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Rejection of Keystone a Blow to Economic Growth

Article by James K. Glassman January 18, 2012 //   3 minute read

The administration’s rejection today of a permit to build the Keystone XL pipeline to carry oil from Canada to the United States was hardly a shock, but it’s still a huge disappointment. At a time when the U.S. economy needs growth desperately, saying no to Keystone is a terrible blow. Republicans forced today’s decision as part of a deal to extend payroll tax reductions at year-end, setting Feb. 21 as the deadline to make the choice. In an indication of his priorities, President Obama beat that target by more than a month. The company that wants to build the pipeline, TransCanada Corp., first applied for a permit in 2008. In November, the State Department, which has jurisdiction, delayed the request until after the 2012 elections. The pipeline would bring an additional 840,000 barrels of oil a day into the United States, and a report commissioned by the consulting firm Wood Mackenzie estimates that the pipeline will generate 85,000 new U.S. jobs by 2020. The rejection of Keystone XL is of a piece with other decisions by the administration. At a time when economic growth is America’s greatest challenge, energy policy is being driven mainly by a particular vision of environmentalism. The irony is that the U.S. stands on the brink of gaining something close to energy security because of technological developments in the finding, producing, and transport of oil and natural gas. Allowed to pursue energy vigorously – with, of course, sensible environmental safeguards – the U.S. could advance on several fronts at once: improving economic growth, lowering the cost of energy, increasing jobs, and shoring up national security. The Keystone XL pipeline would certainly help – as would a policy to encourage the exploration and development of the Outer Continental Shelf, parts of Alaska, and, of course, the vast supplies of shale gas (perhaps more than a century’s worth) that can be accessed through new horizontal drilling and fracking techniques. In case anyone has doubts about the economic effects of extracting energy resources, take a look at North Dakota, where the unemployment rate is 3.4 percent and real estate sales are booming. The reason is increased oil production on private and state land that is largely immune to the delays enforced by the feds. Private businesses are ready and eager to make the energy investments that will contribute to U.S. economic growth – with no taxpayer money involved. It is government that is putting the brakes on the recovery with misguided policies, like the rejection of Keystone XL. We are on the brink of a growth revolution in energy. Let it happen.