Politics Trump Keystone

By Robert Carpenter, Editor | December 2011, Vol. 66 No. 12

It was the “political punt” heard around the energy world. Rather than making a final determination regarding the fate of the Keystone XL Pipeline project, President Obama effectively sidestepped making a decision. Instead, he opted for an unprecedented fourth environmental impact study that would explore alternate routes to avoid the environmentally sensitive Sandhills region and Ogallala aquifer in Nebraska.

His deferral of making a final go/no-go decision on Keystone until after the 2012 election brought applause from the environmental lobby and outrage from the business community. Now, TransCanada Corp.’s $7 billion Keystone XL project is in jeopardy along with the thousands of jobs it would have created, both temporary and permanent.

Granted, it was an awkward political situation for the President. He very much needed to stay in the good graces of his environmental constituency that played a major role in his election and remains a vital cog in his re-election strategy. Yet, with the economy continuing to struggle and high unemployment and jobs creations looking more and more like the paramount issues for the 2012 elections, President Obama needed to find a way to enhance his image as a man-with-an-employment-plan to the American people.

By spinning his position as definitely in favor of the pipeline (i.e. jobs creation) but needing to be a good environmental citizen first and foremost, President Obama is taking a calculated risk that the American electorate will give him a “pass” on this issue – at least until after November 2012. Energy is not generally viewed in a positive light by the American public outside of the few producing states.

Ironically, Nebraska officials and TransCanada started negotiations in mid-November and are well on their way to determining an alternate, less objectionable route – even though that could cost TransCanada as much as an additional $3 billion. That process could be completed in just six to 9 months but a new environmental impact study will take 12 – 18 months. Which takes precedent remains to be seen.

Meanwhile, Canada’s oil may go elsewhere. TransCanada has made no secret that it will find an outlet for the crude coming out of the oil sands and is current planning another pipeline to Canada’s west coast for exportation of oil to China. Enbridge is proposing a pipeline from the Chicago area to the Gulf Coast but it too faces stiff environmental – and thus administration – opposition.