Keystone

Keystone to Productivity or Not

In one of my previous mailings I had neglected to mention the Keystone Pipeline deal and a friend wrote me to point that out. I replied that I really did not know a great deal about it but that I would address that point. I have done that and it is amazingly difficult to find rational, unbiased data concerning the project.

When I first heard of it I just thought that this was a no-brainer since it would allow us to decrease our dependence on Middle Eastern oil. Au Contraire. That was before the good citizens of Nebraska raised a stink about running a pipeline across the Ogalalla Aquifer which supplies massive amounts of water for agricultural purposes to a huge swath of the plains states. Then the GOP attached a rider to another bill that would require the President to make a decision by January 20^th I think. Well, he made one that many in the GOP desired when he turned it down. He said an arbitrary date to force his hand was not going to work. His detractors accused him of caving to the environmental lobby while castigating him for turning down job opportunities. While there are genuine reasons to build the pipeline these are not two of them. The way I see it there are perhaps three factors to be considered. (1) will the pipeline provide oil for the United States and relieve us of our burden of importing oil from nations that don't like us? (2) Are the environmental concerns adequate to reconsider the route? (3) Will there be a significant enough number of jobs created to mitigate the other considerations? I have discovered some interesting facts.

It turns out that the United States is a significant exporter of refined oil products such as gasoline and diesel fuel. What that means is that the oil that would flow along the Keystone pipeline would be largely committed to the export market and would likely have little effect on our domestic consumption problem. The oil and refined products industry is largely driven by market forces rather than some ideal of corporate patriotism or fealty. So, if the refiners can sell the product elsewhere for more money then domestic needs go begging. Yes, we import a lot of oil. No, it is not committed to domestic use and if the refineries are able to produce product for export do we really have a fuel shortage?

When I first heard of the pipeline I thought, “what could be the downside? Exactly how likely is it to leak in amounts that would cause widespread damage?” Turns out it is fairly likely and has happened several times. You may recall a couple of pipelines bursting this past year and fouling some streams. The Ogalalla Aquifer waters the area know as the bread basket of America. Without that water food prices would increase rapidly as would fuel prices since much of the corn grown there is designated for ethanol. Cattle are fed there in preparation for slaughter and much of our agricultural exports come from that area. Contamination of that water supply would wreak havoc on our economic system so it seems prudent to protect it. No big deal to route around it but it requires impact studies for the new route and the GOP instituted a deadline that did not give enough time for that. In time, not too long, the pipeline will be built but it will be built to serve the oil industry and not necessarily the American citizen.

Jobs. It seems we can't talk about anything without attaching the prospect of losing or gaining jobs. Jobs are important as we know from our experience with having been kicked to the curb by the financiers of Wall Street but they are not all important. They do not make risking long term problems a good idea for short term benefit. I have seen claims of as little as 20,000 new jobs up to 400,000. I think the reasonable figure is from the lower end up to about 40,000. Significant numbers when viewed alone but consider that right now there are thousands of job openings in North Dakota that are going unfilled due to inadequate housing and other support facilities. Many are unable to move because of financial liability tied to their housing mortgage. If we develop 20,000 new jobs in an area where there is already a shortage have we really created jobs that we can move people into?

In the interest of full disclosure I think it is no secret that I advocate a national plan to move away from fossil fuels to green energy sources. The new technology would create more jobs that even the rosiest estimates are for the pipeline. However, I am not so ignorant as to believe we can shut off the taps instantly. It will take many years but we can begin now to encourage that development while beginning to wean ourselves off fossil fuels from non-domestic sources. The pipeline should be built and will be built but there is just no need to rush into this project without considering the alternatives. The argument that it will relieve us of the need for foreign oil just doesn't hold water.

I still say there is much that is not known about this deal. We need to take the time to get it right rather than jumping on the “Drill, baby, Drill” bandwagon.

My take on Keystone, a controversial issue. Has this changed your mind or made you curious? Let me know.