Saturday, February 2, 2013

The craven Keystone delay

The Obama administration has again decided to delay deciding on the Keystone pipeline, which would allow oil from Canada to pass through the United States to the Gulf coast. At this point, it is very hard to believe that this is genuine "analysis paralysis," but a considered attempt to kill the project without having to take the responsibility for having done so. Neither explanation reflects at all well on the executive branch.

We are sure there are meritorious arguments in favor of killing the project, just as there are for allowing it. We do have a few observations, however, that are essentially irrefutable facts.

  • Keystone will create American jobs, perhaps a lot of them. A job delayed is a job denied, so this is another example of Barack Obama's contracting regulatory policy fighting against his expansionist fiscal and monetary policy.
  • Small delays in big capital projects significantly reduce their return on investment, because they push out the day when there are actual returns. The impact of a delay in return on net present value is huge. That is math. One cannot escape thinking that these serial delays are calculated to hurt returns in the oil industry, among other motivations.
  • As the story indicates, we are driving the Canadians, arguably our closest and most reliable ally, batty with our indecision. As Glenn Reynolds would say, this must be more of the "smart diplomacy" we were promised.
  • At this point, Barack Obama's calculated indecision is shameful. Kill it and face the consequences -- at least the capital will flow to some other productive use -- or authorize it and put people other than lawyers or lobbyists to work. Just do something.

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