Schaff: Keystone XL delay unworthy lag on economic progress

I’m torn. Last week, the Obama administration punted its decision on the Keystone XL oil pipeline. I’m torn. Last week, the Obama administration punted its decision on the Keystone XL oil pipeline. Sure, it’s nice to have a president who doesn’t share his bed with energy company executives. But at the same time, I think Barack Obama’s making a mistake.

It’s been three years since TransCanada, a major Canadian energy infrastructure company, applied for a presidential permit to begin the proposed $7 billion Keystone XL project. If granted, this permission would give TransCanada the right to build and operate an extension of 1,700 miles of oil pipeline, which would speed 500,000 barrels of Canadian crude oil per day to U.S. refineries along the Gulf of Mexico. TransCanada purports that the project would generate 20,000 “high-wage” jobs, the economic analysis firm the Perryman Group suggests that direct construction spending would add $9.6 billion to the GDP and esteemed energy economist James Hamilton estimates the pipeline could lower fuel costs for a large section of the country — that alone boasts a potential yearly GDP boost of $3.6 billion.

But given the vast stretches of American heartland over which the pipe will weave and the fact that Canadian energy production, which takes oil from hard-to-process sand deposits, releases more CO2 than conventional methods, environmentally conscious observers around the country have thrown red flags. That includes Pitt students. Just last month, the Pittsburgh Student Environmental Coalition protested the Keystone XL pipeline in South Side, where Obama visited to tout his now-defunct jobs bill, according to The Pitt News.

And if the story the mainstream media’s spinning — that the years of delays to the pipeline’s construction derive from Obama bending to pressure from environmental groups, as opposed to legitimate concerns that haven’t yet been resolved in the drawn-out investigation — is true, then it looks like these critics have sidestepped the best interest of the country and frankly, of the president.

Don’t write me off too early — protecting the environment should be a national imperative. We need to ensure that the bountiful resources and wildlife of North America are still around for future generations to enjoy. And perhaps, especially in Republican circles, there’s not enough said about the value inherent in Mother Nature operating undisturbed. But even with an appreciation for the Earth, we have to realize that all-out bans on selected economic activities that affect the environment, which the deliberate Keystone XL delays amount to, don’t accomplish anything constructive. When faced with decisions that carry environmental risks, we should resist the automatic urge to use the stick-our-heels-in-the-(tar)-sand card.

Without some allowance for pollution and environmental disturbance, at least in this century, Americans would not be enjoying the quality of life we take for granted. For example, think about all the fossil fuels that went into putting this publication into your hands. Likewise, pursuing policy that rejects — or indefinitely withholds permission for — development projects that promise wide-ranging benefits but happen to risk any amount of environmental cost is economic stupidity. Anyone who expects to use infrastructure investment as an economy booster without disturbing our natural surroundings is naive.

The only feasible policy for proposals like Keystone XL is cost minimization, and this is what Obama needs to realize. That’s because economic stimulus with manageable side effects beats no stimulus and no side effects.

Although the laughable lineup of GOP presidential hopefuls might tell you otherwise, Obama’s hold on the 2012 election is anything but certain. With tens of millions of still-unemployed voters breathing down his neck, Obama would be foolish to dismiss opportunities for the private sector to put people to work, especially at a time when Congress won’t move on any substantial iteration of Obama’s jobs bill. The Democrats need a stronger job market to assure victory in 2012 — it might be just me, but somehow the whole, “It’s the obstructionist Republicans’ fault” line seems too flimsy to carry a presidential campaign.

So if he wants to continue living in the White House, Obama cannot go around turning proposals like Keystone XL down outright. And he needs to recognize that approving such pipelines doesn’t have to compromise his values unless his values are actually impossible ideals. Instead of eliminating the possibility of environmental harm through bureaucratic lag, Obama should focus on building a regulatory system that minimizes these risks.

How could he do this? One word — incentives. If he gives companies like TransCanada both permission to use American land and a strong incentive to reduce environmental impact, along with vigorous regulatory monitoring, he’ll find a win-win scenario: The company, economy and president will benefit, and environmental damage will be minimized.

So what’s a sample incentive solution? Tax companies based on the size of their environmental impact. Using some to-be-developed formula, companies would have to pay — above and beyond cleanup costs when accidents strike — given the amount of CO2 released, the number of species displaced, the probability of contaminating ground water, etc. If the price of polluting is sufficiently high, firms would have the incentive to do everything possible to avoid —not evade — the tax, which happens to include enhancing the “greenness” of their operations. It’s just too easy.

What would be easier, of course, is to use a magic wand to lower the per-unit cost of solar power, thus swiftly eliminating our reliance on dirty fuels and hostile foreigners. But as we all know, governments are in no fiscal shape to raise appropriations to Hogwarts’ research department.

Call Matt Schaff a filthy oil baron at matthew.schaff@gmail.com.