Some Free Market Talking Points on the Keystone XL Pipeline Amendments

On Monday, the Senate voted 63-32 to end a Democratic filibuster of S.1, The Keystone XL Pipeline Act. Today, Sen. Majority Leader Mitch McConnell (R-Ky.) is trying to negotiate a deal with Democratic leaders on a rule for offering amendments to the bill.

According to Greenwire ($), The Hill, The New York Times, and Politico, Democrats are expected to offer amendments to ban exports of petroleum products made from Keystone crude (Sen. Ed Markey of Massachusetts), mandate the use of American materials during construction (Sen. Ron Wyden of Oregon), require oil sands producers to pay into the Oil Spill Liability Trust Fund (Sen. Maria Cantwell of Washington), require the creation of an equal or greater number of “clean energy” jobs for every job created by the pipeline (Sen. Charles Schumer of New York), and require Senators to declare whether they agree with 97% of climate scientists that man-made global warming is real and dangerous (Sen. Bernie Sanders of Vt.).

KXL proponents should welcome debate on those amendments and look forward to offer some of their own. For example, Sen. Ted Cruz (R-Texas) said he would offer an amendment to lift the 40-year-old ban on crude oil exports.

The amendment to ban Keystone-enabled petroleum product exports would violate U.S. treaty obligations under both the General Agreement on Tariffs and Trade (GATT) and the North American Free Trade Agreement (NAFTA). Since the ban would not apply to petroleum imported from OPEC countries, the policy would, in effect, deny most favored nation status to Canada while retaining it for Saudi Arabia. And if preventing American products from competing in the global marketplace is a good way to lower prices and benefit consumers, why don’t we do it for all goods made in the U.S. of A? For more on this topic, see my Six Reasons Not to Ban Energy Exports. Sen. Markey, go put on a dunce cap and sit in the corner.

The ‘buy American’ amendment is similarly anti-trade. The Buy American Act of 1933 requires federal agencies to prefer domestic-made products in their procurement decisions. The Buy America Act of 1982 gives preferential treatment to U.S.-made products in mass transit projects receiving federal support. Such laws are a headache to comply with and increase taxpayer burdens for the benefit of special interests. But at least their operation is limited to entities that spend or consume tax dollars. The TransCanada Corporation is not an agency of any government, and all funding for the Keystone XL pipeline would be private. If ‘buy American’ requirements were sound economic policy, why don’t we impose them farmers, automobile manufacturers, or Hollywood filmmakers?

Subjecting a privately-financed project to domestic content restrictions would set a dangerous precedent, opening the door to massive new intrusions on entrepreneurial liberty while jeopardizing trade relationships with potentially hundreds of countries around the world.

At the very least, the amendment would effect a major change in public policy. As such, it should have to run the full gauntlet of the legislative process before being put to a vote. Enactment via a floor amendment based on maybe 15 minutes of debate would make a mockery of the Senate’s claim to be the world’s greatest deliberative body. Sen. Wyden, go sit in the corner with the other dunce.

As for Sen. Cantwell’s amendment, yes it’s true that “synthetic crude” or dilbit (diluted bitumen) made from Canada’s oil sands is exempt from the 8¢-per-barrel excise tax refiners normally pay on petroleum products to the Oil Spill Liability Trust Fund (OSLTF). That’s because the IRS interprets the term “crude oil” in the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA), a.k.a. Superfund, as not including “synthetic petroleum,” hence as excluding oil made from “tar sands.”

If, 35 years after enacting Superfund, Congress no longer wants to coddle oil sands producers as an infant industry, fine. But will Cantwell and other Keystone foes switch sides if the amendment passes? Doubtful. As Sen. Jeanne Shaheen (D-N.H.) reportedly said about her amendment to include energy-efficiency incentives in S.1: “I will support the amendment, but I will not support Keystone.”

The amendment to require the creation of at least as many “clean energy” jobs as Keystone-related jobs is loopy. Who would be responsible for creating those jobs — particular firms, specific agencies? Who would pay for them — particular firms, taxpayers? It’s hard to think of another case where Congress denied one company permission to create thousands of jobs with its own capital unless somebody else creates an equal or greater number of jobs with capital from who knows where. Even if this proposal made any kind of economic sense, it too would effect a major change in policy — indeed, in the way we do business in America. As such, enactment via a floor amendment would be utterly inappropriate. Sen. Schumer, take a seat next to the other dunces in the corner.

As for the amendment requiring senators to take a stand on climate science — debate on it could be a refreshing teaching moment if KXL supporters have their wits about them. Some points to make:

(1) Senators should of course be informed by scientists but the Senate has no business trying to resolve scientific controversies or define the legitimate bounds of scientific debate. Indeed, it is not even healthy for scientific societies to do so. Group think stifles the spirit of inquiry and affirmations of consensus by scientific bodies inevitably politicize science. There’s way too much of that already. The Senate should not aggravate the malady.

(2) The KXL is climatologically irrelevant. Even under the unrealistic assumption that all 830,000 barrels per day of Keystone crude would be new oil in the global supply that would otherwise remain in the ground, the pipeline would hypothetically and undetectably add 1/100th of a degree Celsius to global average surface temperature by century’s end.

(3) According to the State Department’s final environmental review, if the KXL is blocked, U.S. refineries will still import roughly the same quantity of Canadian crude, but the alternative modes of delivery — trains, barges, smaller pipelines — would have a larger carbon footprint and carry more oil spill risk. State estimates that denying TransCanada permission to build the pipeline will result in 28% to 42% more CO2 emissions and 136% to 794% more spilled barrels of oil. Approving KXL is the ‘green’ choice!

(4) The claim by Cooke et al. (2013) that 97% of scientists agree that man-made global warming is real and dangerous is balderdash. In fact, less than 1% of the 11,944 abstracts reviewed by the Cooke team explicitly endorse the milder IPCC “consensus” position that most of the warming of the past 50 years is man-made.

(5) The risks of climate change must be weighed against the risks of climate change policy. Because cheap, reliable, scalable alternatives to carbon energy do not yet exist in the vast majority of regions and nations, coercive de-carbonization is bound to be either a ‘cure’ worse than the alleged disease or an expensive exercise in futility. Cap-and-trade, carbon taxes, renewable energy mandates, and the like will accomplish little except to centralize power and transfer wealth from consumers to special interests.

(6) During the past 85 years of unchecked CO2 emissions, global deaths and death rates related to extreme weather declined by 93% and 98%, respectively. Those extraordinary gains in public health and safety were achieved not in spite of mankind’s reliance on carbon energy but, in large measure, because of it. Fossil fuels have made our environment vastly more livable. As energy analyst Alex Epstein puts it, fossil energy companies did not take a safe climate and make it dangerous, they took a dangerous climate and made it much safer.