The U.S. and Canada: we used to be friends

Why Barack Obama shelved the Keystone pipeline, and insulted Canada (yet again) in the process

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No one was more surprised than TransCanada PipeLines Ltd. itself by the Obama administration’s decision to impose a fresh year or more delay on a permit for the Keystone XL pipeline—TransCanada’s proposed 2,673-km project that could transport more than 700,000 barrels of crude oil from the oil sands in Alberta to refineries in Oklahoma and the Gulf Coast of Texas. It had been heavily promoted by the governments of Canada and Alberta. And after two years of studies and drafts, the U.S. State Department had issued a final environmental assessment on Aug. 26 that had turned out to be even friendlier to the pipeline than supporters had been hoping for.

Indeed, the State Department concluded that there are “no significant impacts” to the environment along the route of the pipeline. The department also concluded that the pipeline would fill a need: even under a “low demand” outlook for oil, and even if there was increased fuel efficiency and a greater use of alternative energy sources, the hunger for Canadian crude oil would continue to grow among Gulf Coast refineries because supplies from countries such as Mexico and Venezuela are declining. Alternative transportation methods, such as trucking or rail, would add more emissions and run a higher risk of accidents than a pipeline. The project would not increase greenhouse gas emissions, State reasoned, because the oil would be produced for somebody to use in any case. And State also looked at 14 alternative routes and decided that none of them was preferable to the one proposed by TransCanada.

Then, little more than two months later, on Nov. 10, the State Department abruptly balked and declared the need for an additional study—one that would take a year or more—to look at an alternative pipeline route within the state of Nebraska that would avoid the Sand Hills area. That is a region of grass-covered sand dunes that covers a quarter of the state—and also Nebraska’s Ogallala aquifer, one of America’s largest underground sources of fresh water. The study is expected to delay a permit decision, which State had said would come by the end of December, until 2013. Had the project been approved on schedule, it could have started operating by then; the delay will push final approval for the project past the presidential election.

TransCanada was stunned. “We actually found out about it after others did,” company spokesperson Shawn Howard told Maclean’s. “It was a surprise. We thought the conclusions reached in the final environmental impact statement were pretty clear.” The company believed it had picked the best route. “The biggest issue was distance. This was the shortest route through that part of the state, and as a result it had the least amount of land disturbance and affected the fewest land-owners,” he said.

So what changed?

On one level, it looked like another in a long list of Obama White House affronts to Canada. The administration inserted protectionist “Buy American” language in the President’s jobs bill in September, despite Canada’s objections to similar language in his stimulus bill two years ago. The administration also ended an exemption for Canadians from a $5.50 travel fee to help offset the costs of a trade deal with Colombia. As well, talks on a much-hyped Canada-U.S. border accord have been dragging on inconclusively. Meanwhile, the world’s largest trading relationship continues to face a bottleneck at its busiest border crossing because the state of Michigan refuses to approve construction of a new bridge—which Canada calls its No. 1 infrastructure priority.

But in Washington, the pipeline decision looked less like a reflection of the state of what Canadians consider “The Relationship” between the two neighbours and more like another case of foreign collateral damage in an internal American power struggle. In this case, it was a hard-fought battle by environmentalists to put climate change back on the agenda of a President who had promised that his election would be “the moment when the rise of the oceans began to slow and our planet began to heal,” but then failed to deliver climate-change legislation. In short, the project was a casualty of the President’s effort to win back an important part of his political base ahead of the 2012 election.

In a moment of unprecedented unity and mobilization, environmental groups followed a two-pronged approach: protesting at the White House; and targeting the President’s re-election campaign by showing up at his public appearances, at his campaign headquarters in Chicago and at campaign offices around the country. Sure, some labour unions supported the pipeline, as did business groups, but no one made the issue their top priority quite like climate-change activists.

In August, some 1,250 activists from around the country had themselves intentionally arrested protesting in front of the White House. Then, on Sept. 2, Obama dealt them another blow when he told his Environmental Protection Agency to withdraw a proposed rule to tighten air quality standards, citing the fragile economy. The rule had been opposed by industry and Republicans, who said it would cost millions of jobs.

The oil sands pipeline now became a last stand.


On Nov. 6, an estimated 12,000 people encircled the President’s residence in a human chain. “That was the biggest environmental protest at the White House I’ve ever seen in the more than 20 years that I’ve been doing this,” says Susan Casey-Lefkowitz, director of the international program at the National Resources Defense Council.

Although the environmental movement had been making its case to the administration all along, after the summer arrests, recalls Casey-Lefkowitz, they began to hear from “a new set of voices from within the administration who were taking an interest—from the State Department, the Environmental Protection Agency and the White House. It was a new level of interest. They were starting to focus on this for the first time.”

Meanwhile, another political calculation was playing out in the rural areas of Nebraska, a Republican-dominated state where landowners and ranchers carry political power, and few would be voting for Obama. The ranchers, many of whom have had the same land in their families for generations, complained about heavy-handed treatment by TransCanada, of threats of using eminent domain—the government power to force private owners to sell their land for public use—and fears about groundwater contamination in the event of a spill.

TransCanada denied accusations of bullying, but the landowners’ voices carried weight. In Nebraska’s unique political culture, with its one-house legislature with only 49 members, these Republican donors had easy access to lawmakers and the governor, says political scientist Mark Landow of the University of Nebraska at Omaha. The Republican governor, Dave Heineman, surprised many Nebraskans by coming out against the pipeline route—though he said he supports the project in principle. As for the state’s federal senators, both opposed the proposed route through the Sand Hills—and one of them, Ben Nelson, is a Democrat in a traditionally Republican seat. He is up for re-election next year, and his success could be crucial for Democratic hopes of retaining their slim majority in the U.S. Senate.

The pressure mounted until, on Oct. 24, the governor and the speaker of the legislature called for a special session to debate several bills to regulate pipelines, since Nebraska has no such state law on the books. That was a gamble: it was unclear whether any of the bills would pass. Filibusters and lawsuits were threatened. But the ploy worked. On Nov. 10, the State Department announced its delay and review. Then, on Monday, just as floor debate in the Nebraska legislature got under way, TransCanada reached a deal with Nebraska to reroute the project that included assurances from the speaker that any legislation would not be retroactively applied to the pipeline. “We stepped up and said, ‘Okay, we are in a new process now. We agree to move the route out of the Sand Hills,’ ” said Howard.

Where did the decision to delay the pipeline originate? Kerri Ann-Jones, the State Department official who announced the delay, told reporters in a conference call that the decision to extend the review was made by Deputy Secretary of State Bill Burns in response to listening to the people of Nebraska, who have no state regulatory process for influencing where the pipeline would go. “This is not a political decision,” Jones said. “The White House did not have anything to do with this decision, except we consulted with them once we were moving toward it.”

But few people in Washington believe the White House had no hand in the delay. “It’s not the State Department doing the listening—it’s the White House, it’s the President. That’s why he’s showing good leadership,” says Casey-Lefkowitz.

Supporters of the pipeline also saw election year politics. “It was a cop-out to placate the environmental base of the Democratic party,” says David Wilkins, who served as U.S. ambassador to Canada under George W. Bush. “It was a decision to push it past the election.” Others agree. “I think Canadians should view it as political,” says Chris Sands, a specialist in Canada-U.S. relations at the Hudson Institute, a Washington think tank. “Who benefits? The President’s political campaign—he needs environmental groups to be energized, and he needs them to raise money so they can donate to his campaign.”

“It’s a domestic decision made for domestic reasons,” says Paul Frazer, a former Canadian diplomat who is a consultant in Canada-U.S. relations and whose past clients include Alberta. “It doesn’t reflect on the Canada-U.S. relationship. This is silly season in Washington. There is a sizable and well-organized environmental community that has been frustrated—Keystone XL for some of them was the Battle of the Alamo.”

Yet there persists a feeling in Canada that there has been a public relations failure in selling the pipeline. Only 36 days into her premiership, Alberta’s new premier, Alison Redford, was already in Washington this week, meeting with lawmakers and administration officials. She pledged to carry on a “more sophisticated” conversation about Alberta’s energy future and environmental stewardship. But Sands notes that previous premiers and provincial envoys had long been making Alberta’s case. “The problem was not the message, it was the hearers,” he says. “The hearers kept hearing ‘oil.’ We hear ‘oil’ and we hit the barricades on whatever side of the oil debate we are on.”

Casey-Lefkowitz says that no matter what public relations efforts Canada makes—or even what substantive steps Alberta or Ottawa take to mitigate greenhouse gas emissions or develop alternative energies—the pipeline will face opposition. “Even if you wave a magic wand and the tar sands are as clean as can be, it’s still not a part of our future. What we really need is to try to stop the expansion of tar sands.”

What next? Jones said the State Department will study a new alternative route within Nebraska, and issue a supplemental environmental-impact statement. But Casey-Lefkowitz says environmentalists will press for a fresh review of the entire project that would include not only local concerns in Nebraska but the bigger question of greenhouse gas emissions. Meanwhile, Canada has already served notice that it will intensify efforts to find different markets for oil sands crude—notably China, which could be served with a new pipeline from Alberta to the West Coast.

And back in Nebraska, rerouting is unlikely to end the drama, says Landow. “If you move the pipeline to somebody else’s backyard, it’s going to cause a new set of people, a new set of landowners, a new set of state senators and a new set of activists to mobilize.”

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