Pipeline Call Gives Obama New Problems Either Way

Pipeline Call Gives Obama New Problems Either Way
By JOHN M. BRODER, CLIFFORD KRAUSS and IAN AUSTEN
Published: February 17, 2013 13 Comments
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WASHINGTON — President Obama faces a knotty decision in whether to approve the much-delayed Keystone oil pipeline: a choice between alienating environmental advocates who overwhelmingly supported his candidacy or causing a deep and perhaps lasting rift with Canada.


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Canada, the United States’ most important trading partner and a close ally on Iran and Afghanistan, is counting on the pipeline to propel more growth in its oil patch, a vital engine for its economy. Its leaders have made it clear that an American rejection would be viewed as an unneighborly act and could bring retaliation.

Secretary of State John F. Kerry’s first meeting with a foreign leader was with Canada’s foreign minister, John Baird, on Feb. 8. They discussed the Keystone pipeline project, among other subjects, and Mr. Kerry promised a fair, transparent and prompt decision. He did not indicate what recommendation he would make to the president.

But this is also a decisive moment for the United States environmental movement, which backed Mr. Obama strongly in the last two elections. For groups like the Sierra Club, permitting a pipeline carrying more than 700,000 barrels a day of Canadian crude into the country would be viewed as a betrayal, and as a contradiction of the president’s promises in his second inaugural and State of the Union addresses to make controlling climate change a top priority for his second term.

On Sunday, thousands of protesters rallied near the Washington Monument to protest the pipeline and call for firmer steps to fight emissions of climate-changing gases. Groups opposing coal production, fracking for natural gas and nuclear power were prominent; separate groups of Baptists and Catholics, as well as an interfaith coalition, and groups from Colorado, Toronto and Minneapolis joined the throng.

One speaker, the Rev. Lennox Yearwood, compared the rally to Martin Luther King’s 1963 March on Washington for civil rights, but, he said, “while they were fighting for equality, we are fighting for existence.” In front of the stage was a mockup of a pipeline, looking a bit like the dragon in a Chinese new year parade, with the motto, “separate oil and state.”

Michael Brune, executive director of the Sierra Club, predicted that Mr. Obama would veto the $7 billion project because of the adverse effects development of the Canadian oil sands would have on the global climate.

“It’s rare that a president has such a singular voice on such a major policy decision,” Mr. Brune said. “Whatever damage approving the pipeline would do to the environmental movement pales in comparison to the damage it could do to his own legacy.”

Mr. Brune was one of about four dozen pipeline protesters arrested at the White House on Wednesday, in an act of civil disobedience that was a first for the 120-year-old Sierra Club.

So far, Mr. Obama has been able to balance his promises to promote both energy independence and environmental protection, by allowing more oil and gas drilling on public lands and offshore while also pushing auto companies to make their vehicles more efficient. But the Keystone decision, which is technically a State Department prerogative but will be decided by the president himself, defies easy compromise.

“This is a tricky political challenge for the president,” said Michael A. Levi, an energy fellow at the Council on Foreign Relations. “The reality is everyone has defined the stakes on Keystone in such absolute terms that it is borderline impossible to see a compromise that will satisfy all the players.”

The proposed northern extension of the nearly 2,000-mile Keystone XL pipeline would connect Canada’s oil sands to refineries around Houston and the Gulf of Mexico, replacing Venezuelan heavy crude with similar Canadian grades.

Proponents say its approval would be an important step toward reducing reliance on the Organization of the Petroleum Exporting Countries for energy. Opponents say that the expansion of oil production in shale fields across the country has already reduced the need for imports, and that oil sands production emits more greenhouse gases than most other forms of crude consumed in the United States.

The State Department appeared poised to approve the pipeline in 2011, but Mr. Obama delayed a decision based on concerns about its route through vulnerable grasslands in Nebraska. The pipeline company, TransCanada, submitted a revised route, and the governor of Nebraska approved the plan last month, sending the final decision to Washington.

The Keystone pipeline is treated mainly as a domestic issue in Washington, but for Canadian leaders, it represents a crucial moment in Canada’s relationship with its most vital foreign partner.

Mr. Obama and Prime Minister Stephen Harper are not close, and the two make a portrait of contrasts in style and substance. While Mr. Obama comes from the liberal wing of his party and is known for stirring speeches, Mr. Harper is conservative even by the standards of his own Conservative Party and can be stiff and stern in public. His political base, the province of Alberta, is the heart of the Canadian oil patch and is sometimes compared socially and politically to Texas.

Mr. Obama’s recent expressions of concern about climate change contrast starkly with Mr. Harper’s stated priorities. Under Mr. Harper, Canada formally withdrew from the Kyoto Protocol on climate change, which was agreed to by a previous Liberal government. (The United States never ratified the protocol.)

Still, the amount of Canadian oil that the United States imports daily — 2.4 million barrels, roughly twice what it imports from Saudi Arabia — points up a cornerstone of Mr. Obama’s goal to decrease dependence on oil from the unstable Middle East and unreliable sources like Venezuela. The Keystone pipeline would increase Canadian oil imports by more than 700,000 barrels a day, the equivalent of roughly two-thirds of Venezuelan imports.

Canadian leaders are cautious not to threaten the Obama administration directly, but they suggest that if the pipeline is not permitted, the close relationship between the countries will be damaged and Canada forced to look elsewhere, particularly to China, for new energy markets.

“The signal of a rejection of a permit by the president would be a significant change in the Canada-U.S. relationship,” said Greg Stringham, the Canadian Association of Petroleum Producers’ vice president for oil sands and markets. “Canada, right now, with our potential growth in energy, is looking for security of demand wherever that might be throughout the world.”

Choosing his words carefully, Gary Doer, the Canadian ambassador to the United States, said the two countries had come to expect each other’s support on critical issues.

“Sometimes the call comes from a U.S. president to a Canadian prime minister, and sometimes it comes the other way,” he said. “So the decision has to be made on merit and not noise. And if people in Canada perceive that the decision is made on noise, there will be extreme disappointment.”

Experts who follow United States-Canada relations say that they do not expect Ottawa to retaliate overtly if the Keystone project is not approved, but that a rejection could influence future decisions on purchases of American F-35 fighter jets and other trade and border matters.

Canada has powerful allies in the United States labor movement, which is pushing for the pipeline because it would generate an estimated 30,000 jobs, and in big oil companies like Exxon Mobil and Chevron that are heavily invested in the oil sands fields.

The rapid expansion of oil sands production has made oil critical to the Canadian economy. Canada has invested more than $100 billion in the oil sands over the last 10 years, shifting economic and political power westward to Alberta. Production is tied to 75,000 jobs nationwide, a number that is expected to multiply over the next 25 years, and nearly all of the country’s oil exports go to the United States.

The shortage of pipeline capacity has produced localized supply gluts, forcing the price of Canadian crude well below American and international benchmarks. If the Keystone pipeline is not completed, energy experts say, weak prices will make the economics of future oil sands projects questionable.

The Canadian Association of Petroleum Producers estimates that the country’s current production of 3.2 million barrels of oil a day will reach 6.2 million barrels a day by 2030, with oil sands representing an overwhelming share of the increase.

The producers and Canadian officials insist that more Canadian oil will reach United States markets one way or another, even if the Keystone project is not approved — most likely through a combination of rail, barges, trucks and pipelines once used to transport natural gas.

“We hope Keystone will go through,” said Lorraine Mitchelmore, president of Shell Canada, “but it’s not the only option.”


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13 Comments

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mongooseToronto, Ontario
Writing as a Canadian, I have to say this article is not entirely accurate. First off, not all Canadians support building pipelines without sufficient environmental oversight. Sadly, our current federal government behaves like a PR agency for the oil sand developers – and despite years of warning signs, have done little to regulate the growth or emission output of oil sands projects. The official line is that Canada will act in lockstep with the U.S. in enacting new environmental measures -- up till now, that has mean doing nothing.

Witness the fact there is also major opposition within Canada itself to build a pipeline through B.C. to reach Asian markets like China. No one trusts either the industry's track record or the governmental doublespeak.

The oil sands and its home province, Alberta, are in an absolute economic tailspin, a fact well documented here in the Canadian press. During the boom times, they did little to lower the levels of emissions or advance cleaner extraction methods. Governmental oversight amounts to little more than a slap on the wrist.

Through all of this, Canada has lost its international standing -- by repeatedly going it alone whether by pulling out of Kyoto or getting bounced out of the inner circle at the UN or glossing over oil spills in pristine environments. Not all Canadians are enamoured of this state of affairs -- and join the US environmentalists in opposing projects like the Keystone cops pipeline.
Feb. 17, 2013 at 3:28 p.m.REPLYRECOMMEND3

MaxManhattan
The article says Keystone would generate 30,000 jobs, reduce dependency on unstable sources of Middle Eastern and Venezuelan crude of similar type, and keep a good trading relationship with Canada? Veto it!
Feb. 17, 2013 at 3:28 p.m.REPLYRECOMMEND2

Joseph CapstonDublin
Because the only effect of destroying the environment is "alienating environmental advocates."
Feb. 17, 2013 at 3:28 p.m.REPLYRECOMMEND1

tocnwthTexas
It is unfortunate that the oil sands produce nothing more than tar and the tar has to be diluted so it will flow through the pipeline. It is also very acidic which will eat up the pipeline quicker than most and there have not been any that have not leaked.
THE PIPELINE WILL LEAK, IT IS ONLY A MATTER OF WHEN AND WHERE.
If I were Obama, I would insist it completely clears the Sand Hills of Nebraska and not at all go across the Ogalllala aquifer unless they will put an exterior over the pipe carrying the oil across the aquifer for two miles before the aquifer and two miles past the aquifer!!!
Feb. 17, 2013 at 3:27 p.m.REPLYRECOMMEND1

PaulLong IslandNYT Pick
This is a "moment of truth" for both President Obama and for the future of the planet. The Canadian tar sands are, by all accounts, the dirtiest, most carbon-polluting, oil on earth and many experts claim they'd push global warming over "the tipping point" where it would be impossible to prevent a catastrophic collapse. This should not be a tough or "knotty" decision if the President is serious about his concerns for the environment voiced in both his recent inauguration and State of the Union speeches. The irony is that we don't need this oil and that it's economic impact here is minimal with few jobs created. The short-term economic concerns of the right-wing Canadian government and its GOP allies here should not trump the environmental viability of the entire world!
Feb. 17, 2013 at 3:27 p.m.REPLYRECOMMEND1

GeorgeNorth Carolina
Canada is going to sell the oil whether we alienate them or not. Better to keep an ally and more energy sucurity than to have to buy the same oil back from China.
Feb. 17, 2013 at 3:27 p.m.REPLYRECOMMEND4

MiriamHuntington, NY
It's fine with this reader if Canada does not fear contamination of its aquifers from the Keystone pipeline. However, most of the West Coast is dependent upon the Ogallala aquifer, and its contamination would be disastrous for millions of people. Since I live in the Northeast, with clean, plentiful water, I cannot imagine what living with contaminated water would be like (although I may learn, if fracking takes hold in New York State).

Since many U.S. citizens object to the Keystone pipeline because of its planned passage across this critical water resource, why cannot the pipeline be designed to bring the oil to a refinery close to the Canadian border? Answer: Because Big Oil wants the governments of the U.S. and Canada to build a pipeline to the Gulf of Mexico, where the oil can then be loaded onto tankers and sold to the highest bidder (China, India). This will in no way reduce the price of fossil fuel in the U.S. Such is the cost of free-market capitalism. So:

1) We don't want the aquifer polluted; and
2) We don't want to pay to further enrich Big Oil.
Feb. 17, 2013 at 3:27 p.m.REPLYRECOMMEND

Calvin GrubbsTampa
If President Obama is on the job how much you want to bet that nothing gets done?
Feb. 17, 2013 at 3:26 p.m.REPLYRECOMMEND1

J.DevineNacogdoches, TX
The Times article does not mention the biggest environmental worry in areas through which the TransCanada pipeline would go: the danger of heavy crude leaking into ground water from leaks in the pipeline.
Feb. 17, 2013 at 3:26 p.m.REPLYRECOMMEND

mtravAsbury Park, NJ
Stop destroying our land for oil. Spend the money on researching alternative energy
Feb. 17, 2013 at 3:26 p.m.REPLYRECOMMEND1

H.E. PennypackerManhattan, New York
Who cares how much solar, wind, geothermal "cost"? Killing ourselves is more expensive, no?
Feb. 17, 2013 at 3:26 p.m.REPLYRECOMMEND

bdSan Diego
Now that the election is over he's free to greenlight the pipeline
Feb. 17, 2013 at 3:26 p.m.REPLYRECOMMEND

Jared Knight-FudgeLabradorNYT Pick
There is actually a middle ground here, and Obama alluded to it in his State of the Union speech: take a portion of the profits from pipeline related business and funnel it exclusively into renewable energy research and development. The truth is that there is way too much money in this pipeline for both the United States and Canada, but unlike PM Harper, Obama's base is not going to be 100 percent behind him on this. At least by diverting some of the money toward an environmentally sustainable future he can save a bit of face while not out of hand rejecting the trade and business possibilities of the pipeline.

http://www.nytimes.com/2013/02/18/business/energy-environment/obamas-keystone-pipeline-decision-risks-new-problems-either-way.html?pagewanted=all