| April 12, 2012
Keystone Pipeline: A Second Chance to Get It Right
Try as they might, big government cannot stop free enterprise. TransCanada, the company building the Keystone Pipeline, recently announced that it will proceed with building the section of the pipeline that would connect Cushing, Oklahoma, with refineries on the Gulf Coast in Texas.
This announcement is big news because it shows that TransCanada is committed to the project and willing to proceed in phases. The Cushing to Texas portion (now known as the “Gulf Coast Project”) of the pipeline can proceed without the cross-border permit being granted. TransCanada must still negotiate with some landowners to secure all the necessary easements, but reports say as much as 99 percent of those easements are already secured. The Gulf Coast Project will still need approval from the Army Corps of Engineers, so let’s hope the feds get it right this time.
In a press release about the announcement, TransCanada president and CEO Russ Girling said, “The Gulf Coast Project will transport growing supplies of U.S. crude oil to meet refinery demand in Texas. Gulf Coast refineries can then access lower cost domestic production and avoid paying a premium to foreign oil producers. This would reduce the United States’ dependence on foreign crude and allow Americans to use more of the crude oil produced in their own country” (emphasis added).
The company also announced it would reapply for the cross-border permits necessary to increase capacity to Cushing. A reported sticking point had been the pipeline’s route in Nebraska, and the company is already working toward a solution. According to their press release, “TransCanada will continue to work collaboratively with the State of Nebraska on determining an alternative route for Keystone XL that avoids the Sandhills. TransCanada has been working on assessing the routing in Nebraska since November 2011, following the State Department’s notice to delay a decision on a Presidential Permit until an adjusted route that avoids the Sandhills was developed.”
This is great news for Oklahoma, great news for America, and provides a unique opportunity for redemption. In addition to significant economic-development opportunities, this is the chance to push back against overzealous regulators and special-interest groups while simultaneously providing a public benefit and supporting core services.
Overzealous Regulators and Special-Interest Groups
In round 1, TransCanada cooperated with State Department and other agency requests throughout the long process of seeking approval for the project. They agreed to dozens of requirements, months of public meetings and hearings, and three environmental impact studies. Each of the three environmental impact studies conducted was favorable to the project. In fact, the State Department concluded that the pipeline would cause minimal environmental impact if it was operated according to regulations. TransCanada has promised new, thicker pipeline materials and thousands of sensors in an effort to make this one of the safest pipelines ever built. In addition, major sections of the Keystone Pipeline have been in operation for more than two years with no underground leaks so far. Pipelines are still the safest, most effective, most efficient way to transport oil. The first time around, the tail was wagging the dog as the project was held up even after concerns had been addressed and the positive facts had come to light. There is still hope that this round can be conducted properly and not politically.
Even Broader Opportunity for Public Benefit
The Gulf Coast Project also provides incredible opportunities for local governments and schools in regard to the additional revenue that can be generated. There are roughly 80 miles of the Keystone Pipeline already in the ground and operating in Oklahoma. That relatively short distance is already producing $7.5 million in ad valorem taxes each year in those areas. The vast majority of that revenue (80 percent) benefits area schools, and the remaining 20 percent helps county government provide core services to citizens. Even better news is that the money coming in to help schools in the area along the pipeline impacts the overall state funding formula for schools in Oklahoma. Revenue that impacts the funding formula reduces the amount the state has to send to those schools in that area, allowing more money to be used in other areas in the state. That means Keystone is already helping schools all across the state, not just those in the pipeline area. Completion of the Gulf Coast Project would bring an additional $14 million per year in ad valorem tax revenue for Oklahoma for a total of $22 million per year.
America needs the kind of private-sector investment and development that this project represents. We need to support entrepreneurs in the real economy instead of relying on the myth that government will somehow stimulate the economy and create jobs. Political posturing from government officials threatened progress the first time, but this time we can show that free-market principles are far better than government intervention. President Reagan is famous for saying, “Government can’t control the economy without controlling people,” and it eventually uses “force and coercion to achieve its purpose.” But most importantly, President Reagan believed that government intrusion “interferes with the people’s right to know.”
The people have a right to know if they can trust their government to do the right thing. Because it is hard to kill the spirit of an entrepreneur, we now have a second chance for them to get it right. Let’s hope they take full advantage.
Brian Bush (J.D., University of Oklahoma) is executive vice president of OCPA.