GOP’s Keystone XL Gambit Leaves TransCanada, Other Oil Allies in the Lurch

Republicans' efforts to make the pipeline a top campaign issue against Obama could create new problems for TransCanada and the oil industry.

House Speaker John Boehner (R-Ohio), center, with fellow House Republicans
House Speaker John Boehner (R-Ohio), center, with fellow House GOP members. House Republicans have vowed to keep the Keystone XL pipeline issue on the front burner for the next year. Credit: SpeakerBoehner, flickr

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WASHINGTON—Now that President Obama has at least temporarily quashed the Keystone XL pipeline, TransCanada executives have to be wondering if they really need enemies when their supposed friends, the House Republicans, have placed them in such a financial and strategic bind.

Obama’s Wednesday ruling not only means the Calgary-based company will have to reapply for a permit to construct the $7 billion hotly contested Keystone XL. But it has also sent rumblings of doubt through the entire oil industry and into boardrooms of other Canadian energy companies that are worried about progress on their own separate oil sands pipelines.

TransCanada opted not to discuss the Republicans’ decision to force the president into giving its project a quick “yes” or “no.”

“We are not going to comment on the politics of the Keystone XL application,” TransCanada spokesman Shawn Howard said in an e-mail to InsideClimate News. “That is better left to others.”

Fewer than 24 hours after Obama’s announcement, TransCanada’s chief executive officer Russ Girling assured investors that the permit denial—which he hopes will be reversed next year—should not cause the $60 billion company to fall behind its energy infrastructure competitors.

“Keystone is an important part of our business, but we’re a large business,” he said Thursday at a conference in Whistler, British Columbia, according to Bloomberg Businessweek. “We’ve got a lot of things going on right now. Thankfully, all of those other projects are not attracting the same level of attention as Keystone is right now. We’d never get anything done if that were the case.”

Shortly after Obama’s Wednesday announcement, the value of TransCanada stock shares dropped by as much as 4.8 percent, then rebounded after company officials said they would reapply for a permit. It climbed again Monday, trading at $41.83 per share in New York.

While TransCanada is trying to appear calm, its competitors admit to being flustered.

Enbridge chief executive officer Pat Daniel said he feared that Obama’s decision could fire up anti-pipeline groups to apply more pressure on the controversial $5.45 billion Northern Gateway pipeline his Calgary-based company is trying to construct.

It would transport heavy crude from Alberta’s oil sands mines across the wilds of northern British Columbia to a deepwater port along the Pacific Coast for export to the United States and Asia. Regulatory hearings scheduled for Alberta and British Columbia began earlier this month.

“To have [Keystone XL] turned down for the reasons being indicated is horrible for our industry and it’s a horrible precedent,” Daniel said during an investment conference Thursday, according to Reuters. “It’s bad in terms of future approvals. It will only embolden those opposed to Gateway and other new project developments.”

House Speaker John Boehner, R-Ohio, and his fellow wheelers and dealers haven’t spoken publicly about how a political strategy that leaves the pipeline in limbo might affect TransCanada. Instead, they have zeroed in on deploying it as a campaign issue that berates Obama for rejecting the jobs and energy security they claim the Keystone XL would generate.

None of this is lost on environmentalists and other pipeline foes who clearly feel empowered by an Obama decision. They interpret the GOP’s latest move as a bullying tactic that devolved into a political blunder by sinking a Republican-favored project.

“You don’t need a Ph. D. in political science to know that industry and congressional Republicans essentially shot themselves in the foot,” Tony Iallonardo, a spokesman for the advocacy group National Wildlife Federation told InsideClimate News. “They thought they had better cards than they did and they overplayed their hand. If I were a TransCanada lobbyist, I’d be concerned about what my board of directors thinks about my performance lately.”

Reactionary Politics

David Jenkins is also critical of the GOP’s tactics. He’s the vice president for government and political affairs for the nonprofit Republicans for Environmental Protection.

Although Keystone XL isn’t a signature issue for his organization, he admits to cringing back in December when Congress insisted that Obama give a thumbs-up or thumbs-down to the 1,702-mile oil sands pipeline within 60 days. The Feb. 21 deadline was embedded into legislation that extended the payroll tax holiday and other financial boosts for millions of Americans.

“This is part of a GOP pattern of reactionary politics,” Jenkins said in an interview. “Instead of taking a more nuanced stand, they make their position the polar opposite of their opponents’ without thinking through how it could backfire.

By using the heat of the moment to score a victory, the Republicans clearly weren’t thinking about the consequences for the environment, the economy, the business community or a company such as TransCanada, he said.

“It’s political posturing instead of trying to solve problems. The Republicans who are in charge now are doing this pingpong thing where they can’t predict where the ball is going to bounce.”

What’s especially embarrassing for GOP congressional leaders, he said, is that State Department officials coordinating a Keystone XL reroute in Nebraska had made it clear in December that they couldn’t meet an arbitrary February deadline. Still, he added, Boehner and others were too bullheaded to back off.

The new pathway through the Cornhusker State will avoid the fragile Sandhills landscape and the irreplaceable Ogallala Aquifer. State Department officials estimate an environmental analysis of the relocation could be completed by early 2013.

Pressure from Nebraska landowners and environmentalists prompted Obama to announce in early November that his administration would delay a final decision on a permit until after the 2012 presidential election. TransCanada first filed for a permit in 2008.

Though Jenkins said it was hard to predict what might have happened with Keystone XL in 2013, he pointed out that the Obama administration and TransCanada appeared to be collaborating to solve the environmental and safety concerns of the pipeline.

But by viewing the project through a partisan lens, Jenkins said, Republican leaders might have given the president an edge.

“Essentially, they handed Obama a gift-wrapped excuse to deny the presidential permit and blame the GOP,” he said. “They made it easier for Obama to say no and gave Obama better talking points against the Republicans.”

More Keystone XL Bills Coming

All indications are that the GOP will continue plowing forward with a coterie of legislative initiatives to force the administration to act on the pipeline before 2013.

Boehner has raised the possibility of again wrapping action on Keystone XL into the next round of legislation to extend the payroll tax cut beyond its February expiration date. And Sen. John Hoeven, R-N.D., has introduced a bill that would give Congress sole power to green light the pipeline.  

On Wednesday, officials from the State Department and the Federal Energy Regulatory Commission have been invited to testify at an Energy and Commerce subpanel hearing.

The title of the hearing is “American Jobs Now: A Legislative Hearing on H.R. 3548, the North American Energy Access Act.” Rep. Lee Terry, R-Neb., introduced that legislation last year to shift responsibility for approving the Keystone XL project from the White House to FERC. Terry’s measure would allow pipeline construction to begin a month after the bill becomes law.

Law professor Pat Parenteau said it is amusing that the GOP is accusing the president of putting politics over jobs and energy security when a just-released Washington Post-ABC News poll shows federal legislators have a 13 percent approval rating.

“If Obama had approved Keystone XL, that would have been disappointing to [the Republicans] because they’re happy to keep pounding away,” said Parenteau, who specializes in Congress and environmental issues at the Vermont Law School. “The way they see it, this will provide a sound bite a week for the Republicans about jobs and energy security, so in that way it’s a victory for them.”

However, he pointed out that the Republicans have left an opening for candidate Obama, who was careful to explain that denying the permit was “not a judgment on the merits of the pipeline, but the arbitrary nature of a deadline that prevented the State Department from gathering the information necessary to approve the project and protect the American people.”

That frankness, Parenteau said, opens the gate for the president to craft a campaign narrative that wows his green base and won’t alienate labor unions—even though it isn’t likely to woo undecided voters. It allows Obama to focus on why energy companies shouldn’t be allowed to run roughshod over communities in the nation’s heartland.

“Basically, his message will be about responsibility and that this little Republican charade won’t keep my administration from proceeding in a professional manner when it comes to public health, safety and the environment,” the Vermont law professor concluded. “He’ll be quite eloquent. He’s really very good at that.”