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Last week, Nebraska Gov. Dave Heineman approved a reroute of the oft-disputed Keystone XL pipeline. Previously, the pipeline was slated to cross not only the Nebraska Sandhills but the Ogallala aquifer as well, two areas that had environmentalist groups ready for war. The resultant pressure caused Gov. Heineman to withdraw his support for the pipeline as planned, and President Obama denied the required Presidential Permit in January 2012. TransCanada went back to the drawing board, and submitted several new potential routes to the Nebraska Department of Environmental Quality (NDEQ). The NDEQ, together with the Department of State, conducted an environmental assessment of each plan, finally choosing the now-approved blueprint. The new path cuts further east, bypassing the Sandhills but failing to avoid the aquifer (click here to see a map of the old route as compared to the new one). Now, the process rests squarely in the newly-reelected hands of President Obama, who has an enormous choice to make. Should he capitulate to pressure from environmental groups, or approve a politically-risky plan that could create thousands of jobs?
Overall, the benefits of the pipeline far outweigh the costs. The NDEQ estimates the pipeline could generate more than $400 million in economic gain, including $16.5 million in usage taxes on construction materials and around $11 million in first-year property taxes. This revenue could go a long way to growing the economy of the state, to say nothing of the increased employment provided by such a project. In total, TransCanada estimates that up to 4,560 new or existing jobs will be supported by the new pipeline in Nebraska alone.
Furthermore, many of the most important environmental concerns have been addressed in the reroute proposal. The new blueprints purposefully avoid the most environmentally fragile areas, including the areas in which the aquifer is closest to the surface. The pipeline will now also circumvent the one wellhead protection area (a region where spills or toxins could have a serious deleterious effect on drinking water) covered by the previous plan. As a result, any oil spill would be localized, as opposed to creating a widespread regional problem. TransCanada has also promised to foot the bill for any leakage, and has offered proof of at least $200 million in liability insurance to cover potential spill cleanup. The report also provides case-by-case summaries of recent oil and toxin spills, and the ways in which TransCanada plans to avoid similar situations (for a quick summary of the NDEQ report, click here).
Given all of the above, approval for the pipeline seems like a no-brainer. Unfortunately, as in most White House decisions, politics will likely play a huge role in the decision-making process. One huge opponent could be Warren Buffett himself, a prominent Obama supporter. Buffett is, in fact, one business tycoon who would not be well-served by the installation of the pipeline. He took on a great deal of risk a few years ago to purchase Burlington Northern Santa Fe,even sacrificing Berkshire Hathaway’s triple-A credit rating to acquire the railroad. Burlington Northern already carries a quarter of the oil from TransCanada’s Bakken oil fields, and would be a likely choice to haul the rest if efforts to build the pipeline are blocked. Unsurprisingly, one of Buffett’s oldest friends and close business partner, Dick Holland, has effectively bankrolled BOLD Nebraska, the environmental group leading the charge against the pipeline.
Other environmental groups have weighed in on the issue as well. In fact, Nebraska’s approval of the new pipeline route elicited official support for civil disobedience from the Sierra Club for the first time in the organization’s 120-year history. They’re following the lead of other protestors in Texas and Oklahoma, many of which have been arrested for trying to halt construction of the pipeline in those states. The entire situation has the potential to be very embarrassing for a President who just last week addressed the need to tackle climate change in his inaugural address.
Nonetheless, President Obama ought to let construction of the pipeline proceed. The political cover he was so conveniently afforded by Gov. Heineman’s dissent a year ago has now been removed, and Americans who are increasingly squeezed by high gas prices may not appreciate yet another attack on energy by the Administration. The economic potential of the project cannot be ignored either – support for the pipeline is perhaps a way to win more Democrat votes in states that traditionally vote Republican. With an approval rating just above 50%, it certainly can’t hurt Obama to tie his administration to solid job creation. So please, Mr. President, ignore the politics. Support the pipeline, and all of the benefits it could bring to our struggling economy.