Canada has staked its future on the oil sands. In November, Report on Business magazine together with Thomson Reuters examine what that means both at home and abroad. Read more from the issue at tgam.ca/oil.
Gary Doer has a front-row seat to political gridlock. From his top-floor office along Pennsylvania Avenue, Canada's ambassador to the United States can gaze down on courthouses, government agencies and the majestic Capitol complex, which dominates the view to the east.
In the past four years, productive activity in many of these buildings has slowed to a crawl. A bitterly divided Congress has punted on taxes, trade and other matters and allowed government funding to run out last fall. The world's most powerful military has struggled to respond to new threats in the Middle East while President Barack Obama has watched his gun-control and immigration reform efforts grind to a halt.
Then, of course, there's Keystone XL. Because the $5.4-billion pipeline (all currency in U.S. dollars) would cross an international border on its way from the oil sands of Alberta to the refineries of Texas, the State Department has to determine whether its construction would serve the national interest. Pipeline projects typically take two to three years to clear regulatory hurdles. TransCanada, Keystone's owners, have been waiting for six years.
It's Doer's job as a diplomat not to get ruffled. With his wavy silver hair and pinstripe suit, the former NDP premier of Manitoba projects the confident air of a man who spends his days managing relations between two close allies. Still, it's impossible not to detect a hint of irritation in his voice as he talks about the U.S. environmental groups that have turned the pipeline into a high-profile symbol of global warming. "This is an easy item to raise money on: 'You say no to the pipeline, you've solved climate change.' It's a pretty good bumper sticker, but it's not science," Doer says.
Environmentalists say they are only trying to discourage the development of an especially dirty form of oil extraction. But they agree that Keystone has served as an important symbol in their fight to wean the world's largest economy from fossil fuels that contribute to climate change. Greenhouse gases may be invisible, but Keystone yields powerful visuals: despoiled forest, oozing lakes of spilled oil, pristine prairie habitat along the proposed route.
Since TransCanada filed its application with the State Department in September, 2008, the project has morphed into one of those hot-button issues, like abortion or gun control, that provide steady employment for Washington's army of lobbyists and spin doctors. Environmental groups have staged protests in front of the White House, while business groups and construction unions have blanketed Capitol Hill with papers arguing that the pipeline would boost employment by anywhere from a mere 35 jobs to 500,000 jobs. Well over 100 organizations, from the American Jewish Committee to the League of Women Voters, have lobbied on the issue. The State Department has received 2.5 million comments on the topic.
Keystone had the misfortune to come along as U.S. politics was entering a period of deep polarization. As recently as 2008, Republican John McCain campaigned for president on a promise to scale back carbon emissions; now, few members of his party are even willing to say that human activity is contributing to climate change. Democrats have been tugged in opposite directions by labour unions that see the pipeline as a job creator and environmentalists who view it as a chance for Obama to prove his green bona fides. "It's obviously become a signal of whether the administration is serious about climate change," Democrat Sheldon Whitehouse, a leading environmentalist in the Senate, said this spring.
The State Department has given Keystone backers plenty to cheer about. It has concluded that the pipeline might encourage oil sands development but wouldn't meaningfully affect climate change. Transporting the oil by other methods, such as rail, would lead to more accidents and higher greenhouse gas emissions, the department concluded.
The delay on Keystone hasn't shut down the oil sands, as environmentalists had hoped. But there is evidence that it has hampered development: The State Department estimated last year that 200,000 barrels per day of oil sands crude would travel by rail to U.S. refineries in Texas by December; by June of this year, traffic hadn't exceeded a quarter of that level.
Few observers were surprised when Obama's administration announced in April that it would postpone a final decision until a dispute in Nebraska plays out, well after this year's congressional elections in November.
Since then, the battle has shifted outside of Washington.
On Sept. 5, the Nebraska Supreme Court began hearing a challenge brought by environmentalists and landowners arguing that the state legislature overstepped its authority when it approved a route for the pipeline in 2012. A ruling isn't expected until early next year.
Rocker Neil Young and country icon Willie Nelson staged an anti-Keystone concert in a Nebraska cornfield on Sept. 27. Advocates convened the "largest climate march in history" in New York and other cities on Sept. 21.
In South Portland, Maine, the city council voted in July to prohibit a pipeline owner from exporting oil sands crude through the second-largest terminal on the East Coast of the United States. The pipeline currently carries oil in the other direction, from South Portland to Montreal, but green groups worry it could be reversed. They are also trying to block a similar project in Washington state.
From coast to coast, green groups are squaring off against business interests in the dozen or so elections that will determine whether the Democrats retain control of the Senate in November. For Obama's allies, the Senate is an important firewall against the Republican-controlled House of Representatives, which has tried repeatedly to scale back Obama's environmental efforts.
After years of being outspent by the oil and gas industry, environmentalists have vowed to make climate change a top issue for voters in this election. San Francisco billionaire Tom Steyer, a fierce Keystone opponent, has spent at least $26-million so far to back climate-friendly candidates.
Surprisingly, Keystone doesn't seem to be playing a prominent role in these campaigns; experts who monitor political advertising say the pipeline is showing up in fewer ads this year than in 2012. This may be due in part to the nature of the battleground, which is largely in conservative states. Democrats in six of the most competitive races are eager to tout their support for the pipeline; for candidates like Mary Landrieu in Louisiana, Keystone is a way to demonstrate their independence from an unpopular president.
Environmentalists also can read opinion polls, which consistently show that a majority of Americans support building the pipeline, even though they believe that humans play a role in global warming. While Keystone may be an effective way to rally the most committed activists, it could backfire in a broader political campaign. Thus environmental groups have sought to localize the impact of climate change by highlighting coastal flooding or algae blooms in the Great Lakes.
They also are defending Obama's decision this spring to slash carbon dioxide emissions from power plants, which has prompted a fierce backlash in coal-producing states like West Virginia. Mitch McConnell, the Senate Republican leader, has said he will push to repeal the power-plant rules if his party wins control of the chamber.
In theory, Republicans could force approval of Keystone if they control both chambers of Congress after November. The Republican-controlled House of Representatives has voted several times to approve Keystone, and a majority of lawmakers in the Senate, including 17 Democrats, backed the effort in a non-binding vote last year. However, Republican allies expect they will probably still fall short of the two-thirds majority needed to override an Obama veto.
With no resolution in sight, advocates in Washington have little to do except repeat their talking points and speculate about how Obama might eventually rule.
Those who think the president will greenlight the project say it will be hard to ignore the State Department's findings. Approving the pipeline also would give Obama a bargaining chip with Republicans on other matters.
Those who think Obama will reject it point to the influence of top White House aides like John Podesta and Valerie Jarrett and deep-pocketed donors like Steyer, all Keystone foes. Obama will want to burnish his green record ahead of a global climate conference at the end of 2015, they say, and he also may be reluctant to hand a victory to Prime Minister Stephen Harper, with whom he has a prickly relationship.
Doer says he doesn't want to guess about the outcome. But he points out that Obama has already taken significant steps to curb emissions, thanks to tightened standards for power plants and automobiles. Now he should keep other factors in mind, like the likelihood of an oil-train wreck, as he thinks about posterity. "He's not stopping the oil from coming, and he knows that–I heard him say that to people," Doer says. "I would argue that, God forbid, if there's ever an accident in the States, I wouldn't want that to be my legacy."
Andy Sullivan covers American politics and policy for Reuters News in Washington.