Why Obama rejected the Keystone Pipeline

Chris Prandoni Federal Affairs Manager, ATR
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President Obama has reportedly decided to reject the Keystone XL Pipeline and the 20,000 jobs, increased energy security and billions in economic activity that are tethered to it.

The payroll tax extension bill that Congress passed in December gave Obama 60 days to determine whether the pipeline is in the country’s national interest. It is, but Obama has decided to kill the project anyway — for political reasons. Basically, Obama doesn’t want to alienate his environmentalist supporters, who have worked themselves into a frenzy over the innocuous pipeline. Instead, he’s selling out the union members who would have built it and the consumers who would have benefited from its construction.

Politically, unions have nowhere to go. With public sector workers constituting a majority of U.S. union members, the unions need high levels of government spending (and large numbers of government jobs) in order to remain viable over the long haul. In practical terms, that means they need to support the Democratic Party. During the 2008 election cycle, unions gave 92% of their members’ dues to Obama. Obama knows union money will continue to flow into his war chest even if he kills some union jobs by scuttling the pipeline.

Of course, Obama won’t benefit from blocking the pipeline’s construction if his decision to do so alienates swing voters. To avoid doing that, he’ll make two arguments to justify his decision. Neither holds up to scrutiny.

His first argument is that the State Department has not had enough time to determine whether the pipeline is in our national interests. But the State Department has been reviewing the Keystone XL Pipeline since 2008. Even by federal government standards, this pipeline has been in limbo for a long time.

Interestingly, the State Department approved a nearly identical Canadian-American pipeline in 2009. Here are some of the reasons it gave at the time:

… the addition of crude oil pipeline capacity between Canada and the United States will advance a number of strategic interests of the United States. These included increasing the diversity of available supplies among the United States’ worldwide crude oil sources in a time of considerable political tension in other major oil producing countries and regions; shortening the transportation pathway for crude oil supplies; and increasing crude oil supplies from a major non-Organization of Petroleum Exporting Countries producer.

Canada is a stable and reliable ally and trading partner of the United States, with which we have free trade agreements which augment the security of this energy supply. Approval of the permit sends a positive economic signal, in a difficult economic period, about the future reliability and availability of a portion of United States’ energy imports, and in the immediate term, this shovel-ready project will provide construction jobs for workers in the United States.

I couldn’t have said it any better myself.

Obama’s second argument — that his hands are tied because Nebraska’s legislature has passed legislation preventing the pipeline from being built along the planned route — is equally disingenuous. The Nebraska legislation was passed months ago, and Congress’s December payroll tax extension bill accounts for it by allowing construction on the pipeline to begin outside of Nebraska while officials in the Cornhusker State settle on a final route. In fact, Nebraska Governor Dave Heineman publicly supports the construction of the pipeline. Just yesterday, Governor Heineman said, “Do you think [Keystone XL] is in the national interest of the United States of America? When you have an 8.5% unemployment rate in America — this is a no brainer.”

And there you have it. Sorry, energy consumers and unemployed workers, Obama and his advisers crunched the electoral numbers and are taking cover behind the State Department and Nebraska.

Christopher Prandoni is the federal affairs manager for Americans for Tax Reform.