Obama: Right on Keystone for the Wrong Reasons

The newest controversy over oil pipelines is a distraction from the more fundamental problems in the administration's energy policy.

In January, pandering to the guardians of Gaia like Daryl Hannah and Robert Redford, President Obama blocked the Keystone XL Pipeline. That petroleum pipeline would have carried Canadian tar sand-derived oil from Alberta through Montana, South Dakota, Nebraska, Kansas and Oklahoma to refineries along the Gulf Coast of Texas.

But a funny thing happened on the way to reelection. By the ides of March, retail gasoline prices had soared to nearly $4 per gallon, with prices much higher in several key electoral battleground states. Time to “pivot.”

So last week found Mr. Obama standing comfortably in front of a stack of oil pipe in Cushing, Oklahoma, cockily claiming credit for sweeping away the “red tape” slowing down construction of the so-called southern leg of the Keystone XL pipeline. Of course, although his adoring press did not so report, that “red tape” was manufactured by his own administrative agencies before the current gasoline-price crisis befell the administration. Also, never mind that the southern leg (from Oklahoma to neighboring Texas) is but a tiny piece of the 1,700-mile proposed pipeline.

The president’s sudden approval—don’t say it too loudly—of part of the Keystone project came after having rejected only two months earlier the more substantial, and important, portion of the pipeline. But his arrogance is exceeded only by the public’s ability to be fooled again.

Will the voters not realize that this is the same man who claimed in 2008 that under his administration, electricity rates would “necessarily skyrocket”? This is the same man who has placed more federal land off-limits to oil and gas drilling and exploration than any previous president while directing billions of “stimulus” dollars to political supporters to invest in failed “green-energy” projects (e.g., Solyndra, Beacon, Ener1). This is the same man who, on March 15, stood before Maryland community-college students and claimed that the United States has only 2 percent of the world’s fossil-fuel reserves, while knowing full well that the country has the most extensive gas and oil reserves on the planet. Meanwhile, Obama’s energy secretary, an admirer of $8 per gallon European gasoline prices, gave the administration an “A” for gasoline prices even as those prices head north of $4 per gallon. But standing in Cushing, Oklahoma, in front of that big pile of pipe, as Reagan might say “there he [went] again.” Unlike Carter or Mondale, Obama might just get away with it.

How could the man who killed Keystone—with its promise of thousands of direct and hundreds of thousands of indirect jobs and the billions of dollars in tax revenues that go with them as well as more than a million barrels of reliable Canadian oil per day—get away with the subterfuge that he was actually approving Keystone? Simple. In the long term, the United States does not need that Canadian oil for its own energy security. Of course, it would be good to have the extra oil. Delivered to Gulf of Mexico refineries, it would allow those refineries to produce gasoline, diesel and jet fuel for export to hungry world-energy markets. Such exports would earn much-needed foreign exchange, contributing to a reduction in the nation’s massive foreign-trade and current-account deficits. But over the long term, the United States has all of the transportation energy it really needs right here at home.

What’s that? Doesn’t the United States import 60 percent of its oil, more than 11 million barrels per day of the over 20 million barrels used? Is it not a fact that most of the suppliers of that imported oil are nations that either are unreliable partners or do not like the United States very much, or both? While the answer to both of these questions is yes, those considerations of imported oil are of little importance to the nation’s long-term energy prospects, which portend a new age of natural gas.

On March 28, natural-gas prices reached their lowest level in modern history, sinking to $2.16 per MCF. Indeed, the United States has so much natural gas in storage that there is no place to put any more of it.

Why does the United States need dirty, heavy, hard-to-refine tar-sand oil when the country has a permanent glut of the world’s cleanest energy dense fuel, natural gas? Listen to Bastiat’s advice from 1850: “See that which is unseen.” See the investment benefits and cost advantages of developing the domestic infrastructure to employ what the country already has in abundance, natural gas. See the hundreds of thousands of jobs and billions of dollars in tax revenue that would flow from creating that infrastructure. See the $400 billion per year now spent on imported petroleum that can remain in the United States to facilitate the building of that infrastructure. See the gasoline gallon-equivalent price of $1.25 for natural gas.

The Obama Keystone debacle has been a distraction. A national strategy for energy must see the reality of abundant natural gas.

Jay Zawatsky is the CEO of havePower, LLC (a natural-gas infrastructure developer) and a professor of business in the dual degree MBA program of the University of Maryland University College.

Image: www.whitehouse.gov (Pete Souza)