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Dan Reed

Obama’s Veto of Keystone XL Bill Won’t Last Forever

President Obama’s unsurprising Feb. 24 veto of the bill authorizing construction of the final key leg of the Keystone XL pipeline from Canada through Nebraska took place in private. There was no news conference, no ceremony, no gathering of bill opponents standing behind the President, no TV cameras. The Administration only made a modest statement announcing the veto.

It also means that there continues to be no resolution to the highest-profile energy policy issue of the last decade.

Current Transportation Process is Highly Dangerous

Thick Canadian Tar Sands crude will continue flowing through Canada and the United States, albeit at much lower volumes than the market demands. But it won’t be flowing as efficiently, as cheaply or as voluminously as it could – or should.

Rail cars will continue to carry the stuff – and also oil and liquefied natural gas from major U.S. and Canadian shale formations – at least part way across the continent. U.S. and Canadian trains derail as often as 2,000 times a year. A recent analysis projects that the 15 or so major derailments each year involving trains hauling crude of various types would cause $4.7 billion in collective property damage over the next 20 years.

Although most such accidents happen in rural areas, if any one such accident were to occur in a high population area experts predict that more than 200 people would be killed and property damages could exceed $6 billion. Indeed, the gruesome wreck of a train carrying shale gas in the small Canadian town of Lac-Megantic, Quebec, in 2013 killed 47 people and did $1.7 billion worth of damage.

Veto Costs 42,000 Jobs, Endangers Current Workers

Meanwhile barges and trucks will continue transporting 27 percent of all the crude and raw natural gas moved in North America. Accordingly, they will remain subject to all the inherent dangers of those modes of transportation, both of which entail considerably higher risk than transportation via pipeline.

Perhaps as many as 42,000 workers who would have been hired to construct the pipeline, build and transport necessary equipment or serve those workers in various ways will now how to find work elsewhere. And the few thousand who would have held long-term jobs related to the maintenance and operation of the Keystone XL or the support of those workers also face a less certain future.

Meanwhile, refineries will continue to operate all along the Gulf Coast and elsewhere processing the Tar Sands crude, shale crude, natural gas and any other type of crude that makes it through to them. All of these resources are destined for domestic and international markets where they’ll be burned in home and building furnaces and nearly every type of transportation that runs on petroleum products.

Veto is Merely a PR Victory for Activists Groups

In short, the politically active environmentalist groups and individuals Obama sided with in vetoing the Keystone XL bill achieved nothing but a minor public relations victory. Arguably, they even lost something by forcing Tar Sands, shale crude and natural gas flowing from western Canada and the Bakken shale region in the northwest United States to flow via more dangerous and environmentally unfriendly means than the proposed Keystone pipeline.

But, just as the story of Joseph says that eventually there came a Pharaoh “that knew not Joseph” and therefore began enslaving Joseph’s Hebrew descendants who’d found refuge in Egypt from draught and crop failure in their homeland, there will come a president who will no longer hold in high regard the environmentalists to whom Obama has bowed. That president, whether it’s the next one or the one after that, will approve the completion of the Keystone pipeline – that is, if the courts don’t order it first or Congress doesn’t find a way to overcome Obama’s recent veto or any future vetoes of subsequent legislation authorizing completion of the pipeline.

Eventually, the Keystone XL, or something very much like it operating under a different name, will be built. The global demand for oil won’t go away simply because Obama vetoed this bill.

With oil and gas prices at their lowest in years, the pain of Obama’s veto is not so sharp. In fact, TransCanada, the company building Keystone XL, may be secretly happy about the temporary delays that Obama’s veto represents. Delaying infrastructure spending a bit during a time of shrinking revenues and new price pressures isn’t a bad thing.

But the long-term need for Keystone XL is in no way diminished by the stroke of Obama’s pen on his veto order. Unfortunately, the rest of us will have to put up with the continuing, sometimes nasty, and pointless political arguments for some time more.

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