Girding for battle with a Republican Congress over environmental policy, President Obama is signaling that he is likely to veto a bill authorizing the Keystone XL oil pipeline just as momentum for the project builds on the Hill.
Individuals familiar with the administration’s thinking say Obama is leaning against approving the massive pipeline. And in a news conference in Burma on Friday, the president rejected two of the main arguments made by pipeline proponents, saying he had “to constantly push back against this idea that somehow the Keystone pipeline is either this massive jobs bill for the United States or is somehow lowering gas prices.”
“It is providing the ability of Canada to pump their oil, send it through our land, down to the Gulf, where it will be sold everywhere else,” he said. “That doesn’t have an impact on U.S. gas prices.”
The pipeline fight is coming to a head as Obama seeks to cement his environmental legacy by forging a climate deal with China, imposing carbon limits on U.S. power plants, setting aside more public land for conservation and, in an announcement made Friday, providing $3 billion to poor countries to cope with the impact of global warming.
In the wake of the midterm elections, that will mean a series of fights with Congress. On Friday, the House authorized construction of the pipeline by a decisive vote of 252 to 161. Senate Democrats have agreed to vote on the project Tuesday in an effort to boost the fortunes of Sen. Mary Landrieu (D-La.), who faces a Dec. 6 runoff against the author of the House companion bill, Rep. Bill Cassidy (R-La.).
Cassidy nearly choked up in an interview just off the House floor as he described his relief that Congress is on the verge of approving the project, saying, “If there’s another party that thinks that climate change is a winning campaign issue and they’re going to double-down on moving jobs to China, it’s their party.” While the pipeline may not run through Louisiana or supply any of its refineries, it has become a popular cause in a state that relies heavily on oil and gas.
The White House has indicated that it is prepared to reject the House bill, though it has not issued a formal veto threat. Barring an extraordinary legislative maneuver forcing his hand in the next Congress, Obama is likely to reject a final permit when the matter comes before him, according to the people with knowledge of White House decision-making.
Though a multi-step, multi-agency process must still take place before the State Department recommends whether a permit should be granted, the most important process is happening — as one administration official put it — in Obama’s head.
In public, the president and his aides have said that they will wait for the State Department review, which has been suspended until Nebraska’s Supreme Court rules on whether the pipeline’s route through that state was properly approved. That decision could come out any day; once it does, several agencies will have a chance to comment on whether the project serves the national interest. Secretary of State John F. Kerry can then issue a final determination, which would be subject to presidential approval.
Obama has indicated that the White House is well aware that approving the pipeline would infuriate environmentalists, who not only lent major support to Democrats in the recent election but will serve as important allies in legislative battles as well as the 2016 presidential race.
Republicans have identified Keystone XL as one of their top legislative priorities, and it enjoys the support of several major business groups along with the oil industry.
Russ Girling, chief executive of the pipeline sponsor, TransCanada, issued a statement on Nov. 5 saying that the Keystone XL “has always enjoyed bipartisan support and is a great example of an issue where both parties can work together to create jobs and enhance energy security for the United States.”
On Friday, the company added, “we are encouraged by any effort to move this process forward.” It said “no other pipeline has been scrutinized as carefully as Keystone XL, and it has met every environmental, economic, safety and supply test that has been put in front of it.”
Still, Sen. Mike Johanns (R-Neb.), one of the pipeline’s fiercest congressional backers, said he was “very, very skeptical” that Obama would grant a permit to TransCanada if the question was “left to a presidential decision.”
Some groups, including the Laborers’ International Union of North America and the International Union of Operating Engineers, have endorsed the project as a means of generating high-paying, short-term construction jobs. But environmentalists (and other unions) have framed the pipeline as a referendum on the president’s commitment to addressing climate change.
Environmentalists say the pipeline is especially harmful because it lowers transportation costs and thus provides more incentive for the development of Alberta’s oil sands. Extracting a thick bitumen from those sands requires a lot of energy because the sands must be heated.
In June 2013, Obama said that he would reject the project if it would “significantly exacerbate the problem of carbon pollution,” a pledge he repeated again last week in a news conference after the midterm elections. Kerry has made fighting global warming a hallmark of his career.
In another use of executive authority, the administration is also preparing to designate two new national monuments, California’s Lake Berryessa and Colorado’s Browns Canyon.
“We’re as confident as ever that the president will reject the pipeline in the short term and the long term,” said Sierra Club executive director Michael Brune. “Approval of the pipeline runs contrary to the president’s climate goals.”
Obama will face a more difficult test if the GOP attaches approval of Keystone to a must-pass spending bill next year. But League of Conservation Voters senior vice president Tiernan Sittenfeld said her group was confident Democrats could sustain a veto on that and other efforts to undermine the administration’s environmental policies.
Changing oil market conditions could also shift the administration’s calculation on whether stopping the pipeline would curtail production in the oil sands region. In the Final Environmental Impact Statement issued early this year, the State Department rejected that argument, saying that the oil would be produced anyway, even if it had to be transported on more costly railroads.
But State added that if the price of oil dropped to “a range of prices around $65 to $75 per barrel” and stayed there for a long period of time, the higher rail costs would be enough to discourage oil extraction in Canada. In recent weeks, the price of oil has tumbled more than 25 percent and the benchmark West Texas Intermediate closed at $75.82 a barrel Friday, hovering around a four-year low.
While Obama suggested Friday that a large portion of the oil shipped through the pipeline would be exported, TransCanada said later Friday: “Keystone XL is not an export pipeline — period.”
But a substantial portion of the oil — after being refined into gasoline and diesel — will be exported, companies say. The pipeline would carry 730,000 barrels of thick Canadian crude oil — plus about 100,000 barrels a day of lighter crude from Montana and North Dakota — to Texas.
The Port Arthur refinery of Valero would be one of the customers. Bill Day, a spokesman for Valero, said the company does not plan to export any of the crude purchased from the pipeline. “Zero percent would be exported,” he said. “We intend to process that crude and turn it into products at our refineries on the gulf coast.”
However, a portion of those refined products — primarily gasoline and diesel — would be exported. On Nov. 4, at a presentation of its third-quarter earnings, the company said it has exported 7 percent, or 90,000 barrels a day, of the total amount of gasoline it produced at all its refineries. It also exported 22 percent, or 240,000 barrels a day, of the diesel fuel it produced.
At an earlier presentation to investors, Valero, the nation’s largest refiner, said it is planning to increase its capacity to export refined products.
On the question of how many jobs the pipeline will generate, foes and backers have cited radically different figures. TransCanada says it will create a couple of thousand direct construction jobs that would last up to two years. In the long term, about 100 jobs would go to people working directly on the pipeline itself, doing jobs such as monitoring pumping stations.
Supporters of the pipeline said it would also spur jobs created as a result of buying additional crude oil from Canada, which tends to recycle more dollars back into the U.S. economy compared with other oil-exporting countries.
Ed O’Keefe contributed to this report.