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Leading From The Rear On Energy, Again

By deciding to delay a decision – in this case, on the controversial Keystone XL oil pipeline – the Obama administration has given us a concise summary of everything that is wrong with the executive branch today.

This is the presidency that takes a firm stand against taking firm stands. The buck always stops someplace else. The Obama White House is a quicksand where policy choices, on everything from nuclear waste disposal to shale gas development to offshore oil drilling, disappear into the muck.

President Obama found himself caught in a political vise on Keystone XL. Rejecting the project would offend organized labor, an important Democratic constituency, as well as business interests that the president has been trying to coax into investing in more American jobs. But approving the project would outrage environmentalists, who claim to oppose the pipeline for its own sake, but whose real agenda is to try to halt development of the Canadian oil sands whose crude would be funneled by Keystone XL to U.S. refineries.

So the State Department – which has jurisdiction because the pipeline would cross an international border – responded by delaying a decision until safely past next year’s presidential election. The functionaries at State declared that presidential politics had no role in their need for more time to study the matter. If you find this declaration credible, you need to hand your wallet to someone else for safekeeping before venturing out in public.

The pipeline, proposed by the Canadian company TransCanada, would stretch 1,700 miles and carry crude from oil sands formations in Alberta to refineries in Oklahoma and the Gulf Coast.

Environmentalists have opposed the pipeline on the grounds that producing crude from sand laden with bitumen, as is found in Alberta, generates gases that contribute to global warming. Meanwhile, state politicians in Nebraska have supported the pipeline while pushing for it to be rerouted so as to avoid passing through the Sand Hills region or crossing the Ogallala Aquifer, a critical source of drinking water.

The State Department decision authorizes a search for alternate paths through Nebraska, pleasing the Nebraskans and delaying any definite disappointment for the national environmentalist contingent. But we could save them the trouble. Virtually no route through Nebraska can avoid the Ogallala, which is a huge underground reservoir that is being depleted steadily and rapidly by overuse for irrigation. If politicians in Nebraska were serious about protecting that aquifer, they would get busy trying to raise the price of water, especially for farmers. This, unsurprisingly, is not a winning political argument on the High Plains.

While agriculture, not an oil pipeline, is the real threat to Nebraska’s water resources, the trumped-up perception of the pipeline’s threat is enough to possibly kill the project through delay. This may well be the administration’s real goal, in which case a straightforward rejection of the project would have been better economic policy. At least an outright rejection would have spurred a search for alternatives. But it would not have suited the president’s political calendar, which almost always comes first.

The pipeline is just one of several recent projects opposed by environmental groups that have conveniently been put off until 2013 or later. A review of the nation’s smog standards will now take place in 2013; offshore oil lease sales in the Arctic have been delayed until 2015 or later.

Kerri-Ann Jones, an assistant secretary at the State Department, has nevertheless insisted that the White House did not influence the department’s decision on this most recent postponement.

The irony is that no amount of American obstruction will prevent Canada from developing its own petroleum resources. Another Canadian pipeline company, Enbridge, Inc., has already proposed an alternative pipeline project, which would avoid some of the American regulatory scrutiny the Keystone XL faces by following existing routes. Oil would still be transported from Canada to the U.S.; it would just be done less efficiently.

At most, we can punish our own refining industry by making it more reliant on overseas crude, or force more development of American reserves off the Gulf coast – another area where environmentalists want to limit drilling. Canada, in the meantime, will find other routes to get its crude to market, including possibly hauling it to the British Columbia coast and shipping it to Asia.

Steve Laut, president of Canadian Natural Resources Ltd., which plans to send 120,000 barrels per day down the Keystone XL pipeline once it’s up and running, said in a conference call quoted in the Calgary Herald that if the U.S. does not grant approval, producers will look to other markets. “If it does not happen,” he said, referring to approval of the pipeline, “I think you will see industry in Canada, which as you know is very resilient and very innovative, move very quickly to find other outlets to get our heavy oil production and our synthetic oil production likely off the West Coast and into Asian markets.”

Where would that leave the United States? As TransCanada’s CEO, Russell K. Girling, told The New York Times, “If Keystone XL dies, Americans will still wake up the next morning and continue to import 10 million barrels of oil from repressive nations without the benefit of thousands of jobs and long-term energy security.”

State’s delaying tactic is just one more example of Obama’s tendency to lead from the rear. So far, this strategy has not gotten the country very far down the road to economic recovery. And it’s not likely to get us anywhere for the remainder of his time in office, whether that’s one year or five.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s recently updated book, Looking Ahead: Life, Family, Wealth and Business After 55. His contributions include Chapter 1, “Looking Ahead When Youth Is Behind Us,” and Chapter 4, “The Family Business.” Larry was also among the authors of the firm’s book The High Achiever’s Guide To Wealth.

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