The decision by President Obama to reject the Keystone XL pipeline designed to bring Canadian oil to US Gulf Coast refineries was a surprise to no one. Officially, the State Department said it rejected the project because the Republicans in Congress imposed a deadline of 60 days for review and decision on the project that was insufficient to allow consideration of the issues. The rejection letter also invited the project sponsors to refile their application—after the election!
For the politicians this is a pure win-win. All sides can score points on the issue while doing what they perceive as no lasting damage. For business this is business as usual, large project developers are accustomed to delays, posturing and political extortion. The business calculus is not whether this is still a good project, it is the trade-off between the sunk cost and the to-go cost answer compared to the alternative uses of both financial and political capital. For the special interest advocates on all sides and the media it is a feeding frenzy of bombast and bluster, green versus brown, 1% who want to remain profitable in their oil business versus the 99% who need their oil products but decry how much it costs.
Beyond political theater a profound energy debate is underway
- Should America develop and use its own domestic energy resources to reduce our dependence on imported foreign oil from the Middle East, Venezuela and elsewhere and thus improve both our energy and domestic security?
- Should America and Canada expand their intimate and mutually dependent business relationship in an open, reliable manner? Can America have its environmental cake and eat it too by using cleaner natural gas as a substitute for dirtier coal for power generation and thus reduce emissions?
- For environmental groups the question is will the good and affordable natural gas available from the boom in unconventional E&P be made the enemy of the perfectly clean but uncompetitive and unreliable renewable energy policy aspiration they seek? Does it have to be all or nothing?
- Americans are asking the government to restore a sense of balance between regulatory costs and benefits. Is it good enough to materially reduce the market share of coal and thus emissions with the substitution of cleaner but affordable, plentiful, reliable natural gas? Americans support environmental protections but worry that regulation has been hijacked and turned against us to promote a political agenda that is undermining our economic and global competitiveness, undermining investment and job growth potential with onerous regulatory burdens, and is unreasonably intruding into our lives. This is a major reason we tell pollsters we think the country is going in the wrong direction.
Those are the energy debate questions in the 2012 election. The good news is there are good answers. The bad news is that it is a LONG TIME until November 2012 and so we must endure for a while longer the campaign, political advertising and endless scoring of points.
Be patient America—we’re winning!
The revenge of competitive markets created the boom in unconventional oil and gas domestic production to fill the vacuum from lack of a coherent US energy policy—and it shows no signs of resignation. It’s game on for domestic energy growth.
The market revenge for the regulatory regime bearing down on American markets is to export the coal, oil and refined products and even natural gas as LNG into higher priced foreign markets. The oil from Canada needs the refinery capacity in America to extract its full market value. America needs the refined products which are a (pardon the pun) a keystone of our own export growth.
The revenge of markets is that while the EU eschews horizontal drilling and hydraulic fracturing at home thus insuring that it is hostage to Russian gas imports. While China continues to buy large quantities of oil from Iran, in part to irritate the US and because Iran is desperate for oil trading and will be forced to discount substantially to get China to buy. While Venezuela self destructs from Hugo’s hubris and Nigeria suffers from a low grade civil war over corruption—the US domestic energy market is busy discovering new opportunities for growth from unconventional oil and gas.
And while the US Government dithers over restoring more traditional Gulf of Mexico deepwater drilling the technology and expertise of America’s oil and gas experts are busy on shore exploiting it.
America is getting it energy mojo back—-and there is nothing the politicians can do to stop it.
- President Obama Rejects Keystone XL! (sierraclub.typepad.com)
- On the Keystone XL Project Rejection (spirofloblog.wordpress.com)
- Canada to US: You are Not the Only Hot Date for Keystone XL party! (insightadvisor.wordpress.com)
- Pipeline Protest: The 99% Strike Back Against Keystone XL (thinkprogress.org)
- Chamber touts Keystone XL, domestic energy to create jobs (energyindependenceforstates.com)
- Keystone XL Pipeline Would Increase Oil Prices in Midwest (desmogblog.com)
- My 2012 Predictions (insightadvisor.wordpress.com)