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If President Obama is looking for ideas that would build American infrastructure, create jobs, and reduce the budget deficit, here's an option to consider.
I commented earlier on the current astonishing geographic differential in the price of crude oil. Producers of Williston sweet in North Dakota are only getting $96 a barrel, while refiners on the coast are paying over $120 for similar oil imported from other countries. That disparity in price is a dramatic market signal that we have a desperate need for better transportation infrastructure, ideally a pipeline running all the way from the Williston Basin to the Gulf Coast, to allow refiners to replace expensive imported oil with cheaper domestic.
And a company called TransCanada is seeking permission to build exactly what we need. TransCanada has already spent $5 billion on the Keystone Pipeline connecting production from Canadian oil sands to refiners in Oklahoma and Illinois, and wants to spend an additional $7 billion on a proposed Keystone Gulf Coast Expansion, which would expand the capacity and extend the pipeline all the way to the Gulf of Mexico. The company claims the project would "create more than 15,000 high-wage manufacturing jobs and construction jobs in 2011-2012 across the U.S". Perryman Group estimates the direct construction spending would add $9.6 billion to U.S. GDP and produce substantial new tax revenues for local, state, and federal government. There is the additional huge benefit that, at the current geographic oil price differential, the marginal barrel transported would provide a combined gain in economic surplus to producers and consumers of more than $20. Note we're talking about a project that could deliver an additional 500,000 barrels each day to Gulf Coast refiners, or up to $3.6 billion in annual value added that we're currently missing.
Some of that surplus would be captured by Canadian producers in the form of a higher price received for their product. But better transportation infrastructure would also be a tremendous benefit to U.S. consumers, refiners, and any U.S. producers selling into the flow that currently stops in Cushing, Oklahoma. For example, BakkenLink proposes to build a series of connector pipelines for Williston producers to feed into the Keystone expansion, and Montana producers correctly perceive that the Keystone expansion is critical for their future.
Why isn't this a no-brainer? A letter signed by 50 members of Congress last June urged the U.S. State Department to turn down the proposed Keystone expansion on the grounds that oil produced from Canadian oil sands has a substantially bigger effect on atmospheric CO2 levels than oil produced from conventional sources. While that is true, it is important to recognize that the current alternative is for the U.S. to pay an ever-increasing sum for the privilege of importing oil from places like Venezuela, Saudi Arabia, Nigeria, and Iraq.
My view is that the geopolitical consequences of the latter pose the greater global risk. I urge President Obama to approve the Keystone expansion.
Posted by James Hamilton at April 19, 2011 11:18 AM
Excellent JDH. We desperately need more domestic oil production and less biofuel.
Here is an article from the Journal of Physicians and Surgeons, Spring 2011, that explains exactly why letting climate policy trump all other public policy is beyond reprehensible.
the increase in the poverty headcount in 2010 due to biofuel demand translates into 192,000 additional deaths
http://www.jpands.org/vol16no1/goklany.pdf
You can't call the author a crackpot. He's an IPCC man.
The author, Indur M. Goklany, Ph.D., has been associated with the Intergovernmental Panel on Climate Change (IPCC) since its inception in 1988 as an author, expert reviewer, and U.S. delegate to that organization.
Posted by: tj at April 19, 2011 01:55 PM
Goodness, Jim, next you'll be talking about the virtues of coal!
Posted by: Steven Kopits at April 19, 2011 02:04 PM
Let's build some fracking infrastructure!
Posted by: aaron at April 19, 2011 02:11 PM
tj You do realize that the Journal of Physicians and Surgeons is just a publication put out by a reactionary front organization, right? And its members are not really physicians and surgeons. Some of the far right wing crackpots have used so-called JPAS "studies" to bolster a lot of wild-eyed claims. Calling its members "physicians and surgeons" has about as much truth to it as calling Heritage Foundation a scholarly think tank.
http://en.wikipedia.org/wiki/Association_of_American_Physicians_and_Surgeons
Posted by: 2slugbaits at April 19, 2011 03:20 PM
Jim, great article. The reason this decision is a "no-brainer" is because the energy/environmental issues are based upon science like this: The UN "disappears" 50 million climate refugees, then botches the disappearing attempt http://wattsupwiththat.com/2011/04/15/the-un-disappears-50-million-climate-refugees-then-botches-the-disappearing-attempt/#more-38006
It is also based upon understandings like: "...that oil produced from Canadian oil sands has a substantially bigger effect on atmospheric CO2 levels than oil produced from conventional sources." When the reality is: "US Greenhouse gas emissions drop to lowest level in 15 years" http://wattsupwiththat.com/2011/04/19/us-greenhouse-gas-emissions-drop-to-lowest-level-in-15-years/
Anybody with any common sense, you included, understands the value of inexpensive energy to economic development.
Posted by: CoRev at April 19, 2011 04:22 PM
CoRev It is also based upon understandings like: "...that oil produced from Canadian oil sands has a substantially bigger effect on atmospheric CO2 levels than oil produced from conventional sources."
Suggest you reread what JDH wrote. Particularly this part immediately following your quote: "While that is true..." Whether or not the advantages of an additional pipeline outweigh the environmental costs of higher CO2 is an arguable point over which reasonable people can disagree. I don't have any particular opinion on the matter one way or the other and I'm not aware of any studies that address the issue, although I'm sure there are some studies somewhere. But saying that the advantages of a pipeline bringing down oil from Canadian sands might outweigh the environmental costs is not exactly the same thing as saying there are no environmental costs. JDH said the former, not the latter.
Posted by: 2slugbaits at April 19, 2011 06:08 PM
Jim: Great piece! I wholeheartedly join you in urging President Obama to approve this project.
Posted by: Phil Rothman at April 19, 2011 08:45 PM
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