Keystone XL: Politicians’ inability to balance social, environmental, and economic implications of decisions

By Samantha T.

Given the senate’s ruling against the Keystone pipeline last month, I thought it would be an appropriate topic to discuss. While the entire continent is crisscrossed with oil and gas pipelines, none has drawn more attention than Keystone XL which hopes to connect the oil sands of Alberta, Canada to the oil refineries and ports on the US Gulf Coast. I believe there are a lot of parallels between the way the local government made decisions in the ‘New Orleans After Katrina’ case and how the US Senate is making decisions around Keystone. In New Orleans the government neglected the human aspects of the situation and solely optimized around economic elements. They removed all emotion from their decision and it backfired on them in many ways. I believe the same is happening with the Keystone decision, except that the emotional argument is being prioritized, and all other components are being ignored.

For some context, environmentalists oppose the pipeline because it connects particularly dirty energy sources, Alberta oil sands, with refining and export capacity on the Gulf Coast. On the other side of the argument, analysts support the pipeline because it will create 42,000 jobs and contribute $3.4 billion to the American economy. Without the pipeline, the oil sands will still be developed but will either be brought to market by rail, a less safe and less efficient form of transport, or exported from Canada to other countries.

Unlike other infrastructure projects, Keystone must be approved by the State department because it crosses an international border. When the State department evaluates “our national interest” they are supposed to consider economic, national security, and foreign policy implications, in addition to the environmental implications.

This however is not how decisions appear to be being made. Last year President Obama made a speech about his criteria for approving the project: “Allowing the Keystone pipeline to be built requires a finding that doing so would be in our nation’s interest. And our national interest will be served only if this project does not significantly exacerbate the problem of carbon pollution. The net effects of the pipeline’s impact on our climate will be absolutely critical to determining whether this project is allowed to go forward.”

While the environmental aspects of the project are incredibly important to evaluate, those should not be considered in a vacuum. The President should also assess how this impacts US dependence on foreign oil, what the impact will be on local and national economic conditions, how this market disequilibrium will impact global oil prices, and the alternative methods of transporting and refining this oil. An assessment of these issues may still lead one to believe that the negative outweighs the positives, but I don’t think politicians are actually meeting their obligation to evaluate these tradeoffs.

Lawmakers instead are using an emotional, rather than logical, argument to dissuade construction of the pipeline. Politicians are so afraid of being pegged as someone who does not care about the environment that they are overweighting this single element. Thomas Steyer, the California billionaire who founded NextGen Climate, the environmental advocacy group who is fighting against the pipeline, stated “This is a legacy-defining issue where one’s position signifies whether they are standing up for or against the next generation on the issue of climate.”

Whether or not you agree with the decision to support or reject the Keystone project, I do not believe the decision is being made rationally. It is very difficult to balance all of the stakeholders associated with any decision that impacts so many different areas. Nonetheless, it is the role of our policymakers to adequately educate themselves on the topic and balance the social, economic, and environmental impacts of their decision.



About macomberjohnd

HBS Finance faculty interested in sustainability in the built environment including devices, structures, townships, and cities.

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