Standing at a podium in front of piles of pipes in Cushing, Okla., last week, President Obama unveiled an executive order meant to speed federal permitting of pipeline infrastructure, including the southern portion of the controversial Keystone XL oil pipeline. Critics immediately jumped on the move, accusing Obama of being “the rooster taking credit for the dawn” and arguing that no federal action is actually needed for that portion of the Keystone pipeline to move forward. National Journal’s Energy & Environment Insiders agree.
More than 70 percent of Insiders said that Obama’s executive order was unnecessary, with some even saying the move smacks of federal overreach.
Insiders overwhelmingly agreed that the southern portion of the Keystone XL pipeline, which will run from Cushing to refineries in Port Arthur, Texas, only needs local approval. States typically handle the siting of interstate oil pipelines, while the only federal involvement normally comes from the Federal Energy Regulatory Commission, the Army Corps of Engineers, and the U.S. Fish and Wildlife Service.
Obama’s involvement in the approval process is “not even remotely necessary,” said one Insider, arguing that Obama’s campaign likely thought it was “politically necessary to invent an executive action to [stanch] the coming decline in the polls.”
The Cushing campaign stop came just a day after Gallup released a poll showing that nearly 60 percent of Americans think the U.S. government should approve the entire Keystone project, which Obama rejected in late January.
“The Cushing event was all show ... but a well-executed one,” said another Insider.
Still, by rejecting the permit for the full pipeline—which would run from Canada to the Gulf Coast—and then going full-force in supporting the southern section of the pipeline, Obama is sending out inconsistent messages to the public, Insiders said.
“This is a local permitting decision. The president getting involved looks like federal government interfering in the traditionally local decision of land-use planning—and it likely won’t actually change the permitting process, which is already under way,” said one Insider. “Not great optics—and I say this as a fan of the president.”
Even some of the 29 percent of Insiders who said the Obama administration should be involved argued that it is not legally necessary but noted that it is politically important.
“It is necessary in a political sense, to demonstrate that the administration is doing everything it can to lower high gas prices,” said one Insider. “But even without the administration’s involvement, the southern portion of Keystone will get built and, shockingly, gas prices will remain high.”
Insiders overwhelmingly agreed that the southern portion of the pipeline won’t do much for oil prices. Asked whether prices will go up or down once this piece of the pipeline is completed, 75 percent of Insiders chose "neither," a mere 14 percent said prices would go down, and 11 percent said they would go up.
"You need to connect the hose to the spigot if you want to water the lawn," one Insider said, arguing that only the approval of the full Keystone XL pipeline project would affect prices.
Insiders said that aside from some efficiencies in delivery, this portion of the pipeline won't have much of an impact.
"It will only have an impact on the price of oil if investors see the construction as a sign of things to come in terms of fostering more domestic development," said one Insider.
Is it necessary for the Obama administration to get involved in the permitting process for the southern portion of the Keystone XL pipeline?
- Yes 29%
- No 71%
“As a legal matter, it is not necessary for the president to intervene. However, doing so at the presidential level is a tacit admission that the agencies responsible for approving the southern portion of the pipeline are taking an excessive amount of time.”
“The GOP consistently misrepresents the president's position on energy issues. This was his plant-the-flag moment.”
“According to TransCanada, it is awaiting permits for the southern portion of the Keystone pipeline to be approved by the Army Corps of Engineers. So the administration is involved, no question. The Corps has promised expedited treatment for these permits, pursuant to a commitment President Obama made in February. Some of the president’s environmental supporters probably wish the Corps would restart the analysis from square zero and push back what Obama’s critics are calling the ‘dawn.’ As I see it, President Obama can defensibly claim credit for helping southern Keystone to move forward expeditiously.”
“Pipelines not crossing international borders are the province of state regulators, not federal, save for minimal siting permits from [the U.S. Fish and Wildlife Service] and [Army Corps of Engineers]. The activities by those agencies [were] either near complete or done prior to the White House shutting them down last fall. The Cushing event was all show ... but a well-executed one.”
“The president’s announcement on expediting permitting seems mostly about just saving TransCanada from government rules that would have required a redo on some processes. It may not have been necessary, but it can’t hurt to have the president tell his agencies to make this a priority and work efficiently. Shouldn’t that happen all the time?”
“Obama’s Cushing campaign stop will turn out to be his Dukakis-in-the-tank moment come November. Everybody knows that the feds have no impact on whether or not this portion of the project moves forward.”
“White House involvement is the only reason that all federal permits are not issued already. Further White House meddling will not be beneficial.”
“Legally, no. Politically, yes, since our commander in chief is now trying to win the nickname ‘President Pipeline.’ ”
“It actually hurts Obama because it highlights the fact that he said no to the larger pipeline, the only action that required his support.”
What will be the effect on oil prices once the southern portion is actually built?
- Prices will go up 11%
- Prices will go down 14%
- Neither 75%
Prices will go up
"Oil prices will continue to rise because oil is traded in a global market where the completion of one pipeline in the U.S. is not enough to overcome growing demand from China and India and continuing uncertainty about Iran and the Middle East."
"By clearing out the 'Cushing glut,' two things will happen: The oversupply of oil that is keeping Midwestern gasoline prices relatively low will end (thus raising those prices), and the oil now sitting in Cushing will go to the Gulf—where it will mostly be converted into diesel for export, NOT for domestic gasoline. The shocking thing is that the Obama administration ought to know this; the galling thing is that no one seems interested in asking them about it."
Prices will go down
"It will be a very modest effect. Gasoline prices are largely set by Gulf Coast refineries, so they will be helped a little by extra supply. The bigger effect will be to reduce the very generous profit margins currently enjoyed by mid-continent refineries that currently have the excess crude to themselves, but charge gasoline prices keyed to the Gulf Coast anyway. They will come back closer to the national average for refining margins."
"The prices for crude at the Gulf Coast should go down, helping millions of gasoline consumers. They might even go down further when we can get pipelines to connect the Gulf Coast to the Bakken and the Canadian oil sands. Wait, I think one of those was proposed!"
"More supply will always help serve as a pressure relief on prices although the impact may not be as linear as everyone thinks. What is needed is the completion of the entire [Keystone] XL project to create sustained price impact."
"You need to connect the hose to the spigot if you want to water the lawn."
"No impact at all, but our oil will get to China more quickly."
"The refiners in the mid-continent are making a killing. Anything that de-bottlenecks will reduce refiners' margin, and have almost no effect on price."
"No, this will create some efficiencies in delivery, but if it's more than a few cents per gallon at the gasoline pump, I would be surprised."
"It will only have an impact on the price of oil if investors see the construction as a sign of things to come in terms of fostering more domestic development."
"Despite some of his words trying to explain the reality of industry manipulation of gas prices, all of his actions—from southern Keystone to Arctic drilling to delay on [Environmental Protection Agency] rules—indicate the president is scared of the gas-price mob."
"This will help alleviate the bottleneck of Bakken crude, but until the northern part of the Keystone that Obama has actively opposed is built and Canada's 700,000 barrels a day begin flowing into the Houston refineries, it will not impact the price of crude."
National Journal’s Energy and Environment Insiders Poll is a periodic survey of energy policy experts. They include:
Jeff Anderson, Paul Bailey, Kenneth Berlin, Andrew J. Black, Denise Bode, Kevin Book, Pat Bousliman, David Brown, Neil Brown, Stephen Brown, Kateri Callahan, McKie Campbell, Guy Caruso, Paul Cicio, Douglas Clapp, Eileen Claussen, Steve Cochran, Phyllis Cuttino, Kyle Danish, Lee Dehihns, Robbie Diamond, David Di Martino, Bob Dinneen, Sean Donahue, Jeff Duncan, John Felmy, Mike Ference, David Foster, Josh Freed, Don Furman, Paul Gilman, Richard Glick, Kate Gordon, Chuck Gray, Jason Grumet, Christopher Guith, Lewis Hay, Fritz Hirst, Jeff Holmstead, David Holt, Skip Horvath, Bob Irvin, Bill Johnson, Gene Karpinski, Joseph T. Kelliher, Brian Kennedy, Kevin Knobloch, David Kreutzer, Fred Krupp, Tom Kuhn, Con Lass, Mindy Lubber, Frank Maisano, Drew Maloney, Roger Martella, John McArther, Mike McKenna, Bill McKibben, Kristina Moore, Richard Myers, Aric Newhouse, Frank O'Donnell, Mike Olson, T. Boone Pickens, Thomas Pyle, Hal Quinn, Rhone Resch, Barry Russell, Joseph Schultz, Bob Simon, Scott Sklar, Bill Snape, Jeff Sterba, Christine Tezak, Susan Tierney, Andrew Wheeler, Brian Wolff, Franz Wuerfmannsdobler, and Todd Young.
This article appears in the March 28, 2012 edition of NJ Daily.