By now it should go without saying that President Trump’s actions should be viewed in business terms first. Tuesday’s executive orders to get the Keystone and Dakota Access pipelines finished were not really about energy or environmental issues. It’s all about delivering on a promise to kick-start jobs in the heartland in the cheapest and fastest possible way. What could be more Trumpian than doing that using other people’s money, on projects already started (to use an Obama-ism, “shovel ready”), and involving a product or service people clearly want?
Those pipelines entail billions of dollars, but it’s all private capital and not taxpayer funds appropriated by Congress. And, unlike many “trophy” government projects, the pipelines will be profitable from the get-go. Let’s hope that Trump’s team scans the landscape for yet more such stimulus that merely entails the removal of specious government delay or opposition.
Add to this the reality that Keystone and the Dakota Access are indisputably “shovel ready.” In fact the previous administration actually took the shovels away after construction had begun. The essence of growth, in any domain, is rooted in business willingness to take risks and commit capital ahead of demand. But the fear that governments will be capricious with ex post facto impediments, even outright permit reversals, suppresses such so-called “animal spirits” for investment. The inverse is also true.
Of course a businessman, as opposed to a politician, is mainly focused on building something for which where there is clear consumer demand—which is, by definition, the polar opposite of infamous bridge-to-nowhere projects. Apropos these pipelines: Oil is the world’s largest traded commodity. And both the International Energy Agency and our Energy Information Administration forecast more, not less, demand in the decades to come; this despite, it bears noting, literally hundreds of billions of taxpayer dollars spent on projects, grants and subsidies to advance non-oil alternatives.
The Keystone pipeline will carry, from Alberta, Canada (a friendly local trading partner), the kind of heavy crude that is precisely the type many Texas refineries can process. Those refineries weren’t designed to handle the different, lighter crude gushing out of shale fields. Keystone’s crude can quickly contribute to the already healthy growth in America’s exports of refined transportation fuels. And Keystone’s construction was quickly endorsed by Canada’s green-leaning Prime Minister Trudeau because Alberta’s oil production, which has expanded despite the recent price rout, will soon max out existing pipelines.
Meanwhile, finishing the Dakota Access project will serve as an immediate stimulus to the Bakken shale field. Transporting crude by pipe rather than rail is so much cheaper that it’s the equivalent of giving those drillers a 30 percent profit boost—profits that will lead not only to more jobs but also fewer deficit-creating imports.
These two pipeline actions could constitute just a first step if the Trump administration wants to seize the opportunity to stimulate a second shale boom. Much of this can be done just by undoing recent moves to shackle the industry put in place in the waning months of the Obama administration. And Trump’s Executive Order can boost domestic benefits if industry responds to the stipulation that the pipelines “use materials and equipment produced in the United States, to the maximum extent possible and to the extent permitted by law.”
The overall economic benefits from a second shale boom are not theoretical. We have very recent track record to look to. The first shale boom’s astonishing rise in oil and gas production delivered, initially unnoticed and certainly unsubsidized: nearly one million jobs, the building of the first new steel mill in decades (outside of Youngstown, Ohio, to supply the thousands of miles of steel pipe used in fracking), hundreds of billions of dollars in new foreign direct investment in American industry, radically lower oil imports for the first time in decades, and a global price route making oil (and natural gas) cheaper for everyone. This last benefit also drained money away from bad actors, including ISIS, which still derives its primary funding from selling crude.
Without the $250 billion a year, or more, pumped into the economy by the shale industry during the first six years of the Obama administration, the nation would have stayed in recession. Imagine what can be accomplished now by combining a shale stimulus along with broader actions to unleash the rest of the industrial economy.
The United States is not now nor will it become an oil-centric economy. But the shale technology revolution vaulted America to become the world’s biggest producer of hydrocarbons. And shale offers the fastest, cheapest way to start delivering on promises for growth and jobs—jobs, it bears noting, that will be spread across a slew of states in America’s heartland.
This piece originally appeared on Forbes
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Mark P. Mills is a senior fellow at the Manhattan Institute and author of Expanding America's Petroleum Power: Geopolitics in the Third Oil Era. Follow him on Twitter here.
This piece originally appeared in Forbes