an act of insanity
Text Size PrintE-mailReprintsBy Robert J. Samuelson, Published: January 19
President Obama’s rejection of the Keystone XL pipeline from Canada to the Gulf of Mexico is an act of national insanity. It isn’t often that a president makes a decision that has no redeeming virtues and — beyond the symbolism — won’t even advance the goals of the groups that demanded it. All it tells us is that Obama is so obsessed with his reelection that, through some sort of political calculus, he believes that placating his environmental supporters will improve his chances.
Aside from the political and public relations victory, environmentalists won’t get much. Stopping the pipeline won’t halt the development of tar sands, to which the Canadian government is committed; therefore, there will be little effect on global-warming emissions. Indeed, Obama’s decision might add to them. If Canada builds a pipeline from Alberta to the Pacific for export to Asia, moving all that oil across the ocean by tanker will create extra emissions. There will also be the risk of added spills.
inShare.Robert J. Samuelson
Samuelson writes a weekly column on economics.
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.Now consider how Obama’s decision hurts the United States. For starters, it insults and antagonizes a strong ally; getting future Canadian cooperation on other issues will be harder. Next, it threatens a large source of relatively secure oil that, combined with new discoveries in the United States, could reduce (though not eliminate) our dependence on insecure foreign oil.
Finally, Obama’s decision forgoes all the project’s jobs. There’s some dispute over the magnitude. Project sponsor TransCanada claims 20,000, split between construction (13,000) and manufacturing (7,000) of everything from pumps to control equipment. Apparently, this refers to “job years,” meaning one job for one year. If so, the actual number of jobs would be about half that spread over two years. Whatever the figure, it’s in the thousands and thus important in a country hungering for work. And Keystone XL is precisely the sort of infrastructure project that Obama claims to favor.
The big winners are the Chinese. They must be celebrating their good fortune and wondering how the crazy Americans could repudiate such a huge supply of nearby energy. There’s no guarantee that tar-sands oil will go to China; pipelines to the Pacific would have to be built. But it creates the possibility when the oil’s natural market is the United States.
There are three things to remember about Keystone and U.S. energy policy.
First, we’re going to use lots of oil for a long time. The U.S. Energy Information Administration (EIA) estimates that U.S. oil consumption will increase 4 percent between 2009 and 2035. The increase occurs despite highly optimistic assumptions about vehicle fuel efficiency and bio-fuels. But a larger population (390 million in 2035 versus 308 million in 2009) and more driving per vehicle offset savings.
The more oil we produce domestically and import from neighbors, the more we’re insulated from dramatic interruptions of global supplies. After the United States, Canada is the most dependable source of oil — or was, until Obama’s decision.
Second, barring major technological breakthroughs, emissions of carbon dioxide, the main greenhouse gas, will rise for similar reasons. The EIA projects that America’s CO2 emissions will increase by 16 percent from 2009 to 2035. (The EIA is updating its projections, but the main trends aren’t likely to change dramatically.) Stopping Canadian tar-sands development, were that possible, wouldn’t affect these emissions.
Finally, even if — as Keystone critics argue — some Canadian oil were refined in the United States and then exported, this would be a good thing. The exports would probably go mostly to Latin America. They would keep well-paid industrial jobs (yes, refining) in the United States and reduce our trade deficit in oil, which exceeded $300 billion in 2011.
By law, Obama’s decision was supposed to reflect “the national interest.” His standard was his political interest. The State Department had spent three years evaluating Keystone and appeared ready to approve the project by year-end 2011. Then the administration, citing opposition to the pipeline’s route in Nebraska, reversed course and postponed a decision to 2013 — after the election.
Now, reacting to a congressional deadline to decide, Obama rejected the proposal. But he also suggested that a new application with a modified Nebraska route — already being negotiated — might be approved, after the election. So the sop tossed to the environmentalists could be temporary. The cynicism is breathtaking.
Yesterday in Walt Disney World, the land “where dreams come true,” President Barack Obama appeared before Cinderella’s Castle to announce his latest plan to boost jobs in America–an effort to increase tourism to the United States. His announcement came one day after he flat out said “NO” to another plan that would have directly created at least 20,000 truly shovel-ready jobs–and 179,000 American jobs by 2035–while bringing more than 700,000 barrels of oil to the United States each day. That plan was the Keystone XL pipeline.
Had the President approved Keystone, a 1,700-mile pipeline would have been extended from Alberta, Canada, to Texas refineries — lifting up the U.S. economy with private-sector investment, putting people to work, and helping increase the supply of energy to lower prices when fuel costs are through the roof. Despite a finding by the State Department that the pipeline would pose minimal environmental risk, environmentalists were still up in arms and lobbied the President to say no to the plan.
The President’s decision is so out of line with fact and reason that The Washington Post strongly condemned it in an op-ed yesterday, saying the “pipeline rejection is hard to accept” and “We almost hope this was a political call because, on the substance, there should be no question.” As the Post explained, even without the pipeline, Canada will still export its oil–but across the ocean to China, instead. Meanwhile, the United States will continue importing crude oil from the Middle East. In other words, the environmental lobby might have stanched the flow of oil from Canada, but it’s being diverted onto the seas, and fossil fuel consumption will necessarily continue.
The environmental left’s “victory” is ultimately another loss for the American people — especially the 13.1 million unemployed workers. It’s a loss for small businesses, such as restaurants and hotels, in the towns along the proposed route. It’s a loss for state budgets that would have seen billions in tax revenue as a result. And it’s also a loss for those who are struggling with high energy costs.
Gas prices are at a record high for January and are 28.5 cents per gallon higher than a year ago. And that’s expected to go even higher–some analysts predict that the national average for a gallon of regular unleaded could hit $4 to $4.25 per gallon by the spring.
One might think that given the high cost of energy, the President would be seeking to increase domestic production, especially given Iran’s threats to block the Strait of Hormuz, thereby cutting off a quarter of the world’s energy supply. Think again. Under President Obama, oil and natural gas production on federal lands is down by more than 40 percent compared to 10 years ago, 2010 had the lowest number of leases issued for oil and gas production on federal lands since 1984, and the Administration held only one offshore lease sale in 2011.
There is one bright spot in the nation for energy production: North Dakota. Overall energy production has increased thanks to the state’s pro-energy policies, and North Dakota has reaped the benefits, as have other like-minded states, as Heritage’s Rob Bluey reports:
North Dakota’s unemployment rate is 3.4 percent, the lowest in the country. According to a recent report from IHS Global Insight, North Dakota already returned to pre-recession employment along with energy-rich Alaska. Texas is expected to do so in the first quarter of 2012, followed by Nebraska and South Dakota next year.
There’s much more that could be done, though, to move America further toward safely developing energy resources here at home–and the Keystone XL pipeline would be one such step. The House Energy and Commerce Committee will hold a hearing to review legislation that would restart the project, focusing on a bill introduced by Representative Lee Terry (R-NE), which would allow construction on the pipeline to begin a month after passage. Heritage’s Nicolas Loris explains that “a simple, effective approach would be for Congress to authorize the pipeline application as submitted by TransCanada pursuant to its authority to regulate commerce with other nations.”
Sadly, this action wouldn’t have been necessary if President Obama put the interests of the American people before his own political interests. He could have green-lighted the Keystone XL pipeline this week and helped create real jobs and increase the supply of affordable, reliable energy, without spending public dollars or advocating tax hikes. But instead he headed for the Magic Kingdom and continued to spin the fantasy that he has the answers for job creation in America. In the meantime, Americans can only dream of a stronger economy and a brighter future.
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•Voters in South Carolina head to the polls tomorrow in the next Republican primary election.
•France is suspending training operations in Afghanistan after four French soldiers were killed and more than a dozen were wounded when an Afghan soldier opened fire on his trainers.
•Syria’s opposition movement is calling for a day of protests against the country’s government. Meanwhile, the Arab League is deciding whether to continue its month-long mission to monitor Syria’s government and its pledge to end the violent crackdown on protesters.
•LUNCHTIME WEB CHAT: Join us today from 12 PM to 1 PM as we discuss President Obama’s decision to block the Keystone XL pipeline. Click here to participate!
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