Sunday, February 17, 2013

Environmentalists press Obama to reject Keystone XL pipeline


While Obama stressed the importance of the environment in his State of the Union speech, environmentalists are pressing him to prove it by rejecting the Keystone XL pipeline..
Already this week, 50 people were arrested while demonstrating against the XL pipeline outside the White House in Washington DC.
An even larger rally is planned for this Sunday, Febrruary 17th, in Washington. The rally is billed as being the largest environmental rally in history.
The upcoming rally is designed to convince Obama to reject construction of the Keystone XL pipeline that would carry oil from the Alberta tar sands to a port in Texas. While on one side Obama is under pressure from environmentalists to not approve construction, he is under pressure to approve the project from many in Congress and his own party, as well as business interests and big oil companies in particular.
Just last month, the Democratic-controlled Senate urged approval, after what was said to be an exhaustive environmental review. The senators said that it was in the US national interest to build the pipeline because it would cut dependence on foreign oil. Note that the US senate does not seem to count Canadian oil as foreign oil. There is good reason for that, since were are bound by NAFTA to share our oil with the US even in times of shortages: Despite the fact that we are running out of natural gas, and that we import 49% of the oil we consume, NAFTA dictates that Canada’s government cannot reduce the percentage of oil and gas we now export to the United States even in times of domestic shortages.
NAFTA also prohibits Canada from selling oil at lower prices in Canada than it does to the US. Many countries that have large oil supplies give their own citizens a break on costs but not Canada: NAFTA also prohibits Canada from charging a lower price to domestic oil consumers than to those purchasing exports. It's common practice for countries that are self-sufficient in oil to give domestic oil consumers a discount from the world price, in essence, to control domestic prices. Back in March of this year when vaulting oil prices pushed up the cost of refined products such as gasoline, residents in some oil-rich countries hardly noticed. Kuwaitis were paying 81 cents per gallon for gasoline. Saudis paid 45 cents. And, Venezuelans were paying just 6 cents.It is not surprising then that US senators do not see Canadian oil as foreign oil since our oil policy regulated through NAFTA is designed to supply the US market at favorable prices. The market in eastern Canada is supplied not by western Canada but by expensive imported oil. We are not even self-sufficient in oil supplies in spite of our resources.
Nebraska, which had rejected the original route, now approves a revised route. Dave Heineman, the governor of Nebraska, approved a new route that avoids the Sandhills region of the state. Heineman claimed the project would bring $418.1 million in economic benefits to the state, as well as $16.5 million in taxes from construction materials. Charles Ebinger of the Brookings Institution said:"Any pipeline can have an accident but if one looks at all the pipelines in the country that cross the Ogallala reservoir for many, many years - both oil and natural gas pipelines - I think without great environmental havoc occurring, on balance I think it makes sense to approve the pipeline and get that oil into the market. "
Many environmental critics of the Keystone XL are really against development of tar sands oil per se, since even the extraction of the heavy oil produces much more in the way of emissions than for conventional oil and it can cause serious problems in the local environment particularly on first nations territory.
While some claim that a "yes" by Obama would entrench the oil sands fuel as a major source of energy and a "no"' would make the extraction unprofitable for oil majors, this seems to me too simplistic a view. There are other alternatives. While a pipeline to the Canadian west coast may be even more contested than the Keystone XL project, a pipeline to eastern Canada would not be out of the question. It would make sense too, if the pipeline is blocked, to consider more refining capacity in Alberta or adjacent provinces to create a move valuable product to be transported by rail or truck to markets. Environmentalists might not have the power to block these developments within Canada. We will see soon which pressure on Obama has the greatest force. My own guess is that he will give in to those who want the project to go forward but he will attempt to negotiate a quid pro quo in return.

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