Bloomberg News

Obama Plan on Oil Pipeline Segment Won’t Quell Keystone Debate

March 23, 2012

President Barack Obama satisfied neither critics nor environmentalist allies with an announcement of an expedited review for an oil pipeline as he wrapped up a four-state trip defending his energy policies.

Obama promoted his “all-of-the-above” energy strategy yesterday in Cushing, Oklahoma, the delivery point for New York futures contracts and a symbolic intersection for U.S. energy politics.

Cushing is where TransCanada Corp. plans to begin building the southern segment of its Keystone XL oil pipeline to refineries on the Texas coast even as its proposal for the northern leg, which would connect with Canada’s oil sands, remains in limbo after the administration put off approval until after the election.

The rising cost of gasoline threatens to slow the U.S. recovery and is emerging as an issue in the 2012 presidential campaign. The president spent the last two days promoting development of alternative energy sources, a favorite of environmentalists, while also echoing Republican calls to expand the use and production of fossil fuels.

“Anybody who suggests that somehow we’re suppressing domestic oil production isn’t paying attention,” Obama said while standing in front of pipe for the Oklahoma project. “But the fact is, producing more oil at home isn’t enough by itself to bring gas prices down.”

Quicker Permits

While in Cushing, Obama sought to demonstrate his commitment to domestic oil and gas development by announcing he is streamlining the federal permit process for critical infrastructure and designating TransCanada’s pipeline from Oklahoma to the Gulf of Mexico a priority. The $2.3 billion line is intended to eliminate a bottleneck in the distribution of crude oil.

The action won’t shorten the timeline for the project, which is slated to start as soon as June. TransCanada is awaiting permits from the U.S. Army Corps of Engineers, the last it needs to begin work, according to the company. The Army Corps typically approves such permits within 60 days, according to Meg Gaffney-Smith, chief of the Corps’s regulatory program.

The decision drew fire from both sides in the debate over the Keystone XL pipeline.

Republican House Speaker John Boehner’s office labeled the president’s trip a “tour de farce,” and Republican presidential candidate Mitt Romney said Obama’s move was more about his poll numbers than oil.

“Apparently, the slipping poll numbers have convinced him to announce the lower half of that pipeline,” Romney said at a town hall meeting on March 21 in Arbutus, Maryland.

‘Cut Corners’

The Natural Resources Defense Council, meanwhile, said it’s “foolhardy” to “cut corners” to approve the segment of TransCanada’s (TRP) pipeline.

The double-barrel criticism may not matter to voters, who want to see the U.S. using all available options -- including more domestic drilling, pipeline construction, clean energy investments and more incentives for fuel-efficient vehicles -- to ease the strain of the gasoline prices, according to Andrew Baumann, a vice president of the Democratic polling firm Greenberg Quinlan Rosner.

“Basically what voters want is everything” Baumann said. Obama’s best strategy is “to take the mantle of the do-it-all candidate.”

Obama’s Strategy

Obama sought to do that in four states over the last two days, while also criticizing his opponents.

Speaking at an oil and gas field in Maljamar, New Mexico, on March 21, Obama said his energy strategy “relies on producing more oil and gas here in America, but also producing more biofuels in America, more fuel-efficient cars in America, more wind power in America, and more solar power in America.”

At Ohio State University in Columbus, Obama said Republican presidential candidates, who he didn’t name, were like members of the “Flat Earth Society” for dismissing his initiatives to promote alternative energy sources.

“They want to double down on the same ideas that got us into some of the mess that we’ve been in,” he said.

Four in 10 Americans say the energy situation in the U.S. is “very serious” and half say the nation is likely to face a critical energy shortage in the next five years, according to a Gallup poll of 1,024 people conducted March 8-11. The margin of error is plus or minus 4 percentage points.

The same poll found that 57 percent of the public favors building the entire Keystone XL pipeline.

Economic Impact

With the U.S. recovery gaining traction, rising fuel prices are a potential setback to growth by crimping consumer spending, which makes up 70 percent of the economy. That makes it a political risk for Obama as he seeks a second term.

The average retail price of a gallon of regular gasoline was $3.88 yesterday, according to a daily survey by the American Automobile Association, up from $3.57 a month ago.

Obama picked three battleground states to make his points. He highlighted solar energy in Nevada, domestic gas production in New Mexico and alternative energy research yesterday in Ohio. Obama won all three states in 2008 and they are being targeted by both parties for the November election.

Even if the memorandum Obama issued yesterday will do little to affect the project’s timing, it may neutralize criticism of his rejection of the permit for the Northern portion of the pipeline that would bring oil from Canada. Getting more oil moving out of Cushing ultimately will ease energy prices, said Phil Flynn, vice president of research at PFGBest in Chicago.

“He is trumpeting what is going to be the future,” Flynn said. “Over the long run, by relieving the bottlenecks, it will make sure that prices are lower everywhere as time goes. It is going to be a big step forward.”

To contact the reporter on this story: Julianna Goldman in Washington at jgoldman6@bloomberg.net

To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net


Ebola Rising
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus