Oil & Gas:

API's Gerard reacts to administration's rejection of Keystone XL

With the Obama administration denying a permit for TransCanada's Keystone XL pipeline proposal yesterday, what are the next steps for the oil industry and Congress? During today's OnPoint, Jack Gerard, president of the American Petroleum Institute, reacts to the administration's decision and discusses his expectations for congressional action on the issue.

Transcript

Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Jack Gerard, president of the American Petroleum Institute. Jack, it's nice to see you again.

Jack Gerard: Good to see you, Monica.

Monica Trauzzi: Jack, after months of lobbying and millions of dollars spent on both sides of the debate, the State Department has decided to not approve TransCanada's proposal to build the Keystone XL pipeline in the United States. They did, however, leave the door open for TransCanada to reapply with a new route. What your initial reaction to the decision?

Jack Gerard: Well, it's very unfortunate to the American people that this decision was made today. The president has abdicated his leadership role in trying to create jobs in this country. The president has repeatedly said he's for job creation and today he rejected the largest shovel-ready project in the United States today. He can't be serious about job creation if he takes the largest project that would create jobs and put it on the back burner and say, well, we're not going to do this today. We're very disappointed by this decision and I believe it will have political consequence.

Monica Trauzzi: Would your group be in a position to take legal action against the administration for this decision?

Jack Gerard: Well, we're considering all of our options, but it might be well out of our hands because there's a lot in Congress right now, both Democrats and Republicans, who are tired of this political football. As Prime Minister, Canadian Prime Minister Harper said, this is a "no-brainer." This decision is easy, all you have to do is look at the national interest and that's the only decision before the president. The Congress told him within 60 days, Mr. President, you have to decide if this is in the national interest. And today, by putting this off or by rejecting it, he has concluded this is not in the national interest. We strongly disagree with that, as many in Congress do.

Monica Trauzzi: In his statement, President Obama said that the announcement was not a judgment of the merits of the pipeline, but the arbitrary nature of a deadline. Had the GOP not imposed the deadline on the administration do you think things would've gone differently?

Jack Gerard: No, because this pipeline has been under scrutiny and review for over three years now. The president has had it on his desk for three years, two comprehensive environmental reviews at the State Department concluded it would have no significant impact to the environment. The only issue left to decide was is this in the national interest? That had a 90-day window on it. The president got to the 75th day and made an arbitrary decision to move that question off for another year to try to get it beyond the election. Why? Because he had a strong support from organized labor for this project and he has a very small, extreme, shrill group of individuals who oppose it. Today organized labor issued a statement saying they will not forget this decision. They are very upset and I believe there's political consequence.

Monica Trauzzi: The president indicated he'll continue to work with your industries on ways to move forward with the Keystone project or a Keystone-like project. Do you believe that TransCanada is in a position now that they're going to continue moving forward with the United States or are they going to seek alternate routes, like the one we've talked about going to China?

Jack Gerard: Well, Canadian Prime Minister Harper has already indicated he's going to seek alternative routes. In fact, yesterday he issued a public statement saying he was being held hostage by the United States and this relationship is now strained, because he can't rely on the judicial and regulatory processes of the United States. The president injected politics in this conversation. This three-year review should have been decided December of last year. The president arbitrarily pulled it out of that process and said, "I don't want to make this decision until after the election." If I'm a company in Canada that has committed to invest $7 billion in the United States for a 1700 mile long project pipeline and all the sudden I have the president arbitrarily deciding we're not going to make that decision, I would be very reluctant to invest my dollars. And I would look, frankly, as Prime Minister Harper has said two other sources. They're looking to build the pipeline now from Canada to the West Coast, ship this oil to Asia, specifically to China.

Monica Trauzzi: Why do you think the administration has left that wiggle room though for TransCanada to reapply? Is this a way for the administration to buy some time to get this past the elections and not have to deal with some of the political consequences?

Jack Gerard: No, very candidly, Monica, what it is, it's a poor excuse for trying to avoid a decision. The president has repeatedly said we can't wait. We've got to create American jobs and we need to do it now. What he said today and what's become very clear, he's not interested in job creation. He's interested in political decisions and political calculus to protect one job, his own. This is not in the country's best interest. It's not in organized labor's best interest. It's not in the interest of our national and energy security. Clearly, the factors are in favor of approving this pipeline.

Monica Trauzzi: But what about the environmental impacts? That's been one of the major points against this pipeline and it's something that you haven't an addressed today.

Jack Gerard: Well, no, the environmental impacts have been under review for three years. The president's suggestion today that he needed more time to look at this, there's already been two comprehensive studies done and they have concluded there will be no significant environmental impact as a result of this pipeline. The decision before the president was merely one of national interests. Is this in the United States national interest to approve this pipeline and move it forward? And on those grounds, he rejected the pipeline from Canada, which is our number one energy trading partner.

Monica Trauzzi: You were on the show just last week saying that your industry was planning on spending a big sum of money to keep Keystone and energy issues at the top of the news through the elections in November. Does that plan change at all with this decision and how do you plan to keep Keystone in the news and make it an election issue?

Jack Gerard: I think what it does, Monica, is it actually heightens our resolve to continue to educate around the issues of energy. The public gets it. Public polling shows the vast majority of American people want to produce American oil and natural gas, by Americans, for Americans. What this decision does today, it says we're not interested in that, which is inconsistent with where the American people are. What we are doing is moving energy education. We have organized a Vote for Energy effort to go out and encourage the American people to engage in the energy debate. The president of the United States, the elected officials in Congress, governors, state legislators and all need to understand the consequences of these decisions. If we were allowed to create and invest in the Keystone XL pipeline, produce our own oil and natural gas here in the United States, along with renewables, we could become energy self-sufficient for our liquid fuels in 15 years.

Monica Trauzzi: But can you guarantee that all the oil from this pipeline would go directly back to Americans? That's one of the big points against this pipeline, that this oil is not going to be used here in the United States.

Jack Gerard: Well, let me give you the right answer to that. First is that's a red herring argument. And why is that? When you look at the fundamental economics of the law of supply and demand, if you're bringing crude oil to the United States to be refined here in the United States, where is the market you want to look to? You're looking here. We import over 50 percent of our crude oil today. Surely the energy, the crude we would bring in from Canada, refined in the United States, would be consumed in the United States. But let me challenge the second premise. Since when have exports been a bad thing? The president has indicated he wants to double the exports from the United States. That brings foreign investment to the United States, allows us to produce our own goods and services here that we send elsewhere. So, at the end of the day, there are two positives, we bring it in the United States, we consume as much of it here as the market allows, and we export the rest. So either way, it's a win for the United States. So that's a lame excuse to try to confuse the issues.

Monica Trauzzi: Could we see some legislative action against this? Could this end up in the payroll tax extension bill? Are you expecting that Republicans in the House may try to move on this in upcoming legislation?

Jack Gerard: I fully expect this will be one of the hottest political issues throughout 2012. I think you'll see Republicans and Democrats move to force the president to make an affirmative decision or to take the decision-making process out of the president's hands. He's clearly indicated he's injected politics into this debate and he's unwilling to make an affirmative decision. I think there is a vast majority of others who believe we need to make this decision now. In the words of the president, we can't wait. We need those jobs. And I believe others will take it in their own hands now to try to force that decision.

Monica Trauzzi: All right, we're going to end it right there. This issue is not going away. I'm sure we're going to have you on the show many more times.

Jack Gerard: I'm sure it's going to be around for some time, Monica. Thank you very much.

Monica Trauzzi: I thank you for coming on the show. And thanks for watching. We'll see you back here tomorrow.

[End of Audio]