Our Handling of Keystone Is a Smack In Canada's Face

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The Keystone XL (KXL) pipeline, which would bring oil from Canada's oil-sands to refiners in the Gulf Coast is in the news again. An unlikely set of bedfellows have recently come out with strong statements of support for the pipeline. The American Petroleum Institute says exit polls during the last election showed 75% of Americans support building KXL. A bi-partisan group of 18 Senators also favors it, calling on the Administration to issue a Presidential Permit as soon as Nebraska finishes re-routing the planned pipeline, a process that's nearly complete. And the Laborer's International Union of North America also wants KXL, arguing that there's "no rationale for further delay."

Standing foursquare against Keystone XL is the environmental lobby, led by the peripatetic Bill McKibben, of 350.org, a group devoted to limiting the concentration of CO2 in the atmosphere to 350 parts per million, the level they feel will only lead to moderate warming. McKibben's been dashing around the country in a biodiesel-fueled bus, warning of the perils of greenhouse gases and the Keystone pipeline. He also held an anti-Keystone rally in Washington on November 18th, that while smaller than previous such rallies, still attracted "hundreds" of supporters, according to Reuters.

So let's review the factors that should impact the decision. First up is the potential for economic gain. This should probably be the first consideration on just about every decision while the country remains mired in lackluster growth. Claims for the economic potential of Keystone XL are all over the map, with job estimates ranging wildly from over 100,000 to as little as 4,650 temporary jobs and 50 permanent jobs at the end of the day. But as Cato's Jerry Taylor and Peter Van Doren point out, jobs are a pretty poor surrogate measure for the economic benefits to be had in building the pipeline. What we know is that the market expects enough return on the investment of building the pipeline to produce economic gains for everyone involved, from the oil-sellers, to the refiners, to the people who'll take the refined product to markets - markets both in the U.S. and abroad. And that should be good enough. As Taylor and Van Doren observe, "The argument for allowing the construction of the Keystone pipeline to go forward is simple but, perhaps, not politically all that sexy; the federal government should not needlessly frustrate markets and the gains from trade that go to market participants; firms, consumers, and labor."

But what about environmental risk? The primary concern environmentalists raise when it comes to Keystone XL is that it might leak and contaminate a large aquifer called the Ogallala, and that somehow, stopping Keystone XL would reduce greenhouse gas emissions that they fear are going to cook us all. But again, Taylor and Van Doren point out the insanity of such claims, explaining that because of topography, the Keystone pipeline would only run over a small portion of the Ogallala, and it's the downslope portion at that: for oil from the Keystone pipeline to contaminate the main body of the aquifer, it would have to defy gravity.

The U.S. has over 2 million miles of pipeline that operate with excellent safety, surely we can handle a bit more. As for greenhouse gas emissions, even if one assumed that environmentalists were successful in killing Keystone XL, and in stopping Canada from building other export pathways either via pipelines to their east and west coasts, or via increased use of truck, rail, and marine transport, the impact on the climate would be un-measurably tiny. Canada is responsible for a grand total of 2% of the world's greenhouse gas emissions (not bad for the world's 11th largest economy). Anything that might be accomplished by the tiny incremental reduction of emissions from Canada would be eradicated completely by growth in China, which is the world's largest (and fastest growing) greenhouse gas emitter. China recently joined with India, Brazil, and South Africa to dampen expectations that they'd be a part of any binding greenhouse gas control regime.

Finally, there's what we might call neighborliness (or as the Canadians would say, neighbourliness.) Canada has fought alongside the U.S. in most of our military conflicts since WWII. They helped take us in when planes were diverted to Canada after the September 11 attacks on the twin towers, and they mourned with us for those who were killed. Our trade with them is globally and historically unprecedented. They work and live among us, as we do among them. As John Kennedy said, "Geography has made us neighbors. History has made us friends. Economics has made us partners. And necessity has made us allies. Those whom nature hath so joined together, let no man put asunder."

Environmentalists seek what is essentially a blockade on Canadian oil, an act which we normally consider only fitting for enemies and global evil-doers. It's certainly not something fitting for a staunch ally and our biggest trading partner.


Kenneth P. Green is a resident scholar at the American Enterprise Institute.

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