INSIGHT: Obama kills Keystone project, but it will haunt election

19 January 2012 16:03  [Source: ICIS news]

By Joe Kamalick

Obama rejects TransCanadaWASHINGTON (ICIS)--President Barack Obama had sought to delay his decision on the controversial Keystone XL pipeline until after the November 2012 US national elections, but in killing the project this week he likely has guaranteed that it will haunt his re-election bid.

On Wednesday Obama rejected the long-planned, multi-billion dollar pipeline project, and the decision drew quick condemnation from US energy, chemical and general manufacturing interests – and labour unions.

Obama had been facing a 21 February deadline mandated by Congress to decide whether the 1,700-mile (2,700km) pipeline to bring crude oil from Canada to Texas refineries was in the US national interest.

The $7bn (€5.5bn) project would involve building a 36-inch pipeline across five US states, bringing crude to refineries in the US midwest as well as Texas and providing refined products to another half-dozen states.

In rejecting the project, Obama said in a statement that the deadline imposed by Congress “prevented a full assessment of the pipeline’s impact, especially the health and safety of the American people, as well as our environment”.

Obama said his decision to deny the permit application by pipeline project company TransCanada “is not a judgment on the merits of the pipeline, but the arbitrary nature of a deadline that prevented the State Department from gathering the information necessary to approve the project”.

But American Petroleum Institute (API) president Jack Gerard charged that Obama was only appeasing a “small, shrill group of environmentalists that are just anti-oil and anti-gas”.

Gerard noted that the bill approved late last year by bipartisan votes in both the House and Senate only required that Obama decide the national interest issue by 21 February and specified that the US State Department and the Nebraska state government could take whatever time needed to further review the project.

He also pointed out that the Keystone project has been under review at the State Department for three years and had already been given environmental approvals by the Environmental Protection Agency (EPA).

Cal Dooley, president of the American Chemistry Council (ACC), called the Obama decision puzzling, troubling and short-sighted and said that denial of the Keystone project was “bad news for the nation’s chemistry industry, which needs reliable energy supplies”.

“The administration says it wants to enhance energy security and create jobs, in part by speeding permitting of new pipelines,” Dooley said, “but while rejecting a prime opportunity to do so.”

Jay Timmons, president of the National Association of Manufacturers (NAM), said that “the president’s rejection of the Keystone XL project is a serious blow to job creation and a major setback to energy security”.

Noting that the Keystone project was expected to generate up to 200,000 jobs in the US, Timmons said the White House decision “defies logic when the US is suffering from high unemployment and a struggling economy”.

The US Chamber of Commerce was also sharply critical of Obama’s decision, saying it was “dumbfounding”.

“This political decision offers hard evidence that creating jobs is not a high priority for this administration,” said Chamber president Thomas Donohue.

“The president’s decision sends a strong message to the business community and to investors: keep your money on the sidelines, America is not open for business,” Donohue added.

Environmental groups – a key Obama constituency – hailed the president’s rejection of Keystone.

Kim Huynh, spokeswoman for Friends of the Earth (FOE), said that she “couldn’t be more elated” about the decision. 

“President Obama made the right decision in denying the Keystone XL pipeline,” said Noah Greenwald of the Center for Biological Diversity (CBD).

“The pipeline would have prolonged our dependence on dirty fossil fuels that are polluting our air, land and water, and keep us from stabilising the climate by moving to a clean energy future,” Greenwald said.

However another key Obama constituency, labour unions, were not happy with the decision.

“We are completely and totally disappointed,” said Terry O’Sullivan, president of the Laborers’ International Union of North America (LIUNA).

“This is politics at its worst,” O’Sullivan said, adding: “Once again the president has sided with environmentalists instead of blue collar construction workers.”

“Blue collar construction workers across the US will not forget this,” O’Sullivan said, noting that unemployment in the construction industry is at 16%.

The International Brotherhood of Teamsters also backed the Keystone project, with one union official charging that “over-zealous environmentalists refuse to compromise and try to force their will on the working men and women of this nation”.

David Barnett of the United Association of plumbers and pipefitters (UA) backed the Keystone project, noting that it would employ many of the union’s 300,000 members in both Canada and the US.

When Obama first postponed a decision on the Keystone project late last year, Barnett said he was disappointed.  “We’ve worked very hard in the last three years to get this permit for this pipeline,” he told a talk show.

Although it did not comment directly on this week’s rejection of the pipeline project, the United Mine Workers (UMW) was already at odds with the White House. UMW president Cecil Roberts charged earlier that the Obama administration and the EPA have become “tone-deaf” in dealing with issues that will affect coal miners.

All this suggests that the Keystone issue will continue to percolate through the nine months remaining before the 6 November national elections.

Republicans and some Democrats in Congress are looking for possible legislative remedies that could shift the Keystone approval process from the White House to the Federal Energy Regulatory Commission (FERC).

Whether that effort succeeds or not, the Republican majority in the House is certain to keep putting forward bills aimed at circumventing the White House on the Keystone project. Although the bills are not likely to get past the Democrat-controlled Senate, they will force the Senate leaders to block or vote down what will be presented as a boon to US employment, energy and the economy.

API’s Gerard said that Obama’s Keystone decision “will have political consequences”.

“Members of his own party are not happy with this decision because most of their constituents support the project,” Gerard said.

“I expect this will likely be an issue throughout the year, as both Republicans and Democrats are saying that Obama missed an easy opportunity to say this was in the national interest and would create hundreds of thousands of jobs,” he added.

Citing the criticism levelled by the LIUNA union, Gerard said that “this issue will not go away and could have consequences not only for the president’s re-election bid but for members of Congress too”.

In the November elections, Republican control of the House is thought to be relatively safe, although by no means certain. In the Senate, however, the narrow one-vote Democrat majority control is seen as in jeopardy, if only because 23 Democrat-held seats are up for re-election against only 10 Republican seats.

Kevin Book, chief analyst at Clear View Energy Partners, noted that Republicans already support expanded energy production, “and independents may be attracted to the [Keystone] project’s potential economic upside”.

Had Obama said “yes” to the Keystone pipeline, Book said, that “might have appealed to independents and please labour unions, but it would have disappointed environmentalists”.

“That’s a risky choice if the White House ends up needing greens to come out to the polls during a down economy next November,” he said.

But without full and enthusiastic support of unions and perhaps only lukewarm backing among independents, the green vote might not be enough for Democrats seeking return to Congress or the White House.

 ($1 = €0.78)

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
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