When President Barrack Obama rejected the application for the Keystone XL TransCanada pipeline, he had more on his mind than the environment. The project made no economic sense. According to the U. S. Department of State, bringing heavy oil sands across our border, among the most expensive to convert to crude, would create a total of 35 permanent American jobs. That feeble number provided no incentive to move forward. Unfazed by the numbers, Donald Trump approved the project once he took office. What did he glean from the figures that Obama missed?
The answer is, “not much.” In fact, since Trump’s inauguration, the financial prospects for the project have grown worse. During the campaign, for example, Trump insisted he would build the pipeline using American steel. Apparently, he was unaware the pipes were already on site and “the profits for manufacturing of that steel were booked by companies with corporate headquarters in Russian, India, and Italy.” (Click) To make matters worse, the US and much of the world is suffering from an oil glut. Prices for crude have fallen dramatically, reducing the need for Canada’s more expensive version.
Trump seems to be at cross-purposes with himself, in any case. If he proceeds with his plans to implement a border-adjusted tax (Click), the tax would make Canadian oil even more expensive. Further, making the pipeline profitable depends upon “getting firm commitments from oil shippers to use it, and these conversations have barely begun.” (Reviving Keystone XL Is No Sure Thing,” Edited by Matthew Phillips, Bloomberg Businessweek, Feb 6-12, 2017, pg. 23.)
In the intervening time since the debate over Keystone XL began, Canada’s has made plans to reroute its oil deliveries through pipelines that stretch between Wisconsin and the west coast. (Ibid, pg. 23.) In hindsight, Obama’s decision to reject the pipeline appears to have been the correct one. That President Trump is forging ahead seems little more than an act of willfulness. I’m guessing he is likely to discover that, like health care reform, building a pipeline is ha-r-r-d.
(Originally published 4/4/17)
