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Harper optimistic Keystone pipeline will proceed after Obama leaves office

Veto supporters rally in front of the White House on the same day U.S. President Barack Obama vetoed a Republican bill approving the Keystone XL oil pipeline from Canada, in Washington, February 24, 2015. Prime Minister Stephen Harper voiced his frustration over Mr. Obama’s refusal to approve the project in an interview with Bloomberg News.

LARRY DOWNING/Reuters

Prime Minister Stephen Harper has voiced his frustration over Barack Obama's failure to approve the Keystone XL pipeline, saying the President is ignoring U.S. public opinion and the advice of his own officials.

"I think there's very peculiar politics of this particular administration" on the pipeline issue, Mr. Harper said in an interview with Bloomberg television on Wednesday. He said opinion polls consistently show Americans support the project, while the U.S. State Department has concluded it would not significantly add to global warming, a key criterion for the President.

The Prime Minister's criticism of Mr. Obama's politics was a rare comment by one national leader on the machinations of another, and Mr. Harper quickly qualified it by suggesting he did not want to interfere with an internal decision, other than stating Canada's position.

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The Harper government has lobbied aggressively for approval of TransCanada Corp.'s plan to ship oil sands crude from Alberta to the U.S. Gulf Coast, and the multiyear delay in the review process has driven a wedge between Ottawa and the Obama administration.

Mr. Harper now appears to have given up hope Mr. Obama will approve Keystone XL, but said he remains optimistic the project will proceed under a future administration.

"Notwithstanding the facts, a positive decision has not been rendered for a very long time," he said. "That's obviously not a hopeful sign."

Even as the pipeline issue roils, the U.S. administration has waged a public campaign to force Canada to open its supply-managed agricultural sectors to more competition from imports at the Trans Pacific Partnership (TPP) trade talks. On Wednesday, Mr. Harper said Canada must be part of any TPP deal, and his government will protect the dairy and poultry sectors "as best we can."

TransCanada Corp.'s pipeline plan would move 800,000 barrels a day of oil sands bitumen from Alberta to the U.S. Gulf Coast, where refiners are configured to process the heavy crude and eager for additional supply. Mr. Harper once called approval a "no-brainer" for the United States, despite the determined opposition from environmentalists. Mr. Obama said he would not approve the project if it added significantly to greenhouse gas (GHG) emissions.

"I believe that whether this project goes ahead or not under this administration, it will ultimately go ahead under a subsequent administration," the Prime Minister said on Wednesday.

Democratic presidential candidate Hillary Clinton has dodged all questions on Keystone, including one at a town hall in New Hampshire earlier this week. Ms. Clinton – who oversaw the review process as Mr. Obama's first secretary of state – said she did not want to second-guess the President on a file that she once managed, although critics suggest she is clearly trying to evade a divisive internal party debate.

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Republican presidential hopefuls have no such qualms. Former Florida governor Jeb Bush tweeted that the decision on Keystone XL is an "easy" one. Republicans in Congress accuse Mr. Obama of hamstringing Canadian oil producers while making it easier for Iran to boost production – a reference to the proposed easing of sanctions that will accompany a deal on the Iranian nuclear weapons program.

A U.S. State Department review concluded the pipeline would not affect the pace of development in the oil sands – and hence GHG emissions – because oil sands producers would find other ways to get their crude to market. But that analysis was for the price of a barrel of crude at $100 (U.S.). It concluded that, at prices below $75 a barrel, the pipeline would be more crucial for Alberta shippers, who are increasingly desperate for access to new markets.

Earlier this week, U.S. Senator John Hoeven – a North Dakota Republican – said "sources" have told him Mr. Obama will announce a decision to reject the project next month, after Congress has recessed for the summer. The White House will say only that the President will decide before he leaves office in January, 2017.

TransCanada – which has been seeking approval for the project for seven years – insists the Keystone XL pipeline would bring a secure, reliable source of imported crude into the United States – which still requires 7.5 million barrels a day of foreign oil – and that pipelines are preferable to rail transportation from an environmental and safety perspective.

"If it's not coming from Canada, it's coming from another source," TransCanada spokesman James Millar said in an interview. "It's coming from Venezuela, or Iran, or Algeria, or Nigeria." Even without Keystone XL, Canadian oil exports to the United States have grown in recent years, to nearly three million barrels a day this summer from 2.5 million a year ago.

Mr. Millar said TransCanada will await a decision before talking about what it would do if turned down. "The stated rationale for a decision would impact our way forward," he said. "Both with approval or denial, the devil is in the detail."

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Environmentalists argue the pipeline would facilitate expansion of the oil sands, one of the most emissions-intensive sources of crude in the world. As the world works to conclude an international climate-change agreement at the United Nations summit in Paris in December, the U.S. administration would be out of step if it approved Keystone XL, said Anthony Swift of the Washington-based Natural Resources Defense Council.

"It's clear the pipeline's prospects look very grim," Mr. Swift said in an interview. "There's no question at this point, the pipeline would have an impact on carbon emissions. As the U.S. looks toward Paris, Canada's lack of progress in meeting its climate targets is really front and centre."

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About the Author
Global Energy Reporter

Shawn McCarthy is an Ottawa-based, national business correspondent for The Globe and Mail, covering a global energy beat. He writes on various aspects of the international energy industry, from oil and gas production and refining, to the development of new technologies, to the business implications of climate-change regulations. More

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