Obama rejects Keystone pipeline, strengthening his hand at global climate talks

Bloomberg, AFP-JIJI

President Barack Obama has rejected the Keystone XL pipeline, capping a series of executive actions he has taken that will strengthen his hand later this month as he pursues a global deal to cut emissions of greenhouse gases.

The impact of the announcement was largely symbolic in both economic and environmental terms, as Obama himself acknowledged. Instead, he portrayed it as a way to provide the U.S. maximum leverage in the climate talks.

“America is now a global leader when it comes to taking serious action to fight climate change,” Obama said Friday at the White House. “And frankly, approving this project would have undercut that global leadership.”

The proposed cross-border pipeline would have carried crude from Canadian oil sands in Alberta to U.S. refineries near the Gulf of Mexico.

Alberta’s tar sands are considered to have the “dirtiest” oil on the planet. Tar-sand oil must be dug up and melted with hot water before it can be refined.

This means fossil fuels need to be burned as part of the extraction process, which further contributes to climate change. It also results in huge lakes of polluted water and the strip-mining of vast tracts of pristine boreal forests.

Environmentalists also argue that tar-sand oil contains a harmful and corrosive component — bitumen — that makes pipeline ruptures or leaks more likely and carries greater health and safety risks.

Obama has given himself the job of cajoling commitments from other countries at the United Nations-sponsored talks in Paris for a deal that would for the first time bind all nations to limit their emissions of greenhouse gases. The rejection of Keystone adds one more notch to his climate record, enhancing his authority in pressuring fellow world leaders.

Under the framework being pursued, countries would spell out their own actions to reduce emissions, rather than set them through negotiations. So far more than 150 nations have announced their intentions, including the three biggest emitters: China, the U.S. and India. The U.S. never ratified the 1997 Kyoto Protocol on climate change, citing the absence of targets for developing nations that are big emitters.

The Keystone decision will give Obama and U.S. negotiators “more wind at their back” at the climate talks, said Alden Meyer, director of strategy and policy at the Union of Concerned Scientists in Washington.

The pipeline rejection, after seven years of review by the government, follows regulations the Obama administration issued in August mandating a 32 percent cut in emissions from power plants. The initiative will be one of the most complex undertakings in the Environmental Protection Agency’s history and will force broad changes in the way electricity is produced and delivered in the U.S.

One year ago, Obama announced a surprise agreement with China that commits the U.S. to cutting emissions by 26 to 28 percent by 2025 and sets targets for China’s carbon emissions for the first time. The EPA also has proposed a rule to curb methane leaks from oil and gas drilling, moved to cut the use of hydrofluorocarbons as a refrigerant and set tougher fuel-efficiency standards for cars and trucks. The Department of Energy is requiring improved efficiency for everything from microwaves to walk-in coolers.

That is a sharp contrast from Obama’s position entering the last major international effort to reach an agreement on climate change, at a U.N. conference in Copenhagen in 2009. Though Obama had proposed a U.S. cap-and-trade plan to limit greenhouse-gas emissions, the Senate never voted on it.

“Going into Copenhagen, there was no plan in the U.S. to systematically reduce emissions,” said Jennifer Morgan, director of the climate program at World Resources Institute. “Now you have a credible plan that puts the U.S. in a whole different light. Keystone is the capstone of that.”

Secretary of State John Kerry delivered the State Department’s recommendation to block the TransCanada Corp. project during a White House meeting Friday morning. Obama followed up with an announcement from the Roosevelt Room that ended seven years of debate over an infrastructure project that swelled into one of the most contentious environmental issues of his presidency.

The lengthy review by the State Department concluded that the pipeline “would not serve the national interest of the United States,” Obama said. “I agree with that decision.”

Obama said the project wouldn’t make a meaningful contribution to the U.S. economy, lower gasoline prices or enhance the nation’s energy security.

Keystone has occupied “an over-inflated role in our political discourse,” he said. “And 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.”

White House press secretary Josh Earnest said later that had the project been allowed to proceed, its most significant impact would be “undermining the credibility of the president” on climate change.

The rejection is a victory for environmental advocates, who sought to couple the 1,179-mile (1,897-kilometer) pipeline with Obama’s campaign to combat global warming. Environmental activist Bill McKibben, an early organizer of opposition to the pipeline, said the decision gives Obama “new stature as an environmental leader, and it eloquently confirms the five years and millions of hours of work that people of every kind put into this fight.”

McKibben, co-founder of the environmental group 350.org, said environmental activists “are well aware that the next president could undo all this, but this is a day of celebration.”

Republican presidential candidates criticized the decision before it had even been formally announced. “The Obama Admin’s politically motivated rejection of the Keystone XL Pipeline is a self-inflicted attack on the U.S. economy and jobs,” former Florida Gov. Jeb Bush tweeted. House Speaker Paul Ryan said that by scuttling the pipeline, Obama is “rejecting tens of thousands of good-paying jobs.”

According to the State Department, the construction of the pipeline would have supported about 42,000 jobs, with about 3,900 of them directly tied to building Keystone. Once up and running, pipeline operations would have required about 50 jobs.

The October employment report released Friday, which showed the U.S. gaining 271,000 jobs during the month and the jobless rate falling to a seven-year low of 5 percent, provided Obama with additional ammunition to rebut the arguments of pipeline proponents.

“The pipeline would not have made a serious impact on those numbers and on the American people’s prospects for the future,” he said, adding that the Republican-controlled Congress should focus on broader, more lasting infrastructure projects.

The Democratic presidential candidates, including front-runner Hillary Rodham Clinton and her top challenger, Vermont Sen. Bernie Sanders, both opposed approving the pipeline.

TransCanada said it will review all of its options in light of the permit denial. Those alternatives include filing a new application to receive a presidential permit for a cross-border crude oil pipeline from Canada to the U.S. because the industry still supports the project, Chief Executive Officer Russ Girling said in a statement following the rejection.

Obama’s position has been bolstered by shifting voter attitudes regarding climate change. Two-thirds of Americans said the climate is changing in an October poll released Thursday by Yale University’s Program on Climate Change Communication. Fifty-nine percent of Americans said they are worried about global warming, up from 51 percent in March.

The proposed cross-border pipeline spawned a multimillion-dollar lobbying campaign by both sides. The drawn-out process also soured diplomatic relations between Conservative Prime Minister Stephen Harper and the Obama administration. The incoming Liberal government, led by Justin Trudeau, is much less wedded to the project and to Alberta oil more generally. Obama said he spoke to Trudeau before his announcement.

“We are disappointed by the decision but respect the right of the United States to make the decision,” Trudeau said in an e-mailed statement. “The Canada-U.S. relationship is much bigger than any one project, and I look forward to a fresh start with President Obama to strengthen our remarkable ties in a spirit of friendship and cooperation.”

TransCanada asked the State Department to put its review process on hold in a letter Monday, saying there was no need for the review to continue while it seeks approval from Nebraska authorities for the pipeline’s route through that state. The request was seen by some analysts as an attempt to circumvent Obama’s expected rejection of the pipeline by delaying a final decision until his successor takes office in 2017.

“At the end of the day it doesn’t really matter what Obama does,” said John Kim, a fund manager at Aston Hill Financial in Toronto. His firm manages about C$3 billion, including TransCanada shares. He plans to buy more shares going forward. “The new president, especially if they are Republican, could come in and reverse this decision. Most Republicans were for it so why wouldn’t they?”