The Cable

Citing Climate Change, Obama Shoots Down Keystone at Last

Just weeks ahead of the big Paris climate summit, the Obama administration put paid to a 7-year saga by rejecting the controversial pipeline from Canada.

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After more than seven years of deliberation, President Barack Obama on Friday finally killed the proposed cross-border Keystone XL pipeline, calling it incompatible with U.S. plans to double down on the fight against climate change.

The State Department, which had the final word on the project to carry sludgy oil from Canada to the U.S. Gulf Coast, determined Friday morning that Keystone “would not serve the national interest,” Obama announced at a hastily called White House press conference. “I agree with that decision.”

The pipeline saga had become the wishbone in a political battle between the oil industry and environmentalists, as well as between the White House and Republicans in Congress and on the presidential campaign trail. But after years of stalled decisions, judicial battles, and internal administration squabbling, Obama opted to nix Keystone just ahead of a big U.N. climate change summit in Paris, where the president hopes to propel the United States to a leading role among countries battling to curb emissions of the greenhouse gases that cause global warming.

“Frankly, approving this project would have undercut that global leadership,” he said. “Ultimately, if we’re going to prevent large parts of this Earth from becoming not only inhospitable but uninhabitable in our lifetimes, we’re going to have to keep some fossil fuels in the ground rather than burn them.”

Secretary of State John Kerry explained that he decided to reject the pipeline because it would do little to advance U.S. energy security while incurring environmental risks. But he said the “critical factor” in his decision was that Keystone would “significantly undermine our ability to continue leading the world in combating climate change.”

With an eye on that lower-carbon future, the White House separately on Friday announced a slate of new measures to boost nuclear energy in the United States, including expanding federal loan guarantees for more kinds of nuclear reactors and trying to jump-start research and development of a new generation of nuclear technologies.

TransCanada, the Canadian firm seeking to build the pipeline — and which just this week had asked the Obama administration to pause its review — said it was “disappointed” in the decision.

“Today, misplaced symbolism was chosen over merit and science — rhetoric won out over reason,” TransCanada President and CEO Russ Girling said in a statement. The company pointed to numerous State Department studies that found the project would have minimal environmental impact.

The move to finally drive a stake through Keystone’s heart, long awaited by environmental activists who heartily mobilized for both of Obama’s election victories and long feared by industry advocates leery of the president’s push to transition away from fossil fuels toward cleaner energy, drew predictable responses from both camps.

Environmentalists cheered what they saw as a vindication of years of activism and protest, and applauded the move’s likely warm reception in Paris. “If you’re a fossil fuel dinosaur, the meteor is coming,” said Greenpeace Executive Director Annie Leonard in a statement.

Conservative lawmakers, meanwhile, decried what they described as the president’s knee-jerk environmentalism. “It is a triumph of fringe politics over sound policy,” Senate Energy Chair Lisa Murkowski (R-Alaska) said in a statement. Jack Gerard, head of the American Petroleum Institute, the oil-and-gas lobby, called the move “politics at its worst.”

But as he has repeatedly done during his two-term deliberation over the 1,200-mile pipeline, Obama sought to underscore that Keystone was neither an economic panacea nor an environmental disaster.

“It became a symbol, too often used as a campaign cudgel by both parties rather than a serious policy matter,” he said. “All of this obscured the fact that this pipeline would neither be a silver bullet for the economy, as was promised by some, nor the express lane to climate disaster, proclaimed by others.”

For Obama, the stars have lately aligned to make rejecting the project easier. Leading Democratic candidates for president, such as Hillary Clinton, have recently come out against Keystone, offering him political cover. And Canada’s new Liberal government, while supportive of the pipeline, has quickly moved it away from the center of bilateral relations with the United States.

New Canadian Prime Minister Justin Trudeau said in a statement, “We are disappointed by the decision,” but added: “The Canada-U.S. relationship is much bigger than any one project.”

Perhaps more importantly, the U.S. energy market itself has changed dramatically since September 2008, when TransCanada first proposed linking Alberta’s oil sands patch with Gulf Coast refineries. U.S. oil production has soared, making imports — even from Canada — less necessary. U.S. refiners are using more local crude, rather than relying on heavy blends from Canada and elsewhere. And railroads have in the space of a few years become hugely important in shipping crude around the United States and from Canada across the border, making pipelines less urgent.

TransCanada, which said it is “reviewing” the rejection and its rationale, could always re-propose the project depending on the outcome of next year’s U.S. presidential election; Republican candidates have long supported what they see as a job-creation machine and a way to reduce reliance on imported energy from places like Venezuela and Saudi Arabia.

But the international context has shifted under TransCanada’s feet, too. For years, the company and former Canadian Prime Minister Stephen Harper pointed to China as a potential alternative buyer of Canadian oil if the Obama administration rejected the pipeline. Senate Environment Chair Jim Inhofe (R-Okla.) warned Friday that Obama’s rejection would open the door for Chinese purchases of Canadian oil.

However, China appears to be slaking its once insatiable thirst for oil as it faces years of slower economic growth and a conscious decision to make its economy cleaner. And in a world awash with cheap oil, there are few obvious alternative markets for the thick crude steamed out of the ground in Canada’s landlocked Western provinces.

Ultimately, the biggest loser from the Keystone rejection may not be TransCanada, American workers, or bilateral ties, but rather the already beleaguered Canadian oil sands sector.

Photo credit: PETE SOUZA/White House/Getty

Keith Johnson is Foreign Policy’s global geoeconomics correspondent. @KFJ_FP

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