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February 25, 2015

Obama Vetoes Keystone Pipeline Bill

February 25, 2015
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“Disappointing but not surprising for the president to give the thumbs down to American workers, consumers, and our Canadian friends,” said Michigan Republican Rep. Fred Upton. “Keystone XL is an economic win-win that would create tens of thousands of shovel-ready jobs and strengthen our energy partnership with our North American neighbor, helping insulate us against future turmoil in the Middle East and elsewhere that could cause price hikes.”[i]

Despite being recently passed by both houses of Congress, President Obama has vetoed the Keystone pipeline bill,[ii] a project that would create jobs and is favored by the American public.[iii] President Obama reasoned that 77 months is not enough time for him to properly study if a new pipeline crossing the border from Canada is in the “national interest.”

Further, the pipeline has passed many environmental reviews. In January of 2014, for example, the State Department reported that the project had “no major environmental concerns.”[iv] The State Department also reported that Canadian oil sands would be produced regardless of whether the Keystone pipeline is built, which means more rail traffic and even greater emissions from transporting it across oceans for export to Europe or Asia, rather than supplying U.S. refineries.

The Keystone Pipeline Review

The Keystone pipeline would move up to 830,000 barrels of oil a day from Canadian and U.S. oil fields to Gulf Coast refineries. Keystone’s permit application has been under review for over 6 years—longer than it took the allies to defeat Germany in World War II.[v] TransCanada submitted its permit application in 2008 to the State Department, which has jurisdiction over cross-border pipelines.[vi]

After numerous reviews, the State department has not made a final determination as to whether the pipeline is in the national interest of the United States, despite U.S. refineries being tooled to use heavy oil, which is what Canada produces from its oil sands. Eight other federal government agencies have been asked to comment on the Keystone pipeline and were to provide comments by February 2, 2015.[vii] As might be expected, the Environmental Protection Agency has asked the State Department to look more closely at Keystone given the recent low oil prices, despite the fact that oil prices have been low before and have a history of increasing.[viii] In fact, when TransCanada proposed Keystone XL in 2008, oil prices had dropped to below $40 a barrel. [ix]

Rail vs. Pipeline

Canadian oil sands will be developed with or without the Keystone pipeline and exported to the United States in lieu of U.S. imports from Venezuela and Mexico. Once an oil-sands site is developed, it will produce tens or hundreds of thousands of barrels of oil a day for decades.[x] Without Keystone, oil sands will be shipped by rail rather than pipeline despite rail shipments being more than twice as expensive as pipeline shipments, according to the Canadian Energy Research Institute, and being somewhat less efficient and less safe.[xi] In 2013, trains were carrying about 200,000 barrels of oil per day from Western Canada. That number is expected to more than triple to 700,000 barrels a day by 2016, according to a forecast by the Canadian Association of Petroleum Producers.[xii]

In 2013, the United States moved about 8.3 billion barrels of crude oil via pipeline, according to the Association of Oil Pipelines compared to 291 million barrels of oil moved by rail, according to the Association of American Railroads. Therefore, oil moved by pipeline was almost 29 times greater than oil moved by rail in 2013. Using industry figures from the past several years and the federal spill data, the rate of accidents and spillage per barrel of oil transported can be determined. In recent years, the accident rate for rail-transported oil was 20 times greater than for pipelines. However, since 2011, the accident rate for rail has been on the decline.

The spillage rate figures, on the other hand, generally show that rail typically does better than pipelines. However, in 2013, the number for rail increased above that for pipelines, which was a result of two derailments–one in Aliceville Alabama and the other in Casselton North Dakota. The numbers illustrate that a single spill or two can change an industry’s safety record.[xiii]

From the above, moving oil by pipeline is a less risky than moving it by rail since both the rate of accidents and the total amount of spillage varies less for pipeline transport than for rail transport. However, despite having a larger than average spillage in 2013, more than 99.99 percent of crude oil delivered by rail made it to its final destination safely.

Presidential Vetoes—Thought to Be a Thing of the Past

Due to increasing bipartisanship prior to President Obama’s terms in the Presidency, the use of Presidential vetoes had decreased markedly. President George W. Bush only used the Presidential veto 12 times. Prior to that, President Bill Clinton used the Presidential veto 37 times and President George Bush used it 44 times. But, earlier, the Presidential veto was used much more frequently. President Franklin D. Roosevelt used the Presidential veto 635 times during his 12 years in office and President Grover Cleveland used it 414 times during his first term. At one time, the presidential veto had been an accepted step in negotiations between presidents and lawmakers, but it is now more of a last-ditch effort to reach agreement on policy.[xiv]

Conclusion

Building the Keystone pipeline will provide thousands of construction jobs, ease U.S. reliance on overseas oil, provide additional energy security for the United States, boost the energy sector and strengthen U.S. ties with Canada.

President Obama likes to tell us that Keystone will just serve the Canadian oil industry as a means to export oil. However, IHS just completed a study that indicates about 70 percent of the refined petroleum products from Keystone’s oil would be consumed within the United States and that refinery capacity on the U.S. Gulf Coast is built specifically to handle the kind of heavy oil that would come from Canada. [xv] Further, in 2012, President Obama approved the southern portion of the Keystone pipeline from Cushing, Oklahoma to the Gulf Coast, and that portion of Keystone is operating. The part of Keystone under debate is the northern part that ends in Nebraska.

Vetoing this legislation means putting special interests and ideology above American workers, who need the jobs that Keystone XL would bring. President Obama is objecting to Congress interfering with the pipeline-approval process, which has historically been left to the executive branch.[xvi] But never before has it been an ever evolving process with numerous unfounded reasons for delay. The President’s exclusive right to approve cross-border pipelines seems to be such a fundamental principle to his Administration that the veto is his only way to assert authority on this issue.

[i] Daily Caller, Obama Quietly Vetoes Keystone XL Just Weeks After Saudi Arabia Visit, February 24, 2015, http://dailycaller.com/2015/02/24/obama-quietly-vetoes-keystone-xl-just-weeks-after-saudi-arabia-visit/

[ii] New York Times, Obama Vetoes Keystone XL Pipeline Bill, February 24, 2015, http://www.nytimes.com/2015/02/25/us/politics/as-expected-obama-vetoes-keystone-xl-pipeline-bill.html?emc=edit_na_20150224&nlid=63692790

[iii] CNN, Poll: Majority of Americans Back Keystone Pipeline, January 15, 2015, http://www.cnn.com/2015/01/15/politics/poll-majority-of-americans-back-keystone-pipeline/

[iv] Town Hall, AFP Urges White House Not to Veto Keystone XL, February 19, 2015, http://townhall.com/tipsheet/mattvespa/2015/02/19/draft-n1959542

[v] The Hill, Four more votes to override Keystone veto, January 11, 2015, http://thehill.com/blogs/ballot-box/229147-senate-needs-four-more-votes-to-override-a-keystone-xl-veto

[vi] Wall Street Journal, Court Ruling, House Vote Pressure Obama to Act on Keystone pipeline, January 9, 2015, http://www.wsj.com/articles/nebraska-suit-blocking-keystone-xl-pipeline-route-rejected-by-state-supreme-court-1420815722?autologin=y

[vii] Fox Business, State Dept. gives other agencies 2 weeks to comment on Keystone XL pipeline, January 16, 2015, http://www.foxbusiness.com/markets/2015/01/16/state-dept-gives-other-agencies-2-weeks-to-comment-on-keystone-xl-pipeline/

[viii] The Daily Signal, 3 reasons to Dismiss EPA’s Latest Excuse on Keystone XL, February 4, 2015, http://dailysignal.com/2015/02/04/3-reasons-dismiss-epas-latest-excuse-keystone-xl/

[ix] US News, Wild Card: Will Low Oil Prices Impact Obama’s Decision on The Daily Signal. XL?, January 9, 2015, http://www.usnews.com/news/articles/2015/01/09/wild-card-will-low-oil-prices-impact-obamas-decision-on-keystone-xl

[x] Wall Street Journal, As oil Slips Below $50, Canada Digs in for the long Haul, January 12, 2015, http://www.wsj.com/articles/as-oil-slips-below-50-canada-digs-in-for-long-haul-1421114641?mod=WSJ_hp_LEFTTopStories&autologin=y

[xi] Forbes, Will Obama Negotiate on Keystone XL?, January 30, 2015, http://www.forbes.com/sites/brighammccown/2015/01/30/will-obama-negotiate-on-keystone-xl/

[xii] Financial Post, Oil by rail shipments from western Canada to triple in next two years amid pipeline crunch, June 9, 2014, http://business.financialpost.com/2014/06/09/canadas-oil-industry-cuts-long-term-production-growth-forecast-to-4-8m-bpd/?__lsa=b41a-931d

[xiii] Washington Post, It’s a lot riskier to move oil by train instead of pipeline, February 20, 2015, http://www.washingtonpost.com/blogs/wonkblog/wp/2015/02/20/its-a-lot-riskier-to-move-oil-by-train-instead-of-pipeline/

[xiv] New York times, Obama’s Expected Keystone Pipeline Veto Is Likely to Be the First in a Wave, February 22, 2015, http://www.nytimes.com/2015/02/23/us/politics/with-expected-keystone-veto-obama-to-open-new-era-of-presidency.html?_r=1

[xv] The Hill, Most Keystone oil would stay in U.S., study says, February 23, 2015, http://thehill.com/policy/energy-environment/233522-most-keystone-oil-would-stay-in-us-study-says

[xvi] New Yorker, The Keystone XL Test: Can Obama Make A deal?, January 9, 2015, http://www.newyorker.com/news/daily-comment/keystone-xl-test-can-obama-make-deal

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