When Poor Politics Trumps Good Policy: The Story of Keystone XL

The administration’s rejection of the Keystone XL pipeline stands as a triumph of politics over sound policy—and a prime example of why the country needs less government intervention in the energy sector.

Any pipeline that would cross the U.S.–Canadian border requires a review by the Department of State (DOS) and a presidential permit. The law states that the decision regarding the permit application is to reflect the national interest.  Instead, the administration chose to cater to a special interest: its environmental activist base. In so doing, it consciously ignored robust scientific evidence that the pipeline posed minimal environmental risk.

TransCanada first applied for the permit to build Keystone XL in 2008. At the time, it was not considered especially controversial. After all, America already had more than half a million miles of crude oil, petroleum, and natural gas pipelines—including a Keystone Pipeline that runs from Alberta to Illinois. Energy infrastructure may face local NIMBY fights, but rarely does a single pipeline attract consistent national attention.

The environmental review of Keystone XL consisted of public meetings with communities and consultation with state environmental agencies and outside experts. The State Department studied threats to water resources, soil, wetlands, vegetation and wildlife. Multiple environmental impact statements concluded that the pipeline would pose no significant environmental risk. In October 2010 when someone pressed then Secretary of State Hillary Clinton on a Keystone XL decision, she remarked, “We are inclined to do so.”

But the environmental activist movement changed that inclination. Using scare tactics, they found ways to drive negative attention to the project.

Their first gambit was to raise alarms over the fact that the pipeline would cross over the Ogallala Aquifer in Nebraska—an important source of water for the Midwest.  They didn’t mention that thousands of miles of pipeline already cross the aquifer—without incident. Further, the State Department’s review and external geologists concluded that the slope of the aquifer and the geologic makeup of the soil would make it extremely difficult for any leaked oil to reach such depths. In sum, the contamination risk was extremely minimal.

But sound reasoning was no match for activists with megaphones.

The biggest purported concern however, and what started the crusade to block Keystone XL, was climate change. Opponents of the pipeline said that if you’re serious about combatting climate change, you can’t be serious about building Keystone XL, because extracting and producing oil from Canada’s oil sands would increase carbon dioxide emissions.

No matter how you feel about the severity of CO2 emissions’ impact on warming, the climate effects of the pipeline would be negligible, if any. The State Department’s environmental analysis noted that companies will extract Canadian oil whether Keystone XL is built or not.  Even as President Obama dithered over the permitting decision, Alberta’s oil sands production rose from 1.5 million barrels per day to 2 million barrels per day from 2011 to 2014.  Companies simply shipped the crude via rail and other pipelines. 

Obstructionists argued that killing Keystone XL is imperative to permanently halting tar sands production. And other potential Canadian pipeline projects have, indeed, come under fire. But companies will find a way to ship the crude.  Those alternatives may be more costly and less efficient, but the value of the oil is too large to have a few rejected infrastructure projects stand in the way. Low oil prices may hamper tar sands extraction, but the availability of transportation will not.

Overall, it took President Obama 86 months to reject the permit. Throughout, the administration offered one weak excuse after another for why the project had not yet received the green light. Each time, sound scientific evidence and logic—often drawn from his own agency’s reports—rebutted those excuses. Even Mr. Obama’s former Secretary of Energy Steven Chu said the decision was political, not scientific.

What may be most unsettling is that, in rejecting the permit, President Obama determined, “The pipeline would not make a meaningful long-term contribution to our economy.”  Whether that’s true or not, that’s no reason for the federal government to say no. Just as the president shouldn’t have a say about the economic value of a new restaurant, he shouldn’t have a say about a pipeline. If the project does not pose a public health or safety threat, it’s not Washington’s job to approve a project based on its economic worth.

If a preponderance of evidence didn’t convince the Obama administration to approve Keystone XL, all of the evidence in the world wouldn’t have helped. But reducing the government’s role in controlling decisions would. Anointing bureaucrats to determine whether Keystone XL is in the national interest allows the federal government and their connected special interest groups to ignore sound science and reasoning.

That makes for great political theater but poor public policy.

The Heritage Foundation’s Herbert and Joyce Morgan Fellow, economist Nicolas Loris specializes in energy and environmental policy. A senior policy analyst in Heritage’s Roe Institute for Economic Policy Studies, Mr. Loris has testified before Congress, and has been published or quoted in publications including the Wall Street Journal and New York Times.

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