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From Keystone to Crimea: Liberating North American Energy

This article is more than 10 years old.

If President Obama needed yet another reason to approve the Keystone XL pipeline, he has it with the events in Crimea. Russia’s military incursion has only highlighted the need for improved transportation of oil and natural gas from the world's fastest growing energy hub, North America, for energy-market stability.

Immediately after Putin's forces entered the Crimean Peninsula, the price of crude oil jumped to a sustained six-month high of nearly $105 a barrel. Every dollar increase adds cents-per-gallon at the pump and to heating-oil bills. And it hurts the lower-income consumers the most, followed by middle-class Americans.

Average gas prices across the United States just broke $3.50 per gallon for the first time in six months. And this comes right as many households are facing skyrocketing heating bills with the harsh winter. Increased usage puts a strain on our supply of natural gas -- causing many utilities companies to switch to less environmentally-friendly fuel oil -- a petroleum product that accounts for one gallon of every of 42-gallon barrel of crude oil.

Enter the long market-ready, politically-delayed Keystone XL Pipeline, the final leg of four segments of the project, to move oil from Canada and North Dakota to Gulf Coast refineries for world distribution. Keystone XL's 830,000 daily barrels, which would displace oil now imported by the same refineries, means a more fluid, integrated, supply-rich international oil market.

In times of international incident, that can mean real savings for energy consumers at home and abroad.

There is very much to like about Keystone XL. Obama can both protect the environment and boost the economy by directing the State Department to end his Administration's five-year stall and approve. Obama is out of excuses to not do so. Maybe it will even be done as a diversion from his other problems, a sop of sorts for beleaguered consumers.

Indeed, it might be an offset for the just-proposed environmental regulations tightening controls on sulfur content in gasoline. Regulators claim this move would add less than a penny to the price at the pump. Other studies, however, predict a six-to-nine cent increase per gallon, based on a capital-cost increase of gasoline production of $10 billion, and $2.4 billion in annual compliance costs. A number in the middle represents a real consumer burden that Obama is invited to redress with his pen and phone.

Anti-Keystone environmentalists fell on their own sword with a recent State Department analysis showing that the project was likely to decrease, not increase, greenhouse gas emissions. How so? Because the Canadian shale will get developed regardless of whether Keystone XL is built. In the report's words, "approval or denial of any one crude oil transport project, including the proposed Project [Keystone], is unlikely to significantly impact the rate of extraction in the oil sands, or the continued demand for heavy crude oil at refineries in the United States."

That oil and gas is just too valuable. And instead of being stranded, oil awaiting Keystone XL is being carried by rail and barge (and even truck) that are less environmentally friendly.

Indeed, several construction projects have recently sprung up to deliver Canadian crude oil to U.S. refineries. Three large terminals are being constructed in Canada where oil can be loaded onto trains bound for the United States. A dock on Lake Superior is being upgraded to put Canadian crude on barges that will travel through the Great Lakes to U.S. ports. And at the Port of Vancouver, the Tesoro refining company and oil service company Savage are seeking permits to build an oil-loading facility.

These projects make Obama's Keystone XL stall all the more confounding. The pipeline is not only more environmentally friendly than these alternatives, but would provide a much needed boost to our nation's economy. In addition to creating 13,000 new jobs during its construction, Keystone would directly and indirectly support 42,000 jobs here at home. On top of this, the Canadian Energy Research Institute estimates that by 2035, the pipeline will contribute $172 billion to America’s gross domestic product.

That’s a hefty return on investment for the $5.3 billion infrastructure project. And unlike with Obama's favored energies, no taxpayer subsidies are involved!

Plus, the pipeline will increase our country's energy security. We currently rely on imported oil from unstable regions across the globe, including the Middle East and Venezuela. Building Keystone XL would provide us with oil from our friendly neighbor to the north -- effectively cutting our imports from less amiable countries by 40 percent. Yes, the world oil price would still be paid with less oil imports, but the point is that the oil is transportation-secure, and more oil means lower prices for everyone.

It’s little wonder that the editorial board of the Washington Post has encouraged President Obama to ignore the "activists who have bizarrely chosen to make Keystone XL a line-in-the-sand issue." Former President Bill Clinton has even weighed in on Keystone XL, urging opponents to "embrace it" and move on.

But as the recent Senate Committee hearing on the pipeline revealed, the issue remains very partisan – with most remaining Democrats staunchly opposed and most Republicans in favor of the project's construction. And despite the State Department's Environmental Impact Report, much of the debate still centered, strangely, on the issue of climate change. Climate change, that's the word now used with the pause in global warming, the subject of much debate (see here and here.)

All the facts have been laid out. It is time for action, as the President would say. The American people support the construction of Keystone by a 3 to 1 margin. The winds of economics, eco-analysis, politics, and policy are behind this project. The Obama administration should provide final approval once and for all--and vow to avoid future repeats of politicized policy without a purpose.