Obama allies’ interests collide over Keystone pipeline


From left, Terry O'Sullivan, general president of the Laborers’ International Union of North American; TransCanada chief executive Russ Girling; Jack Gerard of the American Petroleum Institute; and Jay Timmons of National Association of Manufacturers take questions at a news conference regarding the Keystone XL pipeline project earlier this month. (Linda Davidson/THE WASHINGTON POST)

In May, environmental writer and activist Bill McKibben — pondering a simmering energy issue — asked a NASA scientist to calculate what it would mean for the Earth’s climate if Canada extracted all of the petroleum in its rich Alberta oil sands region.

The answer to McKibben’s query came a month later: It would push atmospheric carbon concentrations so high that humans would be unable to avert a climate disaster. “It is essentially game over,” wrote James E. Hansen, who heads NASA’s Goddard Institute for Space Studies and is one of the nation’s leading voices against fossil fuel energy.

That was the moment when McKibben — who had already mobilized a global grass-roots climate movement from his home in Vermont — decided to join the fight against the Keystone XL pipeline, which would carry heavy crude oil from Canada’s Alberta province to the Gulf Coast. It was a decision that eventually landed McKibben in jail, along with Hansen and more than a thousand other pipeline foes who have been arrested in front of the White House.

The Keystone permit decision has landed literally and figuratively on the White House’s doorstep. Several key union allies and the Canadian government are pitted against environmental and youth activists who are threatening to turn Keystone into a campaign issue for President Obama.

The question of whether to allow construction of the pipeline has spawned football-themed ads in Nebraska, protests across the country and Canadian-led strategy sessions for members of Congress in the offices of a D.C. law firm. And the State Department, which is charged with making the permit decision because the pipeline crosses an international border, is on the spot for its handling of the review process.

“This project represents a collision of multiple national interests and multiple political interests,” said P.J. Crowley, who served as spokesman for the State Department during part of the review process. “Energy security and environment normally go together, but in this case they are somewhat at odds. All have come together to make this a bigger deal than it might have appeared at first blush.”

Charles K. Ebinger, a senior fellow for energy at the Brookings Institution, said the issue has “become a test case for the Democrats,” with two factions within the Obama camp asking the same question: “Is he with us or against us?”

“I do think it has become a defining political issue,” Ebinger said. “I don’t think he’s going to win any friends whichever way he goes.”

TransCanada applied in 2008 for a permit to build the pipeline. In the early stages of the process, the pipeline’s backers had plenty of reasons to be optimistic about winning approval. Only one U.S. environmental group, the Natural Resources Defense Council, had an anti-oil-sands project up and running. Not only had Trans­Canada won approval for an earlier stage of Keystone, but the State Department approved another oil sands pipeline, Enbridge Energy’s Alberta Clipper, in August 2009.

Canadian Embassy officials made repeated rounds on Capitol Hill to enlist support, distributing fact sheets about oil sands production — also called tar sands because operators extract a viscous oil called “bitumen” from formations of sand, clay and water — and the number of jobs a new pipeline could generate in the United States. Oil companies that extract crude from the oil sands — Shell, Exxon Mobil and Chevron — and those with refineries on the Texas Gulf Coast — Valero Energy, Shell and Total — supported the pipeline.

Valero, the nation’s largest oil refiner, has a refinery in Port Arthur that uses oil that arrives by tanker, mostly from Mexico and South America. But with Mexican oil output waning, Valero spokesman Bill Day said, the Keystone pipeline would give Valero “more flexibility, more choices, more options,” and more leverage in negotiating prices.

Opposition, lobbying grow

But opposition to tar sands exploration, and the pipeline, was growing among environmentalists. Tapping tar sands is an energy-intensive process more like strip mining than oil drilling. Kenny Bruno of the liberal advocacy group Corporate Ethics International said he and other activists targeted Keystone’s expansion because “it’s an infrastructure linchpin for the expansion of the tar sands.”


Lawmakers on both sides wrote to the administration. While dozens sent letters supporting the project, 50 Democrats wrote to Secretary of State Hillary Rodham Clinton on June 23, 2010, to complain that the department’s draft environmental impact statement failed to take into account the full climate impact of shipping crude from the oil sands.

“I’ve always felt uncomfortable that the State Department is heading this process,” Rep. Henry A. Waxman (D-Calif.), who at the time chaired the House Energy and Commerce Committee, said in an interview. Waxman, who wrote his own letter to Clinton on July 2, 2010, added that he believes the agency lacks the environmental expertise to make the determination.

Two weeks later, the Environmental Protection Agency called State’s draft “inadequate,” in part because of its climate analysis. The State Department agreed to extend the environmental review.

In September 2010, four unions — the United Association of Journeymen and Apprentices of the Plumbing and Pipefitting Industry of the United States and Canada; the Laborers International Union of North America; the Teamsters; and the International Union of Operating Engineers — reached a tentative project labor agreement with Trans­Canada to build the pipeline, which is now finalized. They say the project will directly generate as many as 20,000 high-wage jobs for their members.

“It doesn’t cost the government two cents,” said United Association General President William P. Hite, whose union represents plumbers and pipefitters in the United States and Canada. “We promote it every chance we get.”

A choice of ‘dirty oil’

In mid-October, Clinton told an audience at San Francisco’s Commonwealth Club that she and others in the administration were “inclined” to give TransCanada the permit, adding, “We’re either going to be dependent on dirty oil from the Gulf or dirty oil from Canada.”

In many ways, her comments were simply a blunt version of the argument made by TransCanada and U.S. oil producers and refiners: The pipeline will secure a more reliable source of petroleum.

Over the next months, Canadian officials continued to press for approval of the permit: Prime Minister Stephen Harper mentioned it to Obama during a visit to Washington in February; Foreign Minister John Baird brought it up with Clinton in August; and Natural Resources Minister Joe Oliver raised it with Energy Secretary Steven Chu in August as well.

At the same time, an unlikely coalition of farmers, ranchers and other residents along the pipeline’s route from Nebraska to Texas stepped up its opposition. The Sierra Club joined with tea party activists to protest the pipeline, while Nebraska’s Republican Gov. Dave Heineman said it threatens his state’s Ogallala aquifer.

By August a group of environmental leaders that included McKibben was able to enlist more than a thousand opponents willing to be arrested outside the White House, including actresses Daryl Hannah and Margot Kidder. The two-week demonstration prompted a flurry of calls between White House offices and State, sources said, as administration officials asked to be briefed about the project’s status.

“That was the sort of ante we needed to get us into the game,” McKibben said.

The U.S. Chamber of Commerce launched a campaign the same month — which it dubbed the Partnership to Fuel America — to mobilize business owners and associations in key states that would be crossed by the new pipeline. It hired consultants and tapped its own network of state and local chambers to find small businesses that might benefit from the project.

“What we’re trying to create is an opportunity for small businesses in states and communities to become educated on oil sands and energy,” said Matt Koch, a pipeline expert at the U.S. Chamber of Commerce, which also launched a print ad campaign in Nebraska, Montana and the Dakotas.

Meanwhile, Republican presidential candidates have hammered on the need to boost domestic energy production and create jobs, with unemployment stuck around 9 percent.

Questioning the review

On Sept. 2, the president announced he was pulling back widely anticipated new national smog standards. The decision infuriated environmentalists, prompting them to warn White House officials in a private meeting that day that the pipeline permit decision had become even more significant. White House officials remained noncommittal in that Sept. 2 session; in another closed-door session a few weeks ago, White House chief of staff William Daley told environmental leaders that the White House would stay out of the final decision unless another agency objected to the State Department’s final determination.

Environmental groups have challenged the administration’s integrity. Since Sept. 22, they have released a series of embarrassing e-mails between Trans­Canada lobbyist Paul Elliott and State Department officials. The groups, along with several Democratic lawmakers, have also questioned why State retained Cardno Entrix — a consulting firm that counted TransCanada as a major client and which had consulted for TransCanada on a different pipeline — to help prepare the federal environmental assessment and run the agency’s public hearings.

Kerri-Ann Jones, who heads the review as the assistant secretary of state for the Bureau of Oceans and International Environmental and Scientific Affairs, defended the process during a news conference Oct. 7, saying, “We want to hear from every perspective, and we are on listening mode, and there has been impartiality.”

A green line in the sand

Some major Obama donors have threatened to withhold campaign contributions unless the president kills the project; both environmental and labor activists have raised the issue with his campaign staff.

Both publicly and privately, however, Obama administration officials have told environmentalists they are better off with the president in office than without him.

“When Americans compare the president’s record promoting clean energy and America’s energy security to those of the leading Republican candidates, who don’t even believe that climate change is an issue that we need to address and would cede the clean-energy market to China, there will be no question about who will continue our progress,” campaign spokesman Ben LaBolt wrote in an e-mail.

Shell sent a note in late September to all of its roughly 20,000 U.S. employees urging them to write to the State Department in support of the project and providing them an address. “It’s a voluntary program,” said Shell spokesman Bill Tanner. “Our employees also understand the need to have this sort of infrastructure project available. We’re doing what we can to make sure our views are heard in the permitting process.”

On Oct. 5, in response to the growing outcry against the pipeline, the Canadian Embassy urged approximately 100 supportive lawmakers gathered at the offices of the law firm Nelson Mullins to lobby for the permit.

“The pitch was that this was a critical moment of decision and everyone should bring out all the political firepower they could in their congressional districts,” said Ebinger, who attended the meeting.

On Oct. 11, in an interview with the Associated Press, Clinton said she realized “this is a very emotional decision” for some but emphasized that she had not been involved in the process yet because “originally, two and a half years ago, this had been delegated to the deputy.”

State Department officials have said they will issue a final decision on the permit by the end of the year; on Nov. 6, McKibben and other activists plan to ring the White House with placards of Obama’s words from the 2008 campaign, including his pledge to free the United States from “the tyranny of oil.”

Credo Mobile chief executive Michael Kieschnick, who donated $4,600 to Obama’s 2008 campaign and was arrested during the last round of White House demonstrations, said the president’s fundraisers continue to press him to support the 2012 campaign.

“I always say the same thing, talk to me after the Keystone decision,” Kieschnick said. “I’d be delighted to talk to him when we surround the White House. We’ll be very nice to him.”

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Steven Mufson covers energy and other financial news.
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