Keystone: Why the White House Delayed the Pipeline Project and Its Impact on the Canadian-U.S. Relationship

Just three days after the White House announced the delay of the Keystone pipeline, a $13 billion dollar cross-border project that would have transported crude oil from Alberta’s oil sands all the way to Houston, Texas, President Barrack Obama and Prime Minister Steven Harper sat down in Hawaii to show bi-lateral relations remain strong.

As reported by CBC, Prime Minister Harper has attributed the Keystone delay, and other recent White House decisions, to America’s upcoming presidential election:

"This is simply the political season in the United States and decisions are being made for domestic political reasons that often have little or nothing to do with what other countries may think."

Obama's administration recently revived its "Buy American" provisions, potentially costing Canadian businesses billions of dollars in U.S. sales, and in the budget proposal he tabled last week the president proposed a $5.50 "passenger inspection fee" for Canadian air travellers.

On Thursday, the State Department ordered TransCanada to reroute its proposed pipeline and subject it to further environmental assessment.

The 2,700-kilometre pipeline would bring crude from the new oilsands expansions in northern Alberta to be turned into gasoline and other fuels in Texas, the hub of the American refining industry.

Canada has lobbied hard for an expanded pipeline to be built, saying it would provide jobs and economic benefit to both countries.
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"We have already indicated of course that we are disappointed," Harper said. "Nonetheless, I remain optimistic that the project will eventually go ahead because it makes eminent sense.

"I would also point out — I think it's important to note — that there has been extremely negative reaction to this decision in the United States because this pipeline and this project is obviously what's in the best interests of not just of the Canadian economy but also the American economy."

Nevertheless, he said the decisions also underscore the need for Canada to secure access to Asian markets for its energy products. 

"That will be an important priority of this government going forward," he said, noting he raised the issue with Chinese President Hu Jintao on Saturday.

Yet, Christopher Sands—a Canada-U.S. relations expert—takes a harsher line against the Keystone delay:

Christopher Sands, a specialist in Canada-U.S. relations at the Hudson Institute, a think-tank in Washington D.C., argues the White House simply "messed up" and is now in a serious jam over an issue that threatens to derail Obama's re-election hopes. 

Environmentalists were looking for an issue to grasp, he said, and the pipeline seems to offer something for several green groups because there are concerns about land, air, water and climate change. 

"It's just a sign of how badly the president is concerned about his reelection hopes, that he can't afford to upset his constituency," Sands said. 

"The delay we're now stuck with is because the president mishandled the file."

But, whether or not the White House made the right call on Keystone, the political reasons for the delay are significant:

But the delay, which will very likely place a final Keystone decision well after the presidential election a year from now, was the culmination of a remarkable few weeks that saw the president take an increasingly personal interest in the issue. That interest, many observers believe, makes it clear this was a political decision, made by a White House eager to hold on to a base of young environmental-minded voters who were instrumental in handing Barack Obama the presidency.

“I am sure the Obama campaign did not like the idea of their campaign offices being occupied by a bunch of people who were against the pipeline,” said Jane Kleeb, the Nebraska campaigner who was instrumental in stirring up that state’s opposition. “And I’m sure they were tired of the high-level donors saying, ‘No we’re not going to donate until you do something on this pipeline.’”

Mr. Obama’s growing interest was evident over the past few weeks. There was the Oct. 26 event in Denver where, in response to a heckler, Mr. Obama stopped mid-speech and responded: “I know your deep concern about [Keystone],” he said. “We will address it.”

Finally, and surprisingly absent from the Canadian news sources, is the fact that the environmental concerns regarding Keystone are not limited to the White House or State Department. As reported by Reuters:

The State Department's environmental assessments of the Keystone are also being challenged by another lawmaker, whose committee has oversight of such reviews. Barbara Boxer, the chairman of the Senate Environment Committee, asked Secretary of State Hillary Clinton on Friday to answer a series of questions about the environmental assessment by November 14, probing whether the firm had a conflict of interest.

Boxer asked whether the Keystone decision will be delayed until the State Department knows the results of an independent engineering evaluation of spill detection measures and valves.

And this is not to mention the laundry list of complaints from the Natural Resources Defense Council, Sierra Club, National Wildlife Federation, and Friends on the Earth, that were lobbing legal challenges to what they considered a rushed State Department review . Among the groups’ complaints are (1) their contention that additional pipeline infrastructure is not necessary, (2) inadequate safety analysis, (3) an incomplete study of the green house gas and other air pollutant effects of the project, and—finally—(4) insufficient public review of the project.