Will U.S. Energy Greening Stiff Canada? If It Does, U.S. Will Alienate an Ally and Probably Just Promote Self-Defeating Green Policies

By Keith Edmund White

Editor-in-Chief

When we think of Canadian energy, Keystone XL reigns supreme.  But did you know about the abundant hydropower the U.S. gets (and could get more of) from Canada?  In short, efforts to find sustainable 'green' energy alternatives are great.  But stiffing Canada in the process only alienates a partner and makes it more likely that government subsidies or other protections to green projects won't work on the global marketplace.

“Even green protectionism is protectionism nonetheless.” - Jim Prentice, former Conservative cabinet member, 2006-10 (Minister of Industry, Environment, and Indian Affairs and Northern Development)

Most Americans sympathetic to protective trade practices usually think of combating low-cost Chinese goods, not blocking our lucrative crossborder trade with Canada.

And most Americans concerned about the environment, wouldn't think that 'greening' the United States means protective trade practices.

But Jim Prentice, former Conservative three-time cabinet official from 2006-10 and now CIBC Vice President, reminded a Halifax audience of three important developments:

• North America is on the verge of being energy independent
• How the United States goes about promoting green energy could essentially lead to U.S. energy protectionism that directly affects Canada
• Canada's energy sector will rejuvenate Canada's Atlantic provinces.

From The Globe & Mail: 

“If we play our cards right, there will be profound opportunities for Atlantic Canada and for our country as a whole,” he told the Maritimes Energy Association in Halifax, according to a text of his speech.

But he said Canadians can’t take access to the U.S. market for granted.

Rather, Prentice warned that they should be vigilant about signs of protectionism coming in the form of low carbon fuel standards or regional requirements to use specific amounts of renewable energy.

“Canada must continue to fight for a continental energy marketplace that is free of national and sub-national impediments. Interventions by government, while well meaning, are nevertheless potentially damaging and counter-productive,” he said.

In short, Canada offers the United States a rich and diverse set of energy. And, frankly, both countries should to looking at a regional--not national--approach to energy.

Why? Well, because we share rich deposits of natural gas and oil along our shared border. And hydropower already links of nations.

But there's also this:  Shorting our critical energy player who can already provide abundant high and low-carbon energy sources to prop up U.S. energy production is likely to not even make the U.S. more 'green' in the long-term   

Instead, 'green' U.S. policies should incorporate the dynamics of its Canadian partner, so that both nations can focus their resources in ways that benefit both--and lead to lasting energy providers in both nations that can compete internationally.  The other option, making U.S. green energy policy in a vacuum--and ignoring the rich energy we can get from Canadian oil and hydropower--just means the policies the U.S. support just won't be the best fit for North America, or match the business dynamics of the global energy marketplace.

In short, the United States should ensure that it continues to use Canada as a partner to promote sustainable energy solutions.   The other option not only alienates a critical ally, but also makes it less likely that U.S. green initiatives will stick in the long-term. 

Alberta's 'Green' Talk: A Serious Plan to Combat Greenhouse Gases, or Gambit to Secure U.S. Keystone XL Approval?

By Keith Edmund White

Editor-in-Chief

Alberta, Canada's oil production heavyweight, is pushing for increased carbon production taxes and seeking to slash GHG emissions.  Apparently, Ottawa is surprised.  Yeah, I thought I was reading an exceedingly dry Onion article.  Oh, wait...it's a plan offered by Alberta's Environment Minister...that is not endorsed by Alberta's Conservative government.  OK, the sky's not falling.  So the real question:  Are Alberta's Conservatives looking green to win Keystone, and then offer up a dead-on-arrival plan?

Is McQueen's  carbon plan for real?

The Globe and Mail reports (or hypes up?) a recent carbon tax and reduction plan offered by Alberta's Environment Minster:

The Alberta government has quietly presented a proposal to sharply increase levies on carbon production and force large oil-industry producers to slash greenhouse gas emissions by as much as 40 per cent on each barrel of production, a long-term plan that has surprised Ottawa and industry executives with its ambition.

Alberta Environment Minister Diana McQueen stunned a recent meeting in Calgary attended by senior oil executives and her federal counterpart, Peter Kent, with the proposal, which goes well beyond anything Ottawa or the companies contemplated, industry and government sources said Wednesday. The three sides are engaged in intense negotiations, with the industry warning that regulations that are too onerous could undermine the competitiveness of the oil sands sector as it seeks international investment. to drive production growth.

...

[Alberta Premier Alison Redford/Diana McQueen's boss] and Prime Minister Stephen Harper are under considerable pressure to introduce regulations for the oil industry to limit greenhouse gas emissions.

The Cynical Read:  Looking Green Key to U.S. Keystone Approval.  My guess is that this plan has one main audience:  the United States.  If Alberta looks 'super' green, it makes it easier for Keystone to get approved.  The catch:  the plan will be so long-term that the 'carbon pain' won't be felt until Alberta's Progressive Conservatives or either out of office or filled with new leaders.

Cynical Read 2.0:  What 'Great' Timing!  Oh, and this is a pretty well-timed leak, given that Alberta oilsands environmental data is about to be released. 

Yeah, yeah...but maybe the plan's for realies?  Ha.  This March 2013 Globe and Mail article shows just how blistering the Alberta's environmental hot potato is.  

The main takeaway:  Alberta Premier Redford will take heat for any real carbon tax increase, let alone steep reductions, unless (1) they come online way into the future and (2) secure Keystone XL in the short-term.  

And Redford's opponents, Alberta's Liberal Party and the strong provincial party Wildrose, are happy to exploit Redford's tough spot whatever way they can. 

Something tells me that Redford's Alberta critics and Keystone critics are going to react to news of Redford's Green Plan 2.0 with some help The Who:

But it might just get Alberta Keystone.

From the Globe & Mail ,March 2013 article on Alberta Conservative's environment-Keystone XL headache:

The Alberta government’s climate-change plan was under scrutiny Tuesday, a day after comments Ms. Redford made in Ottawa were interpreted as a call on the federal government to follow Alberta’s lead in putting a price on carbon.

...

The Premier quickly backed away from those remarks, saying that’s not what she meant, but was grilled in Question Period by the opposition. At one point, she scolded the provincial Liberals – a party that last year proposed what would ultimately be a $1.8-billion-per-year provincial carbon levy – for “saying that our environmental record in Alberta isn’t good enough. That’s not good for Alberta, and it’s not good for Canada.”

Liberal Leader Raj Sherman said a higher carbon price would help pave the way for pipelines. “If we actually dealt with the environmental issues that we face, we could get our pipelines to the U.S. and the West Coast. It’s hurting us not to do this right,” he said.

...

The Premier was said to have called on the federal government to follow Alberta’s lead and introduce a price on carbon. Her office later said she was misunderstood, issuing a clarification and then making Ms. Redford available to speak to reporters in Edmonton on Tuesday. “I am in no way advocating any sort of national carbon tax. That’s for other governments to decide,” she said.

Wildrose Leader Danielle Smith nonetheless accused the Premier of advancing a plan that “would see Alberta’s vast resource wealth sucked out of this province and pumped into Ontario and Quebec.” Ms. Redford later fired back. “The suggestion that that’s what the conversation was about [in Ottawa Monday] is absolutely absurd, but I don’t expect anything more from the opposition,” the Premier said, later noting that Ms. Smith said just last year that the “science isn’t settled” on climate change.

Keystone XL: The Roar of 2012, Now the Yawn of 2013?

"Canada needs pipe – and lots of it..."  -Andrew Potter, managing director, Equity research, CIBC

"[I]t [Keystone XL] looks… well, not irrelevant, but certainly much less important."  -Erica Alini, Macleans

Erica Alini blogged yesterday on the "much less important" Keystone XL pipeline project.  From her post:

Just over a year later, though, it looks… well, not irrelevant, but certainly much less important. “Even if the current Obama administration gives its final assent to the Keystone XL pipeline this will not resolve Canada’s export challenge,” notes a new CIBC report that came out yesterday. And it’s not just because we should really stop depending on a single buyer of our most prized export and diversify by catering to oil-thirsty Asian countries. It’s also because “US energy production is increasing at a pace that few, if any, saw coming,” reads a foreword penned by none other than Jim Prentice.

Instead, pipeline politics will be Pacific Canada's chief cause of concern, writes Alini.  From the excellent BIBC Alini links to in her post:

2013 WILL BE A DEFINING YEAR FOR CANADIAN PIPELINE POLITICS

Pipeline capacity out of western Canada is adequate for the short term, but substantial progress must be made on this front in 2013.  Progress (or lack thereof) will have a big impact on sentiment towards Canadian oil producers. we estimate that pipeline capacity out of the western Canadian sedimentary Basin (wCsB) could effectively be full in the 2014 time frame (our production forecasts are higher than consensus), suggesting little room for error/politicking in bringing on new pipeline capacity. 

There are ~2.9 mmbbl/d of long-haul pipeline proposals on the table (out of western Canada). that sounds like a lot until one considers that two of the largest (the proposed  525,000 bbl/d Gateway and 450,000 bbl/d tmX expansion through BC) face ever-increasing political risk; we assign no better than 50/50 odds that these pipes are built before the end of the decade. the proposed transCanada mainline conversion (estimated ~600,000 bbl/d) is compelling but very early stage and could also provoke some political backlash in Québec.  We also note that the 2.9 mmbbl/d proposed capacity is quickly depleted given our forecast of 100,000 bbl/d per year growth in Canadian conventional oil and 230,000 bbl/d per year growth in oil sands (or ~300,000 bbl/d when blended).  Canada needs pipe – and lots of it – to avoid the opportunity cost of stranding over a million barrels a day of potential crude oil growth.   [Source: A Look to the Future 2013 Edition, CIBC, Page 42]

The NYTimes Gets It Wrong: The Keystone XL Pipeline and Understanding the Canada-U.S. Energy Relationship

By Keith Edmund White

Editor-in-Chief

If you gave quick glance to yesterday’s NYTimes article detailing Canadian blowback from the Obama administration’s rejection of the Keystone XL pipeline, you might think that the Canada-U.S. energy relationship is now in grave jeopardy—and that the Keystone rejection has come with irreversible and grave economic costs to the United States.  But that impression has less to do with the actual facts surrounding Keystone than the NYTimes article’s poor and misleading structure, which suggests the NYTimes was more interested in getting ‘lazy clicks’ than actually informing the public on the state of the post-Keystone XL Canada-U.S. energy relationship.  

The short answer:  (1) there is no post-Keystone XL Canada-U.S. energy relationship--the southern leg of Keystone is already under construction and Keystone XL's reapplication is very likely to be approved after the presidential election; (2) the US isn’t losing energy security from its Keystone rejection; and (3) any loss of jobs from not constructing the northern portion of Keystone now seem delayed—not lost—because Canada is running into the same, if not stronger, environmental roadblocks that triggered the Obama administration’s Keystone rejection.  But even if you don't buy any of that, there's one glaring omission from Rosenthal’s article:  actually spelling out what was lost by the United States when the Obama administration rejected Keystone XL.

Yesterday, the NYTimes’ Elisabeth Rosenthal documented Canadian blowback resulting from the Obama administration's rejection of the Keystone XL pipeline.  While tightly written and not inaccurate, the article’s structure and considerable cherry-picking of facts implies the Keystone rejection has damaged America's energy relationship with Canada, a Saudi Arabian-sized energy supplier.  In fact, the real cost of not building the Keystone XL appears most likely to be only a delay in jobs related to constructing Keystone's northern portion and exporting Canadian oil outside North America through U.S. ports.

But you wouldn’t get that from reading Rosenthal opening paragraph: 

As the United States continues to play political Ping-Pong with the fate of the Keystone XL pipeline, Canadian officials and companies are desperately seeking alternatives to get the country’s nearly 200 billion barrels in oil reserves — almost equal to that of Saudi Arabia — to market from landlocked Alberta.

Six paragraphs down Rosenthal finally gets to discussing Canada’s ‘response’ to Keystone—three westward pipelines in Canada. Oh, but wait, in the next paragraph Rosenthal discusses a small problem with those plans:

Together, the new westward [Canadian] pipelines would carry more oil than Keystone XL would. But even with aggressive government backing, creating new pipelines may prove as difficult in Canada as it has been in the United States, though for different reasons.

And Rosenthal entirely omits another aspect of the Keystone XL debate: construction has already started on the Keystone XL’s southern portion. Why’s this important? Well, at the very least, it makes clear that the Canada-U.S. energy relationship isn’t fading anytime soon. From a February 2012 Mining.com article:

In a move that should go a long away to relieve the oil glut in the US Midwest TransCanada said on Monday it is going ahead with construction of the $2.3 billion southern leg of the Keystone XL oil pipeline from Cushing Oklahoma to the US Gulf Coast. 

The Calgary based company said the shortened pipeline could be operational by June-July next year. Keystone XL was designed to carry 830,000 barrels per day.

...

Canada exports 2 million barrels of oil per day to the US and almost all of it ends up at Cushing – the pricing point for US crude – where inventories have been piling up and refining capacity is limited.

Oh, and that brings up an interesting point about Keystone XL. The additional oil that Keystone would have flowed into the United States would then be likely exported out of the United States. Why’s that? Because the United States can already take in the Canadian oil it needs—with or without Keystone. From a March 2012 MSNBC article:   

Most analysts agree that more Canadian oil flowing south would help reduce imports from other regions. Less obvious, however, is the fact that the Keystone XL pipeline is not actually needed to bring all that new Canadian oil to the US – a flow now projected to rise to 1.7 million barrels per day by 2030, according to the same DOE study. Often characterized by proponents as validating the need for the pipeline, that study actually found that Canadian oil import growth will go on at “almost identical” levels through 2030 using existing and new pipeline capacity as well as rail shipments – whether or not Keystone XL is built.

This brings us an important point: what’s at cost for the US economically in rejecting Keystone is not energy security, but--again--additional pipeline construction, refinery, and export-related jobs tied to being Canada’s access point to non-U.S. consumers of Canadian oil.

Now if you read Rosenthal’s piece that point was probably lost one you, since the entire narrative she constructs comes awfully close to:  ‘The U.S. Rejection of Canada’s Pipeline Jeopardizes the Canada-U.S. Energy Relationship.’   Sure, the Keystone rejection was driven by domestic politics, and did come at an economic cost to the United States.  But the scale of this cost seems rather minimal:  (1) Canada was pushing a pipeline in the US to avoid its own domestic opposition to westward pipelines in Canada, (2) the U.S.-Canada energy relationship (whether in terms of oil supply, refinery operations, or construction of pipelines) is still ongoing and growing, and (3) work on Keystone continues.  And the environmental concerns that led Obama to ‘cave’ to an interest group, well guess what?  They're even stronger in Canada.

And then there's the underlying point that makes most of this article, and this blog post, moot:  a modified Keystone XL pipeline will likely be approved after the presidential election--regardless of the election's outcome. A May 2012 Fox Business report states: 

TransCanada Corp is taking its second shot at asking Washington to approve the contentious Keystone XL oil pipeline, betting that a new route through Nebraska and post-U.S. election time frame for a decision will push the project forward.

… 

"This project has been caught up in presidential politics long enough, it's time to get to work," Senator Lisa Murkowski, an Alaska Republican and ranking member of the Senate Energy and Natural Resources Committee, said in a statement.  

[Alex] Pourbaix said he believes the Nebraska Department of Environmental Quality will be able to decide on a new route that skirts environmentally sensitive areas by September or October. [Pourbaix is TransCanada's pipeline division president.]

Now, perhaps this criticism of Ronsenthal’s piece is asking too much for a moderately sized news article, which has to boil down complicated ideas and can’t inject every wrinkle into a story.  This posting—if it has succeeded—has brought up some nuanced--if easy to find--points, and perhaps crafting a compact NYTimes article including these points is simply impractical.  And, admittedly, she does—six paragraphs down—discuss Canada’s own challenges in getting their western pipelines off the ground.  But wait, what about this: 

As Canadian officials and companies desperately seek alternatives to get the country’s nearly 200 billion barrels in oil reserves – almost equal to that of Saudi Arabia – to market from landlocked Alberta, Canada pushes forward with Keystone XL alternatives forcing the United States to gauge the cost of Keystone’s rejection.

Now this opening paragraph, while still buying into the misleading narrative pushed by Rosenthal, at least lays a groundwork for understanding the micro-topic (Canada wants to get its oil out) without suggesting the United States is sacrificing its own energy relationship with Canada, let alone its energy security, by rejecting a portion of the pipeline. Furthermore, at the very least, it focuses on what matters to readers: spelling out the actual costs of the Obama administration's decision to reject Keystone XL.

Perhaps that type of article lacks the (misleading) black-and-white narrative that drives readership in today's newsmedia marketplace. But, at the very least, aren't these the type of topics that a world-class news organization—with their voluminous research database, rolodex-bursting access to public officials and experts, and supposed commitment to fostering informed discourse—should answer? And wouldn’t that article get more ‘clicks’ than an article that simply documents Canadian discontent without giving readers the context necessary to assess the Keystone XL delay's impact?

Canada-U.S. Commentary Highlights

by Keith Edmund White, Editor-in-Chief

*Note an earlier version of this article incorrectly referred to James Coan as Joan Coan, and omitted to refer to other Woodrow Wilson materials related to deepwater drilling.

A wrap up some commentary from March and April I thought might be of interest. Topics include Canada's federal and Ontario's provincial budget, Canada's Asia pivot, offshore drilling, a chat with the Prime Minister, and some summit forecasting.

Canada’s Asia Push. Paul Wells blogs on Bank of Canada governor Mark Carney’s tying Canada’s “unsteady” recovering with Canada’s shrinking share of the world’s export since 2000. The cause: the high Canadian dollar and “a reflection of who we traded with than how effectively we did it.” And guess what “who” he’s talking about? The United States. The solution? “[R]efocus[ing] on commodities exports to Asia.”

Two Budgets, Four Commentaries Plus a Quick US Comparison. Last week, Canada’s Conservative federal government released its first majority budget; at the same time, Ontario Liberal government released its first budget as a minority government. Fleishman Hillard’s Anne Marie Quinn provides some context to the budget proposals. Even in these two different situations, American readers can glean the dramatic difference in Canada's budget politics. The Fraser Institute slams the Conservative government “no-cut” (but rather cost savings budget), arguing that the Conservatives should have used their new majority government to “enact a bold and aggressive plan to balance the budget more quickly through actual reductions in spending.” Finally, going back to Ontario, this Atlantic Market Institute for Market Studies sets forth broad guidelines of balancing Ontario’s budget through cuts, not new revenues. Best budget overview, though, goes to Michael Holden's blog post at the Canada West Foundation.

Assessing Summits—More Players, Less Substance? Chris Sands reads the past and future Summit dance-card, predicting which ones are worth watching—and which aren’t.

Woodrow Wilson Center Gets Two Shout-Outs:

Canada’s Offshore Drilling—Decentralized Better (Or Should We Be Looking at Other Variables)? Woodrow Wilson’s Canada Institute chats with two experts on the differences in the U.S. and Canadian offshore drilling political regimes. interviews Alexander MacDonald, managing partner of the St. John’s, Newfoundland and Labrador office of Cox & Palmer, an Atlantic Canadian law firm. Offers some nice (and thankfully well-edited) clips with Mr. MacDonald. Key insight: offshore drilling is a provincial-federal issue, not like America’s debate which is held hostile on the national stage. Joan James Coan, Energy Forum research associate at the James Baker III Institute for Public Policy then comes up and pushes back a bit: he notes that even if a (future Republican) U.S. president took the federal obstacles away, how many States would actually opt for drilling? While he might be right on western coast Florida and the Northwest, I’m not so sure about Virginia. 

Some omissions additional aspects of note: (1) discussion on the politics of Canada west coast offshore moratorium, and (2) the different model of offshore regulation Canada uses ("goal oriented") from the United States (criticized as overly "prescriptive"). Yes, a bit wonky--but critical to assessing whether any U.S. offshore expansion sticks (not to mention if Canada is sticking on its own Deep Water Horizon time bomb).

The Woodrow Wilson Center offers more of these topics in their publication The Risk and Regulation of Deepwater Offshore Drilling: American and Canadian Perspectives and the 14th edition of the Center's One Issue, Two Voices series with James Coan, Alexander MacDonald, and moderator David Longly Bernhardt on the topic of deepwater offshore drilling. This March 7, 2012 event is what led to the shorter interviews discussed above.

[Note: CUSLI-Nexus thanks the Woodrow Wilson Center for bringing the misnaming of Rice University Research Associate James Coan and its deepwater drilling materials to its attention]

Woodrow Wilson Snags PM Harper for hour-long chat in DC. Harper chats on Canada’s envious economic performance over the recession, among other topics. A “very solid system of financial regulation” – really? What about that murky, provincial system of securities regulation?) Harper notes Canada’s stimulus response (emphasizing “shovel-ready projects” like the U.S.), but emphasizes that Canada’s smaller debt as giving it greater flexibility. But let’s be fair: Canada had the nice buffers of a booming economy market and a property market that hasn’t crashed. And, perhaps, a less polarized political sphere? And what about simple differences in scale between the two stimulus approaches? But I would be interested in reading a comparison on Canada and America’s stimulus approaches. Harper also dishes on Keystone XL, foreign policy, health-care, Canada joining the Trans-Pacific Partnership, and other topics. Two additional topics worth noting here: Canada’s push for FTAs around the world, and Canada’s “profile challenge” when it comes to addressing tensions in the U.S.-Canadian relationship.

And Canada West Foundation Reports on Water in Stress Points. Could federal involvement in water policy be on its way? This March 2012 Report describes seven stress points in Canada’s water security. The culprits? Agricultural demand for water, shale gas development, oil sands development, uranium mining, urban growth in Canada’s west, the deteriorating health of Lake Winnipeg—which could pose become a thorn in the US-Canadian relationship. One important point brought up by the report: where do aboriginal rights fall into increasing Canada’s water security? Another point not really discussed: assuming the federal government wants to stretch its muscle in this provincial area, in light of the Canadian Supreme Court’s ruling on securities regulation, what shape should it/will it take? Final note: were getting a national water policy in Canada depend on the NDP leadership race?

And Yes, It Is All About Gas. Finally, Metanoodle cuts through some of the noise on what can and can not be solved when it comes to North American energy prices. Key points: (1) gotta think in oil districts and (2) the sexy topic of transfer capacity. And is four cents enough when it comes to the Keystone XL pipeline?

Bismark ND, Datalog, and KeyStone: The Complicated and Rich Energy Relationship Between the United States and Canada.

The Datalog story shows the rich economic and energy relationship between Canada and the United States, the importance of the U.S. generating top-notch engineers, and the ever-increasingly marketability of IP—oh, and Bismark.  And guess what?  Keystone XL—and its apparent resuscitation—may decide whether his venture booms or peters out.

An Alberta-based company, Datalog, is making its first Logging While Tripping (LWT) location in Bismark, North Dakota.  This means that $3 million of equipment is coming to Bismark, along with the resulting jobs and spending.

Logging While Tripping, in short, is a patented technology that speeds up the process of exploring whether oil or natural gas exists under a certain surface.  As such, oil drilling companies look to it as a technological means to lower the costs of extracting oil.  Datalog acquired this technology from LWT, Inc.—who patented the technology—in 2005, and apparently it has proven itself to be a wise investment.  The company boasts an annual revenue of over $45 million has approximately 300 employees.

The reason for the location:  attracting and keeping a high-skilled labor force.

“We made the decision to come to Bismarck rather than the traditional western North Dakota locations as we felt we would have a better chance of hiring and retaining good engineers and technologists in a major centre with full amenities,” explains Rob Duthie, vice president of Operations. “The cost of training an engineer is expensive so retention is key to our success. Our business requires our units to drive to well sites to perform our services as needed so the extra hour and a half to Bismarck from the Bakken play was acceptable for our logistics.”

But how smart this investment is may well show itself within the coming months and eyrasuntil the next few years.  Surprisingly, the price for crude oil coming out of North Dakota is actually falling.  The reason?  There’s more oil coming out then can be transported—one of the reasons that the Keystone Project was important oil producers in the region. 

But, in any case, as this small project shows:  The US-Canadian relationship is felt everyday in important ways.

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.
…
"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.