Market News

 August 02, 2013
Keystone Kremlinologists Trying to Decipher Obama

 President Barack Obama twice in the past week has made openly critical comments about the proposed Keystone XL oil pipeline from Alberta, questioning its value as a job creator and suggesting Canada do more to assuage environmental concerns.

White House senior adviser Dan Pfeiffer amplified that message at a reporters' roundtable yesterday, saying that there's a "legitimate debate" over whether to build the pipeline. "One infrastructure project is not a jobs strategy," he said.

The remarks represent a shift to more critical rhetoric on Keystone from the administration ahead of its decision on whether to approve the project. What is not clear is whether Obama's stance on the project has soured under a barrage from environmental activists, or whether his message is aimed at securing concessions from Canada officials or from U.S. Republican lawmakers who are promoting the project as a job creator.

"It's like Kremlinology," said Rogan Kersh, a lobbying expert and provost of Wake Forest University in Winston-Salem, North Carolina, referring to the practice of attempting to decode statements from the leaders of the former Soviet Union.

"This feels like they are trying to reach for some decision that isn't, 'Yes, we support it wholeheartedly,' and isn't, 'No, we oppose it wholeheartedly,'" Kersh said in an interview.

Critics Emboldened
Obama's comments have emboldened critics of Keystone who argue the pipeline would worsen global warming by promoting the development of Alberta's oil sands and exposes farmlands and wildlife habitat to damaging spills if the line should rupture.

Jane Kleeb, a political organizer in Nebraska, across which the pipeline would run, says she was always hopeful Obama would reject Keystone. Now she's almost sure he will.

Obama "took out his pipeline-fighting gloves," Kleeb, the founder of the group BoldNebraska,org, a leading critic of the $5.3 billion project to link Alberta oil sands to refineries in the Gulf Coast, said in an e-mail. "No one saw this coming. No one in the political class expected the president to fight along side farmers and ranchers."

In a July 30 speech in Chattanooga, Tennessee, on middle-class jobs, Obama said Republican lawmakers were holding up Keystone as their solution to unemployment.

"They keep on talking about this -- an oil pipeline coming down from Canada that's estimated to create about 50 permanent jobs -- that's not a jobs plan," Obama said.

Newspaper Interview
In a July 24 interview with the New York Times, Obama said the project is "a blip relative to the need" in terms of job creation.

"Republicans have said that this would be a big jobs generator," he said. "There is no evidence that that's true." The pipeline would create only 50 permanent jobs, Obama said.

The remarks prompted an outcry from Republicans and business groups supportive of the project. They noted a draft environmental analysis by the U.S. State Department that found Keystone could create as many as 42,000 direct and indirect jobs during the two-year construction phase. That estimate includes 3,900 people directly employed in construction.

After completion, the project would support about 35 permanent jobs, according to the State Department.

The agency is reviewing Keystone because it would cross a border. A final report on the environmental impact of the project is expected in September. After that, the department will conduct a 90-day review to determine if Keystone is in the national interest, pushing a final decision to late this year or early 2014.

'Immense Uncertainty'
"Your recent comments have only added to the immense amount of uncertainty that currently surrounds the Keystone XL approval process," Representative Fred Upton of Michigan, the chairman of the House Energy and Commerce Committee, and two Republican colleagues wrote Obama yesterday.

Christopher Bosso, a political science professor at Northeastern University in Boston, said Obama's comments may be less about a political calculation and more reflective of the fact that he doesn't face re-election.

"It's a second-term president saying this is what I really think," Bosso said. "I don't think that politically for Obama it's as dire as it might have been a year ago."

Legacy Issue
Presidents in second terms often pick a legacy issue designed to cement their historical status, Bosso said. With the president also pushing new limits on carbon dioxide emissions from power plants, climate change could be that issue for Obama, he said.

"I don't see the political upside to the president of affirmatively supporting Keystone," said Stephen Brown, a former political aide to then-House Minority Leader Dick Gephardt, a Missouri Democrat, who now lobbies for Tesoro Corp. (TSO), a San Antonio-based oil refiner. "It's not like the oil industry all of a sudden will fall in love with him. It's not like Republicans will all of a sudden fall in love with him. What does he get? He gets the ire of his base and gets nothing in return. This is a legacy issue."

While Obama doesn't face re-election, his decision on Keystone is still likely to anger either environmentalists or unions whose support he'll need to push his agenda in his remaining time in office, Wake Forest's Kersh said.

Union members will be disappointed and angry if Obama rejects the pipeline, said David Mallino, legislative director for the Laborers International Union of North America, in an interview.

"We don't get massive infrastructure projects like this everyday," he said. "We would hope for better from somebody we count as a friend and who we aggressively supported through two election cycles."

TransCanada Spokesman
A TransCanada spokesman said that the construction industry supports tens of thousands of good-paying jobs.

"We do not think it does any good to get into a debate about whether one job is more important than another," Shawn Howard, the spokesman, said in an e-mail.

To be sure, Obama in the interview with the Times left open the possibility his administration will approve the project. He said it represents "a potential benefit" in terms of integrating energy supplies with ally Canada.

Greenhouse Gases
Obama also hinted he is in search of concessions on greenhouse gases. Keystone's fate hinges heavily on whether the project "is going to significantly contribute to carbon in our atmosphere," he said. "And there is no doubt that Canada at the source in those tar sands could potentially be doing more to mitigate carbon release."

White House officials aren't saying what steps Canada could take to alleviate concerns that the development of Alberta's oil sands would worsen the risks of climate change.

The Environmental Protection Agency, in a response to the State Department's environmental analysis, suggested TransCanada use renewable energy to power pumping stations along the pipeline, and that Canada work with the U.S. to develop carbon capture technology to reduce the climate footprint.

Joe Oliver, Canada's natural resources minister, said his nation is leading the U.S. in reducing greenhouse-gas emissions.

"Canada has an excellent environmental record," he said in an e-mail. "We've already acted to phase out traditionally fired coal electricity."

Obama may be looking at the "entire chess board," and could still approve Keystone and protect his legacy on climate change if he could squeeze new limits out of Canada and implement planned emissions reductions on coal-fired plants in the U.S., Tim Greeff, an energy and environmental consultant in Washington, said in an interview.

"My general rule of thumb in this town is that everything is 50-50 until a decision is made," Greeff said.