Wealth & Poverty Review Obama’s Mysterious Keystone Pipeline Opposition Policy

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The Keystone XL Pipeline is one of the three legs that ensure achieving energy independence for the U.S. that I wrote about in the Houston Chronicle (May 2). Given that U.S. energy independence is such a laudable goal with bipartisan support, why is it that President Obama would block Keystone? Space did not allow me to elaborate, so let’s explore the mystery of the Keystone XL delay and opposition saga.
The primary purpose of the Keystone XL pipeline is to transport the thick crude oil from the oil tar sands of Alberta, Canada’s Athabasca region, to refineries on the Gulf Coast in Texas and Louisiana that are specifically designed to process and refine heavy crude into by-products, like gasoline, diesel and jet fuel that the market demands.
Radical environmentalists may have heightened opposition to so-called dirty oil from tar sands, but the end products are essentially the same as those refined from light sweet crude.
Regardless of environmental opposition in the U.S., Canada made the decision years ago to harvest this remarkable oil sands resource. Like accessing oil from shale rock formations, the harvesting of oil sands was made possible by technological breakthrough from the human capital of the scientific-engineering mind. What had no value for thousands of years now has enormous value.
If the U.S. does not take advantage of the availability of this resource, China certainly will to a greater and greater extent. In February 2013, the Chinese National Oil company, CNOOC, closed its $15 billion acquisition of Canada’s Nexen Oil Company, which has a significant stake in the Alberta oil sands. Most environmentalists think globally and must realize that, if the can keeps getting kicked on Keystone, China’s getting there first will make it much harder for the U.S. to have and secure access to Alberta’s Athabasca oil. And then who wins? Certainly not Mother Earth, given China’s horrid environmental record.
Then there is Venezuela who benefits from the failure to build the Keystone XL pipeline.
Most of the capacity of the refineries in Texas and Louisiana, which could handle and refine heavy crude from Alberta coming through the Keystone XL pipeline, is currently taken up by Venezuelan oil, which has similar characteristics. Should the U.S. shift those refineries to processing Canadian oil, Venezuela’s ailing economy would be dealt another blow, which might well bring about regime change in Venezuela–one that would likely turn away from “spreading the wealth” statist socialism and more toward the market and private sector solutions.
People need to follow the money and understand the Keystone mystery by analyzing who benefits. President Obama’s opposition to the Keystone XL pipeline benefits anti-fossil fuel billionaire environmental extremists–like Tom Steyer–and billionaire Democrat supporter Warren Buffet–whose Burlington Northern Santa Fe railroad capitalizes on transporting the oil that would otherwise flow more economically through the Keystone pipeline.
People also need to follow the power and ask who benefits. Neither American workers nor consumers benefit from Obama’s opposition to the Keystone pipeline. But internationally, Obama’s position benefits China and Venezuela–two repressive regimes that are often hostile to the United States–while at the same time weakening U.S. relations with our longstanding friend and ally, Canada.
Call it “leading from behind” on energy independence and security.
Image: Flickr/Suncor Energy

Scott S. Powell

Senior Fellow, Center on Wealth and Poverty
Scott Powell has enjoyed a career split between theory and practice with over 25 years of experience as an entrepreneur and rainmaker in several industries. He joins the Discovery Institute after having been a fellow at Stanford’s Hoover Institution for six years and serving as a managing partner at a consulting firm, RemingtonRand. His research and writing has resulted in over 250 published articles on economics, business and regulation. Scott Powell graduated from the University of Chicago with honors (B.A. and M.A.) and received his Ph.D. in political and economic theory from Boston University in 1987, writing his dissertation on the determinants of entrepreneurial activity and economic growth.