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Friday, December 9, 2011

Let’s Make a Deal — Oil for a Tax Cut

"We are either a united people, or we are not. If the former, let us, in all matters of general concern act as a nation, which have national objects to promote, and a national character to support. If we are not, let us no longer act a farce by pretending to it." — George Washington

Yesterday the Republicans in the House balked at allowing a freeze on Social Security payroll taxes unless Obama’s energy department would give the green light to the Keystone Pipeline. According to Fox News:

“House Republicans are on a collision course with the White House and potentially the Senate over an emerging proposal to extend the payroll tax cut, teeing up a protracted debate that could keep lawmakers in Washington for the holidays as they try to avert a Jan. 1 tax increase.

The Senate on Thursday afternoon rejected rival Democratic and GOP plans for extending the cut. The failure was expected, cueing the House to step in with a new plan.

Details of that proposal, expected to be unveiled in full on Friday, suggest its Republican authors are preparing for a showdown with President Obama. The bill includes a controversial provision to move along the construction of an oil pipeline from Canada to Texas — the Obama administration recently put that project on hold until after the 2012 election, citing environmental and safety concerns.

The provision pertaining to the Keystone pipeline helped sweeten the deal for House conservatives skeptical of a payroll tax extension.

Rep. Lee Terry, R-Neb., told Fox News that a number of Republicans who were on the fence said they would vote for the bill if it includes the Keystone pipeline provision.

House Speaker John Boehner said Thursday he's confident Republicans are ready to move on the proposal.

But Obama explicitly has said he will reject any effort to tie the Keystone pipeline construction to the tax extension. His allies echoed that message Friday.

It's a non-starter," House Democratic Leader Nancy Pelosi said.

Her top deputy, Rep. Steny Hoyer, D-Md., urged Republicans to "reconsider" the Keystone language.

White House Press Secretary Jay Carney warned Republicans not to include "extraneous attachments" in the bill.

"Whatever happened to Republicans being for tax cuts?" Carney asked. "Is it because this one goes to 160 million Americans, middle-class working Americans, that they're ambivalent or they're willing to oppose it if they don't get some political scalp? Is it because President Obama supports it, or Democrats support it?"

At stake is a cut in the Social Security tax valued at about $1,000 a year for the average family.”

Obama wants a $2.74 per day temporary tax reduction that he can tout as a tax cut but will not green light a pipe line that will increase our supply of oil from Canada, reduce our dependence on Middle-Eastern oils and provide 20,000 well-paying jobs for union and non-union workers, something Obama claims he works 24/7 to create.

We are staring into the face of $180-per-barrel oil. Under President Barack Obama, the Nation is not producing enough oil and is importing far too much of it from potential enemies. This is a reckless game engineered by the President, because oil is America’s economic lifeblood.

It recently become apparent that Obama either does not understand the danger the country is facing or, worse, is willing to ignore it because he has conspired with Arab oil exporters to give them dictatorial powers over America’s energy needs and economic future.

The United States is critically dependent on imported oil, consuming almost 10 million barrels of foreign crude every day. That is about three times more oil than the United States imported 25 years ago. With Obama’s restrictions on further oil exploration, especially offshore, the United States may import 18 million barrels per day by 2020.

Petroleum is essential for the United States. With so many hostile governments selling it to us, it would be easy to think that Canada would be America’s energy oasis. The two countries haven’t had so much as a skirmish in 200 years, and more than any other nation, Canada has stood shoulder to shoulder with the United States. So close are the two peoples that I can’t tell the difference between being in Montana or Alberta.

Both Nations have Judeo-Christian values and common law borne from the Magna Carta. American and Canadian men fought and died together during the two world wars.

On the surface it seems like a pretty simple equation: Canada has 180 billion barrels of reserves, second only to Saudi Arabia, the kingpin petroleum producer and de facto leader of the Organization of Petroleum Exporting Countries.

Canada has a democratically elected parliament. The House of Saud is a desert fiefdom run by a few dozen billionaire princes. Whereas Canada has combat troops stationed in Afghanistan killing Muslim militants, Saudi Arabia provides tens of millions of dollars to Islamic terrorists bent on killing Westerners.

Beyond this, Canada has been a rock-solid energy supplier to the United States. In fact, thousands of Americans work in the Canadian petroleum industry, and there are hundreds of U.S. corporations that have a large stake in further developing Canadian petroleum. Scores of Canadian corporations are traded on the New York Stock Exchange. Conversely, Saudi Arabia has nationalized its oil properties, and it implemented two oil embargoes against the United States in the 1970s.

It only makes sense that the United States would sign on to buy more Canadian crude. But with Obama, common sense is not at all common.

TransCanada Corporation is seeking Presidential authorization to build itsMK-BQ952_THEBIZ_NS_20111208185713 $7.5 billion Keystone XL pipeline. The line would transport tar sands crude oil from Alberta through Montana, South Dakota and Nebraska on its way to refineries on the Gulf Coast.

A number of groups, comprised mostly of environmentalists and liberals, have banded together to oppose its construction. Obama is leading the crusade against Canadian crude.

The President said last month: “Because this permit decision could affect the health and safety of the American people as well as the environment, and because a number of concerns have been raised through a public process, we should take the time to ensure that all questions are properly addressed and all the potential impacts are properly understood.”

The President doesn’t seem concerned that 1,661-mile pipeline would deliver 700,000 barrels per day of crude from the oil sands to the United States.

David H. Wilkins, U.S. ambassador to Canada from 2005-2009, wrote:

“The proposed Keystone XL Pipeline offers nothing but promise: tens of thousands of desperately needed jobs, and a big step toward ensuring North American energy security. But in mid-November, promise gave way to politics when President Obama punted on the pipeline permitting decision, delaying it until after the 2012 election. The Wall Street Journal called the decision a “Keystone Cop-Out.”

I call it a catastrophic cop-out, one with certain economic and diplomatic consequences. The decision on the KXL permit was expected before the end of this year and elected officials in both Canada and the United States rightly called it a “no-brainer.”

The project would reduce dependency on petroleum from the Middle East, a region that is rife with civil war. And what of the economic recovery that Obama promised three years ago? You would have to have been in a coma to see that things are no better and that, overall, the U.S. economy might be in worse shape than when he took office.

This gets me back to why the United States should be begging to sign this pipeline deal. It is estimated that the project would create a minimum of 20,000 well-paying U.S. jobs. That economic bonus would span far beyond all those families that could again have a wage earner and would spill over to every part of the economy, from Wal-Mart to mom-and-pop shops.

In fact, the pipeline deal will add more than $20 billion to the U.S. economy. An extra $5.2 billion in State property taxes would be collected.

The United States will have to deal with the consequences of turning its back on Canadian crude. First and foremost, Ottawa is building closer trade ties with Beijing with a great deal of emphasis on a possible blueprint that would deliver Alberta’s oil sands to the West Coast, where it could be delivered via tankers.

Last month, Canadian Prime Minister Stephen Harper met with Chinese President Hu Jintao about future Canadian oil exports to China.

Harper said: “This does underscore the necessity of Canada making sure that we are able to access Asia markets for our energy products.”

Canada is counting on China to be a key investor in Alberta’s oil sands projects and a big buyer of crude which would flow through a proposed Northern Gateway Pipeline if Canada encounters further opposition from the Obama Administration. This will make the United States all the more dependent on Arab oil. You would think Obama would understand this. The truth might be that he understands it all too well.

In a December 9th Op-Ed by John Bussey in the Wall Street Journal the construction of Keystone Pipeline is inevitable. Bussey writes:

“If the Prohibition Era taught us anything about business, it's that demand has a way of finding supply. That was true of whiskey. It will likely also be true of Canada's oil sands and the controversial Keystone XL pipeline.

Keystone XL, or a similar pipeline and set of worries, isn't just inevitable. It's something we should accept to prevent worse alternatives from coming to pass.

The 1,700-mile pipeline, proposed by TransCanada Corp. and blocked for the moment by the White House, is back in the news. Lawmakers in the U.S. Congress are seeking to override the administration and start construction of the pipeline, which would carry oil from the oil sands of Alberta to refineries in Houston. President Barack Obama and Canadian Prime Minister Stephen Harper discussed the matter on Wednesday.

Big corporate names have stakes in the Canadian oil sands: ConocoPhillips, Exxon, Shell, Chevron, Marathon, Statoil, Total, Sinopec and BP among many others.

Environmentalists say the pipeline is a bad idea: "It locks the U.S. into a high carbon form of energy," says Nathan Lemphers at the Pembina Institute in Calgary. "Until there's a national energy policy, these sorts of pipelines will become the surrogate battleground for the environmental movement."

Susan Casey-Lefkowitz of the National Resources Defense Council says the pipeline would promote a dirty and energy-intensive form of oil extraction, pipe that oil through environmentally sensitive areas and aquifers in the U.S., and ultimately keep the U.S. addicted to the wrong sort of fuel, speeding climate change.

Theirs is a compelling argument for abstinence: Until Washington stops dithering and charts a clear road to cleaner energy, remove the temptation to burn more oil by preventing access to supply.

Last month, the White House delayed a yes-or-no decision on the pipeline—conveniently until after the 2012 presidential election.

Markets, however, won't delay. Global demand for energy, driven by growth in developing countries, is expected to rocket 33% over the next 25 years, says the International Energy Agency. By 2035, China is likely to consume almost 70% more energy than the U.S.

Fossil fuels such as oil will still account for 75% of energy consumed in 2035, says the IEA. And these numbers assume positive steps toward conservation and the adoption of renewable and other fuels.

Where will the new energy come from? Globally, reliance will grow on a relatively small number of producers, mainly in the Middle East and North Africa, and the oil will be shipped along vulnerable supply routes, says the IEA. By 2035, the agency says, OPEC's share of global production will rise to above 50%.

If you wonder why China is currently running sea trials for its first aircraft carrier, these vulnerable supply routes and China's own energy insecurity provide an answer.

Frustrated with the U.S., Canada is talking with China about piping its oil west instead of south. Enbridge Inc. has proposed a pipeline to a port at Kitimat, British Columbia, where the oil would be loaded on ships bound for Asia. Native communities in the region are resisting the project.

Somehow, though, demand will eventually pull the oil to market. "That oil is going to get produced, it's going to get refined somewhere, and it's going to get consumed," says Larry Nichols, executive chairman of Devon Energy. Devon produces about 30,000 barrels a day in the oil sands now and plans to more than quintuple production by 2020.

Until cleaner energy sources are cheap, effective and available enough to supplant oil—until pipelines like Keystone are no longer needed—the options for the U.S. are difficult but clear:

The U.S. can continue to rely on dicey regimes in countries such as Saudi Arabia and Venezuela. Or it can buy more oil from its ally Canada and companies it knows, with the added short-term benefit of generating jobs to build new pipelines to U.S. refineries.

The U.S. can let oil-sands oil go to Asia with all the carbon emissions that entails: pollution from shipping, possible substandard refining, and use of the product in Chinese industries with weak emissions rules. Scientists have already found that mercury and other effluents from China's power plants and factories drift across the Pacific and contaminate North American waterways. Expect more.

Or the U.S. can pipe the oil to Houston where regulators scrutinize refiners over emissions, where ever-greater economies of scale help companies create best practices in refining, and where the U.S. can earn money exporting refined products to the rest of the world.”

One of the biggest political and policy winners for Republicans is their strong support for expeditious approval of the Keystone Pipeline. Their unified support for this favorable project has provided voters with a sharp contrast to Obama’s casual disregard for private-sector job creation and cheap energy for consumers. Hence, it is a no-brainer that the pipeline issue should be used as a rallying cry for all Republicans running for elected office in 2012.

In that vein, Nebraska Governor Dave Heineman would be wise to remain in Lincoln, and discard any aspirations to run for Senate.

Toward the end of the summer, amidst pressure from members of his own administration, Obama was on the verge of signing off on the deal. The State Department had published yet another favorable environmental impact study, and even Energy Secretary Steven Chu seemed to concede that opposition to the pipeline was indefensible. But then came the vociferous protestations from Obama’s base; greenies, hippies, Hollywood bimbos, and — Nebraska Governor Dave Heineman.

Late in August, the Nebraska Republican penned a letter to the President and Secretary of State requesting that they deny the permit for the pipeline. Heineman stated that he objected to the route of the pipeline for fear that an oil spill would affect that Ogallala Aquifer – an underground water table in western Nebraska.

Never mind that unlike oil tankers, pipelines are much safer, and in the rare event of a spill, the affected area is measured in tens of feet, not thousands. Never mind that the EPA and the State Department saw no concern with the proposed route of the pipeline. Disregard the fact that the only legitimate threat to the water supply comes from the ethanol production that is so blithely promoted by Nebraska’s Republicans, without any concern for the Ogallala Aquifer. Dave Heineman felt that he must convene a special session of the legislature and block the pipeline, granting Obama the vital bipartisan cover he needed to scuttle the project.

Two months later, buoyed by Republican Heineman’s moral support, Obama suspended the pipeline until after the 2012 elections. As they say, the rest is history.

I have driven across the part of Nebraska where the pipe line will cross andoil126_image seen the daily progression of Union Pacific trains hauling hundreds of tanker cars loaded with ethanol. If one of those trains were to derail and spill their contents onto the Nebraska soil and eventually permeate down to the aquifer the damage would be 100 times greater than any potential leak from the pipe line. This risk is much greater than a pipe line would create. As a surveyor I have worked on pipe line construction and seen how well they are constructed. Every weld is x-rayed and mapped by its precise geographic coordinates, including elevation, and those coordinates are entered into a geographic information system where the line can be monitored on a 24/7/365 basis. If a leak should occur maintenance crews can quickly respond to repair the line and mitigate any damage caused by the leak. On the other hand if an ethanol loaded train should derail and spill thousands of gallons of refined ethanol on the ground the damage could not be repaired anywhere as quickly and in addition there would be clouds of black smoke laden with carbon and other dangerous particulates filling the skies and drifting across the countryside.

The opposition to the Keystone Pipeline is not based on science and engineering. It is based on politics and the constant desire of the statist environmentalist to change our behavior to conform to their view of the world. While they sit in their air conditioned offices in Washington and Berkley drinking their Kool-Aid and singing the same hymns to mother earth they believe they can enforce their world view on the rest of society through taxes and regulations.

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