11.10.11

Obama Delays Keystone Pipeline at Least 12 Months

Stuck between two unpopular options on a controversial oil pipeline, President Obama finds an escape hatch. Daniel Stone reports.

Stumped for weeks about how to handle the economic and environmental sensitivities of a controversial oil pipeline, President Obama finally arrived at a solution to keep the lucrative process in motion and his base appeased.

After large protests on Sunday at the White House demanding Obama call off the project, White House and Capitol Hill officials confirmed Thursday that the government would delay the process. U.S. regulators with the State Department and other federal agencies plan to tell TransCanada, the company behind the 1,700-mile pipeline, to make the project more environmentally friendly by changing its route before it can receive a clear green light from Washington. Doing so allows the administration to delay a final approval for as much as a year, staving off a lose-lose decision certain to be politically unpopular.

"I welcome today's announcement that the State Department has decided to delay a decision on this project in order to further review its potential impacts,” Sen. Bernie Sanders said in a statement, confirming an earlier report that the White House had decided to delay making a final determination. Secretary of State Hillary Clinton was expected to speak about the decision later Thursday.

The complex solution had stemmed from two unpalatable options. Obama could have approved the construction of the pipeline—an economic boon and a substantial move toward energy security and stability. Or he could have called off the project entirely to appease the demands of environmentalists, incensed that the U.S. would encourage even more large-scale fossil-fuel production and the spewing of more greenhouse gases into the atmosphere.

“There’s really no reason why that pipeline should not be approved,” said Jack Gerard, president of API, said in response to the raucous White House protests. API and other energy groups estimated that the project would create 1 million new jobs in the next seven years and bring in $127 billion in revenue without raising any taxes. Other proponents noted that were the U.S. to withdraw, the Canadians would still produce the oil and just sell it to Asian countries, including China, which has laxer environmental regulations, resulting in a situation that could be even worse for the planet.

Environmentalists pointed out that the jobs number had been wildly inflated and have even alleged corruption in how the State Department handled the pipeline’s initial application. Responding to complaints, the inspector general at the department recommended that the decision—initially expected at the end of 2011—be delayed until a full investigation could be completed.

Doing so allows the administration to delay a final approval for as much as a year, staving off a lose-lose decision certain to be politically unpopular.

The environmental community had also appealed to Obama on political grounds, applying pressure on a 2008 campaign promise he made to reduce fossil fuels and expand renewable energy. "If the U.S. government goes ahead and makes it easier to develop [the pipeline], then there is no credible way to insist that they're working hard on climate change," Bill McKibben, the lead protester and organizer, said at Sunday’s protest. The demonstrations were designed to threaten a lack of support for Obama's reelection bid next year.

On the defensive, the White House had maintained that Obama is focused on jobs and has believed there’s a way to build the pipeline and scrupulously protect the environment at the same time. “He doesn’t see it as an either/or,” one official, speaking under the usual rules of anonymity, told The Daily Beast.

Obama even personally tried to stake the middle ground. "We need to encourage domestic oil and natural-gas production, and we need to make sure that we have energy security and aren’t just relying on Middle East sources," he told an interviewer in Omaha last week. "But there’s a way of doing that and still making sure that the health and safety of the American people and folks in Nebraska are protected, and that’s how I’ll be measuring these recommendations when they come to me."

The administration is keen to point out Obama’s other environmental accomplishments, which haven’t gotten the attention the president’s aides would like. The Recovery Act funded considerable leaps in renewable energy and efficiency research. A mandate on fuel standards will nearly double mileage efficiency by 2025, in turn reducing fossil-fuel consumption. And the percentage of oil the U.S. imports has dropped sharply—from about 60 percent in 2005 to 48 percent now—mostly because of the recession, but also because of expanded exploration and production in places like the Gulf.

The extension of the review is expected to take 12 to 18 months. If it stays on schedule, Obama will make a final decision, conveniently, just weeks after the 2012 election.