Keystone Pipeline–State Dept gives green light, what will Mr. Obama do?

Posted on January 31, 2014 by

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In a huge win for economic analysis triumphing over politics, the state department today released a report showing that the Keystone Pipeline will not increase environmental emissions of greenhouse gases over alternative production realities.  This is a big blow to the environmental lobby as it makes it more difficult for Mr. Obama not to approve the project.  Given the federal government has taken far too long to approve this already, Mr. Obama’s critics such as T. Boone Pickens will only increase their rhetoric

“We’ve been sitting here with this on the table since September of 2008….,” Pickens complained in a phone interview on “Street Signs” “Why can’t this government make a decision in a reasonable amount of time and move forward?”

Why is this a triumph of economics over politics you ask?  Not because there is no environmental impact, or that there might not be effects that none of us want to see.  But the heart of economics is understanding that in a world of scarcity–a fallen world–we don’t get the option of utopia.  As we say almost daily in my classroom, “there are no solutions, only trade-offs.”  Yet the environmental complaints suggest that if we just kill this pipeline, we can stop the bad things from happening.  Yet every rational person looking at this (including the latest State Dept analysis) knows full well that the tar sands oil development is going to happen–the only question is where does the oil go?  In other words, what is the trade-off?  Right now much oil is being transported by rail, and will only be exacerbated as the oil sands development continues.  And rail transport has far more deadly potential (not to mention over highways).  Alternatively Canada has threatened to build the pipeline to its west coast and ship the oil to China.  Now I’m not concerned that the oil would go to China (since the oil market is a global market) but rather its more inefficient and would result in not only increased costs, but higher greenhouse gas emissions, as well as reduced U.S. jobs.

So what is stopping Mr. Obama from signing?   This report suggests to me that he IS going to sign it.  It seems highly unlikely that the report’s results weren’t known and approved by Mr. Obama prior to its release.  So the only question is when.  I suspect that at this point he is calculating the optimal time, balancing (making a trade-off!) antagonizing his environmental base and trying to help vulnerable red-state senators.

 

EDIT:  WSJ now has a couple of nice articles on this, first from the news, and 2nd from their editorial page.

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