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Sean Hackbarth President Obama has no more excuses for delaying the Keystone XL pipeline.

Another excuse for President Obama to delay deciding on the Keystone XL pipeline bites the dust. Here is what you need to know about a Nebraska court ruling and the fate of the pipeline.

The Nebraska State Supreme Court left intact a state law that gave its governor the authority to approve the Keystone XL pipeline route, Reuters reports

[The ruling reverses] a lower court that had blocked the proposal and clearing the way for a U.S. State Department ruling on the plan. 

The court said it was divided and could not reach a substantive decision, leaving in place legislation that favored TransCanada Corp and its claim to build a crude oil pipeline across the state.

The Nebraska legal issue was the latest self-created roadblock the administration has used in its six-plus years of delay in approving the pipeline. White House Press Secretary Josh Earnest told reporters recently:

There continues to be an outstanding question about the route of the pipeline through one part of Nebraska…. Once that is resolved, that should speed the completion of the evaluation of that project.

The Nebraska Supreme Court has resolved it.

“The Nebraska Supreme Court’s decision removes the last excuse that the Obama administration has been using to justify the unconscionable delays in the permitting process for the Keystone XL pipeline,” said Karen Harbert, president and CEO of the U.S. Chamber’s Institute for 21st Century Energy, said in a statement.

The ball goes back to the State Department to determine if the Keystone XL pipeline is in the national interest. In 2010 as one of the five studies were underway, then Secretary Hillary Clinton said the State Department was “inclined” to approve the pipeline. Based on its latest analysis the pipeline will create 42,000 jobs, generate $3.4 billion in economic activity, and produce $55.6 million in local property taxes annually once it’s operating. All of this with little environmental impact.

To any ordinary person, this project is in the national interest, and Secretary John Kerry should approve it.

If the State Department does approve the project, but another agency objects—like EPA, which has been critical—then President Obama makes the final decision.

Harbert wants him to say, “Yes”:

It is time for President Obama to approve the pipeline—no more excuses, no more delays. A strong, bipartisan majority of Americans expect nothing less. Delaying the decision further will only expose this administration to valid accusations of political posturing.

Even as legal questions in Nebraska have been settled, work continues in Congress.

Today, the House of Representatives is expected to pass a bill that would approve construction of the pipeline. Next week, the Senate is expected to begin debate on a similar bill.

Tell Congress to support the Keystone XL pipeline.

Unfortunately the White House reaffirmed its veto threat despite the settlement of the Nebraska question:

Regardless of the Nebraska ruling today, the House bill still conflicts with longstanding executive branch procedures regarding the authority of the president and prevents the thorough consideration of complex issues that could bear on U.S. national interests, and if presented to the President, he will veto the bill.

The administration’s obstruction runs counter to public opinion even in Nebraska, where opponents have focused much of their attention.

A Nebraska poll released in December showed that a 55% of Nebraskans support the pipeline.

omaha_world_herald_keystone_poll_122014.jpg  55% of Nebraskans support the Keystone XL pipeline. Chart: 55% of Nebraskans support the Keystone XL pipeline.

Nationally, even stronger majorities support the pipeline. A December 2014 Fox News poll found nearly 70% support it, and a Pew Research Center poll found majorities of Republicans, Democrats, and Independents back the project.

Either through federal permitting or legislation, the Keystone XL pipeline should be approved. It’s a job-creator, a benefit to state and national economies, has broad support, and will reassure people that it’s possible to build big things in America.

Sean Hackbarth Steel pipe for the Keystone XL pipeline piled near Gascoyne, North Dakota.Pipe to be used for the Keystone XL pipeline in a field in Gascoyne, ND. Photo credit: Sean Hackbarth.

On the first day of taking control of the U.S. Senate, Republicans ran into some trouble:

Democrats managed to put the kibosh on a planned Energy and Natural Resources [ENR] Committee hearing today on Keystone XL, forcing Republicans to cancel the event. Sen. Dick Durbin, on behalf of Barbara Boxer, objected to a GOP floor move seeking unanimous consent to appoint Lisa Murkowski and Maria Cantwell as the leaders of ENR. The appointment was necessary for the move to take place because Democrats do no formally organize until today. Objecting to the UC request prevented the committee from being able to organize in time for today's hearing, which was then scrapped.

While a minor setback, it typifies the many delays and obstacles put in front of the Keystone XL pipeline since permits applications were filed in 2008.

However, as soon as the bill to approve the job-creating, energy infrastructure project was filed in the Senate, the White House threatened to veto it.

The Statement of Administration Policy on the bill states the bill “seeks to circumvent longstanding and proven processes for determining whether cross-border pipelines serve the national interest” and “prevents the thorough consideration of complex issues.”

In other words, the President wants you to believe that there hasn’t been enough time to study the pipeline.

That’s absurd.

The Keystone XL pipeline has been studied for over six years. Five times, the State Department has issued reports that the project would have minimal impact on the environment.  

00_energy_keystone_osfc_800px.jpg Oil Sands Fact Check Keystone XL timeline.Oil Sands Fact Check Keystone XL timeline.

In the time it's been studied you could have built one Golden Gate Bridge (with time to spare), built three Pentagons, or watched all six Star Wars movies 3,917 times.

The most recent State Department analysis found that along with little environmental impact, the Keystone XL pipeline will create 42,000 jobs, generate $3.4 billion in economic activity, and generate $55.6 million in local property taxes once it’s operating.

taxfoundation_keystonexl_propertytaxes.jpg  Tax Foundation.Estimated local property taxes from the Keystone XL pipeline. Source: Tax Foundation.

Reaction to the President’s veto threat was greeted with bipartisan disappointment. Senate Majority Leader Mitch McConnell (R-KY):

I assure you, threatening to veto a jobs and infrastructure bill within minutes of a new Congress taking the oath of office — a bill with strong bipartisan support — is anything but productive.

Bill co-sponsor, Senator Joe Manchin (D-WV):

His decision to veto such a commonsense bill prior to the unfolding of regular congressional order and the offering of amendments appears premature and does little to mitigate the congressional gridlock. It is time that we address the critical issues of moving America toward energy independence and fostering job growth and economic prosperity.

By working at a snail’s pace, the administration has turned this project into a mobilization tool for anti-energy activists. It has allowed special interest demagoguery to trump sober policy analysis and made the Keystone XL pipeline a symbol of a dysfunctional federal permitting process.  People in Montana, South Dakota, Nebraska, and the rest of America have waited long enough.

The Wall Street Journal editorial board advised Congress to vote to approve the pipeline anyway [subscription required]:

Members of both parties should move ahead despite the veto threat and call his bluff. At least the country will see who is the real obstacle to faster growth and job creation.

Agree. Tell Congress to support the Keystone XL pipeline.

Businesses, investors, and entrepreneurs wondering if it’s still possible to build big things in America are watching, labor unions that support the pipeline are watching, and a majority of the public who supports the pipeline is watching.

pew_poll_keystonexl_11_2014.png Pew Research Poll on the Keystone XL pipeline.Pew Research Poll on the Keystone XL pipeline.

 

Sean Hackbarth  Andrew Harrer/Bloomberg.Interior Secretary Sally Jewell. Photographer: Andrew Harrer/Bloomberg.

Interior Secretary Sally Jewell gets two cheers for her recent comments on hydraulic fracturing.

First, she’s correct that local hydraulic fracturing bans are a bad idea:

“I would say that is the wrong way to go,” Interior Secretary Sally Jewell told KQED in an exclusive interview. “I think it’s going to be very difficult for industry to figure out what the rules are if different counties have different rules.”

Voters in two counties in California and a Texas community approved bans in 2014, and Governor Andrew Cuomo banned hydraulic fracturing in New York State.

Last April, Secretary Jewell told a House Natural Resources Committee that hydraulic fracturing “can be done safely and responsibly.” She joined a list of other federal and state regulators in defending the technology that has powered American’s oil and natural gas boom.

But at the same time, Secretary Jewell’s Interior Department continues work on duplicative hydraulic fracturing rules that will continue to bog down energy development on federal lands.

With volatile oil prices, this is no time for the federal government to pile on unnecessary regulations.

CRS_Stat_Oil_800px.png  Oil production on federal lands is declining.Chart: Oil production on federal lands is declining.

CRS_Stat_NatGas_800px.png  Natural gas production on federal lands is declining.Chart: Natural gas production on federal lands is declining.
J.D. Foster Gas prices reflected at a gas pumpThe price of fuel is seen on a pump at a Sunoco gas station in Rockbridge, Ohio, on Dec. 17, 2014. Photo Credit: Ty Wright/Bloomberg

Is the recent drop in crude oil prices a boon for the economy? One might think so from the way some commentators are responding to the halving of crude oil prices in recent months. This decline is trumpeted as equivalent to a huge tax cut for consumers and a boon for consumption and the economy. Sounds right, but basic theory suggests this may not be so. Basic theory suggests the effects on the economy as measured by Gross Domestic Product (GDP) may be negligible. If this sounds counterintuitive, it may be because most commentary tells only half the story.

To be sure, consumers are likely to feel much better about their purchases if they can spend less at the pump and more for other things. And this sense of enhanced well-being is entirely valid. Economists would say it represents an increase in “consumer surplus.” It just doesn’t show up in GDP, or in investment incentives, or in hiring trends.

Start with the most intuitive part of the story, the first half repeated every time there’s a major move in the price of oil – the effect on consumer purchases of everything else. In this case, the price of oil fell from around $115 a barrel to below $60 a barrel, and pump prices fell more or less commensurately. Consumers then need to spend less for gas at the pump: $554 less on average in 2015 if the barrel price remains around $60 according to the Energy Information Agency. Spending less at the pump means consumers have more left over for other purchases – like Christmas gifts.  Conclusion – consumers will spend more and the economy will strengthen. Sound familiar?

This then raises the question – is $20 spent filling the car less important to the overall economy than $20 spent on Christmas gifts?  The oft-neglected rest of the story is that if consumers spend $20 less on gas and $20 more on other things, then the overall level of consumer spending is unchanged. For the overall economy only the composition of demand changes, which granted is important if one’s business is selling any of these other consumable goods. Retailers, for example, should be well pleased. But changes in the composition of consumer demand are not increases in the level of consumer demand – or of GDP.

A similar story plays out on the production side of the economy. For some industries a lower oil price is great. Chemical companies, for example, typically use petroleum as a feedstock. Reduce the crude price and input prices fall, and this either supports profits or allows chemical companies to reduce their prices to the benefit of their customers, and on and on. Oil companies, in contrast, especially those which own the oil pumped out of the ground, see their incomes fall.

So the pattern of production, profits, and income changes much as the pattern of consumption changes, but in each case overall levels and thus GDP are little affected. The complication arises because crude oil is a traded commodity. Thanks to fracking resulting in soaring production, the United States is today nearly energy independent, and this neutralizes net trade flow effects that would have developed in years past, and will still manifest for countries that are net energy importers.

For net oil importers a fall in the crude price would reduce the net trade deficit and improve the nation’s terms of trade – essentially the value of what is sold broad to purchase foreign goods like oil. However, the balance of payments still balances, which means a reduction in the net trade deficit must be matched by a reduction in the capital account deficit – the net inflows of capital. This reduction in net capital inflows don’t just happen miraculously, but result from some combination of a somewhat stronger dollar exchange rate and slightly lower U.S. interest rates relative to the rest of the world. This decline in net capital imports in turn results in a reduction in domestic investment. Therefore, in theory, even the reduction in the trade deficit which would otherwise benefit GDP is neutralized by a reduction in domestic investment as net capital inflows fall.

Does this mean the fall in the price of oil is irrelevant to the overall economy?  Not at all. Common intuition is correct, but it is often incorrectly expressed. Consumers can now spend more on what they want most and less on the necessity of gas in the tank. And Americans overall benefit from the stronger dollar because their labor and products now command a higher price in terms of what the rest of the world offers. On balance, Americans benefit from a lower oil price, but perhaps not in the terms usually used to describe the economy like GDP. 

Sean Hackbarth 2014 White House Christmas Ornament Features a Coal-Fired Train

The Obama White House may think coal isn’t good enough to power our economy, but it must think it’s good enough to add some Christmas cheer.

While the Obama administration gave coal producers and electricity generators an early lump of coal after EPA released proposed carbon regulations, a coal-fired train is the star of the 2014 White House Christmas ornament.

2014 White House Christmas Ornament Features a Coal-Fired Train2014 White House Christmas Ornament Features a Coal-Fired Train

As the White House Historical Association explains, the ornament is the first to be composed of two pieces [emphasis mine]:

The locomotive is a detailed miniature replica of one of several steam-powered locomotives that pulled the Presidential Special; it is attached to the coal car that held its fuel. The other miniature car is the Superb, the president’s private heavyweight Pullman car. The last car on the Special, the Superb was outfitted with a public address system. President Harding made appearances and delivered speeches at stops across the country from a platform at the back of the car.

President Warren Harding’s transcontinental speaking and sightseeing tour inspired the design.

The ornament reminds us that just as it powered the trains that tied America together into an economic powerhouse, coal still plays a critical role in fueling America’s economy. According to the Energy Information Agency, more electricity is produced by coal (37%) than any other energy source. It’s the backbone of affordable, reliable electricity.

Electricity generation by energy source.Electricity generation by energy source.Source: Energy Information Administration


The United States possesses coal reserves that can last for nearly three centuries. The attacks on this abundant energy source by regulators will mean lost jobs, slower economic growth, higher electricity costs, and a less reliable electrical grid.

President Obama said in 2008 while campaigning, “If somebody wants to build a coal-fired power plant, they can. It’s just that it will bankrupt them.” However, trinkets depicting coal apparently are acceptable.

The ornament is a lovely decoration sure to add character to anyone’s Christmas tree, even of those whose jobs will be lost because of federal regulations pushing coal use out of the economy.

This post originally appeared on June 11, 2014.

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