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Editorial/Opinion

 

The Wall Street Journal: Keystone XL copout


Nothing Obama says to justify his Keystone XL pipeline veto is true

The Senate on Wednesday failed to override President Obama 's veto of Congress's bipartisan bill authorizing the Keystone XL pipeline, falling five votes short of the necessary two-thirds majority. The vote was nonetheless a bipartisan rebuke of the President that shows how captive his Administration is to green billionaires.

In an interview last weekend with a North Dakota TV station, Mr. Obama said: “I'm happy to look at how we can increase pipeline production for U.S. oil, but Keystone is for Canadian oil to send that down to the Gulf. It bypasses the United States and is estimated to create a little over 250, maybe 300 permanent jobs.” Except for the prepositions, everything in that statement is false.

Plenty of oil flowing through Keystone would come from Canada's oil sands. But owner TransCanada also designed the pipeline with the U.S. in mind (witness its route), and it has already signed contracts to move some 65,000 barrels a day from the Bakken Shale in North Dakota and Montana. The plan is to carry as much as 100,000 barrels a day, some 10% of Bakken production.

According to the Canadian Association of Petroleum Producers, only about 55% of oil production in the Canadian oil sands is managed by Canadians. Nearly 30% is managed by U.S. companies that have invested in our northern ally.

As for bypassing the U.S., Mr. Obama knows that with few exceptions the U.S. bans oil exports. Canadian crude is eligible for an export license, but only if it isn't commingled with domestic crude. Mr. Obama's State Department review also made the point that it makes no economic sense for producers to pay hefty fees to transport Canadian oil to foreign refiners when cost-effective U.S. refineries are sitting on the Gulf Coast—many of which have already signed 20-year contracts to process Keystone crude.

A February report by consultant IHS Energy estimates that 70% of the resulting refined products—gasoline, diesel—would be consumed in the U.S. No country would benefit more from Keystone than America.

Mr. Obama's paltry jobs estimates are pure distortions. Keystone XL would support the expansion of a burgeoning northern oil industry, in which growing numbers of well-paid workers would spend their salaries on real-estate, food and vacations. Mr. Obama believes in the Keynesian spending multiplier for government spending but not private jobs.

The White House will supposedly now wait for the conclusion of its own Keystone review before making a final decision, but don't hold your breath. Mr. Obama's one honest moment was admitting he doesn't like oil pipelines. So the Canadian oil will instead be transported by railcars that are much less safe. At least Warren Buffett 's railroads will be happy.

In that sense Mr. Obama's Keystone XL veto is a microcosm of his overall economic record: bonuses for billionaires, scraps for middle-class workers.


The Wall Street Journal is a US business and financial national newspaper. Petroleumworld does not necessarily share these views.

Editor's Note: This commentary was originally published by The Wall Street Journal , March 6, 2015. Petroleumworld reprint this article in the interest of our readers.

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