Politico.com

How Obama's waiting game killed Keystone

2015-11-07

In the summer of 2011, the <a href="https://www.politicopro.com/energy/story/2011/08/greens-protests-a-warning-to-obama-005410" target="_blank">signs outside the White House gates</a> denouncing the Keystone XL pipeline mixed with Barack Obama campaign buttons and chants of “Yes we can.”But inside, the president and his top aides were fretting about the economy, with unemployment stuck at 9 percent and gasoline topping $3.60 a gallon little more than a year before Obama had to face the voters again. And supporters of the Canada-to-Texas oil pipeline were playing the pocketbook card big time, promising it would put thousands of Americans to work, lower prices at the pump and lessen U.S. reliance on Mideast oil.Obama and his aides were skeptical of those claims, but knew they could lose the political argument if his opponents painted him as a jobs-killer. So, stuck between the demands of allies he would need for his reelection — labor unions that supported Keystone, and green groups and liberal donors who detested it — he waited.And waited some more, past 2012, past the 2014 midterms. Until Friday, when he finally rendered the verdict that the project’s supporters and foes had come to expect: He was saying no to the $8 billion, 1,179-mile pipeline.The White House said Obama’s decision was entirely based on his commitment to taking on climate change — and the decision came just weeks before he’s due to jet to Paris to try to reach a global climate agreement with leaders of nearly 200 nations. But the move also came in a world where many of Keystone’s political and economic underpinnings had collapsed: Oil prices have plummeted in the past year, while the unemployment rate fell Friday to 5 percent, the lowest since before the 2008 financial crisis. “Four years ago, anything that said ‘job creation,’ people would jump onto,” said former Obama chief of staff Bill Daley, whose one-year tenure coincided with those first massive anti-Keystone protests outside the White House. “Now it’s a very different world.“They waited long enough to where — whether intentional or not — obviously I don’t think it’s a big deal,” Daley said Friday. “Oil prices are down, unemployment’s low.”White House press secretary Josh Earnest said the decision shouldn’t have surprised anyone who understands “a basic tenet” of Obama’s presidency. “The president’s campaign slogan in 2007 and 2008 wasn’t ‘Stay the Course,’” he said. “It was ‘Change You Can Believe In.’”And one prominent Keystone opponent, climate activist billionaire Tom Steyer, said he’d been confident all along about where Obama would land. “The president, always, in his heart was here," he said.But for years, neither side was taking anything for granted. The fight over Keystone became the United States’ <a href="https://www.politicopro.com/campaigns/story/2014/05/keystone-inc-033658" target="_blank">loudest, most expensive, most politically fraught</a> environmental controversy in a generation. In the end, its fate came down to a question of power — with the greens, not the oil industry, wielding the political heft and grass-roots energy to sway Obama to their side.American Petroleum Institute President Jack Gerard, the top advocate for the normally powerful oil industry, left no doubt Friday about what he thinks went wrong. “Obama has put extreme ideology over American opportunity," he said.BIG STAKES ON BOTH SIDESA defeat for Keystone was far from the conventional wisdom four years ago in Washington, which saw the pipeline as primed for Obama’s sign-off. The president was campaigning on an “all of the above” energy platform that included a big role for fossil fuels, while Hillary Clinton’s State Department was producing one environmental study after another that concluded Keystone posed little danger. Polls showed the project had the support of more than 60 percent of Americans.Opposing it, however, was a new generation of in-your-face green activists who were re-energizing an environmental movement that had seen its agenda log-jammed in the Capitol. More than 1,200 of them were arrested in those first massive protests in 2011, and months later thousands returned to encircle the White House.Those latter protests convinced Sierra Club Executive Director Michael Brune that the environmentalists would win, he said Friday. "When we were able to turn 10,000 people out in Washington, D.C., around a single pipeline, I knew,” he said.Crucial acts in the Keystone passion play also took place far from the Beltway — in the Sandhills, legislative halls and courtrooms of Nebraska, and in the strip-mined oil sands of Alberta, Canada. Steyer and other well-heeled liberal campaign contributors weighed in as well. “Over 175 significant donors to the Democratic Party have urged the president to reject this pipeline since late 2011,” political consultant Betsy Taylor, who coordinates a network of wealthy climate donors, said by email Friday.Meanwhile, Obama’s public thinking on the pipeline appeared to evolve as his political fortunes fell and rose.Former aides portrayed Obama as repulsed by the degree to which Keystone dominated the political echo chamber, a frustration he made evident Friday as he lamented the pipeline’s “overinflated role in our political discourse." Though he had privately said environmentalists were exaggerating the pipeline’s threat to the climate, he more frequently complained that Keystone’s supporters were overstating its economic bonanza — and he increasingly came to resent their attempts to force his hand. “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,” Obama said Friday as he announced his decision.At the same time, Obama repeated one of the most disputed claims that environmentalists have used to discredit the project — the argument that Keystone would simply be an export pipeline, whose oil would flow “through our heartland to ports in the Gulf of Mexico and out into the world market.” (Backers say much of the oil would instead be refined in the U.S.) Secretary of State John Kerry’s written statement announcing his decision repeated greens’ favorite description for the heavy Canadian crude: “one of the dirtiest sources of fuel on the planet.”THE BATTLE'S QUIET BEGINNINGSOn Sept. 19, 2008, a Canadian energy company little known to most Americans filed what should have been a routine permit application with the State Department.The world’s descent into financial crisis was dominating the news — Lehman Brothers had filed for bankruptcy just four days earlier. Obama was preparing for his first debate against John McCain. Even environmentalists had little reason to pay much notice to TransCanada’s project, consumed as they were by the expectation that the next president, whoever he was, would push to enact some kind of climate change legislation.But the new project was a big deal for TransCanada — and by extension the regime of Canadian Prime Minister Stephen Harper, a Conservative leader who staked his economic record on turning his nation into an “energy superpower,” fueled by an expansion of heavy oil production.Before 2008, TransCanada made most of its money from natural gas, with a smaller share from green-energy sources like solar and wind. But that year, it unveiled an oil pipeline called Keystone, which began shipping up to 590,000 barrels of crude a day from Alberta to the Midwest in 2010. Now it was seeking to expand its pipeline network to the Gulf Coast — a venture it christened Keystone XL. This oil would come from bitumen, a heavy hydrocarbon mined or steamed from deep underground the boreal forests of western Canada in an energy-gulping extraction process that makes it even more reviled by environmentalists than conventional fuel. The thick, tarry Alberta crude gives Canada the world’s third-largest oil reserves, behind Saudi Arabia and Venezuela.With Venezuela and Mexico facing grim futures in the U.S. market, thanks to political and financial struggles, the company expected the United States to welcome the chance to import oil from its stable, friendly northern neighbor for decades to come. Meanwhile, studies estimated that building the pipeline would create several thousand spin-off jobs in construction and other industries, welcome news to Democratic-leaning labor unions, and it would help shore up the reelection hopes of Democratic lawmakers from oil- and gas-heavy states, including Louisiana Sen. Mary Landrieu. Besides, Keystone would hardly be the first oil pipeline that would cross the U.S.-Canadian border.“We’re a smallish Canadian company that builds infrastructure — why would we think any of our products that we’ve built many, many times over the decades would become a point in a presidential debate?” asked TransCanada spokesman James Millar. “I don’t think any of us could have predicted that.”But some people would soon take notice of TransCanada’s project. They included U.S. environmental activists whose hopes of getting Congress to pass a massive climate bill ran aground when the Democrat-controlled Senate failed to pass cap and trade in 2010.Bruised greens were eager to regain their footing. Keystone XL became their North Star.One of those greens was Bill McKibben, a bespectacled Middlebury College scholar from Vermont — and neighbor of independent Sen. Bernie Sanders — who in 2007 founded a climate activist group called 350.org with social-media-savvy former students. (The group’s name comes from the carbon dioxide level in the atmosphere that scientists say would begin to trigger catastrophic climate change.) He seized on the pipeline issue in the summer of 2011, after NASA climatologist turned activist James Hansen published a warning that tapping Canada’s oil sands would be “essentially game over” for the global warming fight.So McKibben and his supporters began what seemed to many at the time as a doomed-to-fail protest movement, more like a quixotic throwback to 1970s-era eco-activism than the sophisticated backroom lobbying campaign that the major environmental groups had waged on behalf of cap and trade. The smart money inside the Beltway saw Keystone as a slam-dunk, probably by the end of 2011.Clinton, whose department would need to sign off on the project, signaled as much in a 2010 appearance in San Francisco where she said the administration was <a href="http://www.politico.com/story/2014/05/clinton-keystone-and-2016-107047" target="_blank">“inclined”</a> to green-light it.“We’re either going to be dependent on dirty oil from the Gulf or dirty oil from Canada … until we can get our act together as a country and figure out that clean, renewable energy is in both our economic interests and the interests of our planet,” Clinton said in her off-the-cuff remarks to the Commonwealth Club of San Francisco.But fighting against a pipeline offered a purity that the Capitol Hill haggling had lacked. Obama had a simple choice: yes or no.The anti-Keystone campaign relied on old-fashioned civil disobedience and some Hollywood star power — among the 1,200-plus activists arrested in a weeks-long sit-in outside the White House was actress Darryl Hannah. The demonstrators were undeterred by a night in jail, and undaunted when, in the middle of their sit-in, the State Department released an environmental study that found no major risks to granting TransCanada's permit.They even took inspiration from unexpected sources, chuckling for years after a 2011 National Journal poll found more than nine in 10 “insiders” predicting the pipeline would proceed.Months later, 350.org and Washington green groups summoned thousands of demonstrators to form a human chain around the White House, hoping that would have an impact on Obama’s thinking. Later protests saw arrests of eco-leaders like Brune, a former rainforest activist who brought a more in-your-face style of protesting to the 120-year-old Sierra Club. FUROR IN NEBRASKAMeanwhile, another anti-Keystone force was stirring more than 1,300 miles from Washington: In Nebraska, red-state ranchers and native Americans worried that leaks from Keystone could foul their soil and their biggest water source, the vast but shallow Ogallala Aquifer. Their case rested chiefly on the pipeline’s proposed route through remote northern counties where endangered whooping cranes cruise among piles of soil that give the region the moniker Sandhills.The Sandhills, covering an estimated third or more of Nebraska, overlie the eight-state Ogallala region and include prime agricultural land in the Cornhusker State. Rural residents worried about disruptions the pipeline's construction would cause, as well as contamination if the pipeline leaks.Nebraska has a surprisingly strong populist vein running through its deep-red political system. The state’s one-house, nonpartisan legislature meets in a Capitol building inscribed with an overt call to grass-roots engagement: “The salvation of the state is watchfulness in the citizen.”Still, few players in the Keystone debate expected the debate to be swayed by a handful of heartland landowners, few of whom considered themselves environmentalists when the pipeline was first proposed. But the landowners started off suspicious of TransCanada's tactics in wooing local support, wariness that hardened into distrust as the company prepared to condemn land for the pipeline if necessary. As the years passed, some of Keystone’s conservative Nebraskan critics even grew more open to the climate cause.The landowners’ activism still needed a flint to spark. That’s where Jane Kleeb came in.Kleeb, a 42-year-old former Democratic organizer and MTV correspondent, attended her first public meeting on Keystone in May 2010. She came at the request of a National Wildlife Federation organizer who thought she could take on the obscure pipeline fight through her liberal-leaning nonprofit, Bold Nebraska.Kleeb and her rancher allies did that and more, lobbying for state legislators to take action on the rules for deciding where pipelines can run. The opponents also filed challenges in state court that managed to gum up the project for years. They even swayed Nebraska’s Republican then-governor, Dave Heineman, who had publicly criticized the pipeline’s proposed route for crossing the beloved Sandhills.Kleeb and her grass-roots cavalry set to work in 2010 and 2011, forcing Heineman to schedule a special state legislative session aimed at prodding TransCanada to accept a new route and crafting a new pipeline-siting bill. Heineman approved a deal that angered Kleeb and the ranchers, one that set new limits on future pipeline routes but allowed TransCanada to change Keystone’s path on its own, keeping the project moving.Still, the opponents’ work paid off in Washington: In light of the wrangling in Nebraska, the State Department announced in mid-November 2011 that it was postponing its decision on Keystone’s national permit. The decision would now come sometime after the 2012 elections — putting off Obama’s politically no-win decision.'POLITICS INVADED THE PROCESS'Congressional Republicans suspected that Clinton, their longtime nemesis, had dragged out the review to spare Obama. So they insisted on giving the president a deadline in exchange for approving a must-pass tax bill before the end of 2011: Within 60 days, he had to decide yes or no on Keystone.In January, Obama called the GOP’s bluff and said no.But, he said, TransCanada was welcome to reapply. He said he was rejecting the permit solely because 60 days was not long enough for State to review the new Nebraska route.“Politics invaded the process” after the route was moved, TransCanada’s Millar said, though he warned that “we’ve always looked at the political process as something we can’t control.”Republicans in Congress developed an unusually close relationship with officials of Canada’s Conservative government during the Keystone fight. Canadian Ambassador Gary Doer and then-Natural Resources Minister Joe Oliver were regular fixtures at pro-pipeline press conferences.“I will build that pipeline if I have to myself,” GOP presidential nominee Mitt Romney declared in April 2012.And Obama at times didn’t sound much different, running for reelection on an “all of the above” energy platform that included room for both green energy and fossil fuels. He gave one March 2012 speech from a TransCanada pipe storage yard near Cushing, Okla., where he boasted that “my administration has approved dozens of new oil and gas pipelines over the last three years — including one from Canada.”“Anybody who suggests that somehow we’re suppressing domestic oil production isn’t paying attention,” Obama added in front of the piles of green-tinted pipelines. He also used the speech to order speeded-up approval for Keystone’s slightly less controversial southern half, which would connect Oklahoma’s oil storage hub with Texas.But almost as soon as Obama won a second term, he shifted gears: making climate change a focus of his inauguration speech and using a June 2013 climate address at Georgetown University to lay down an ultimatum: He would approve the pipeline “only if this project does not significantly exacerbate the problem of carbon pollution.”That promise marked the beginning of the end.Canada’s uncharacteristically aggressive lobbying of the Obama administration to approve the pipeline rose as high as Harper, who declared in 2013 that his nation “won’t take no for an answer.” The Canadian government spent more than $20 million in D.C. <a href="http://www.cbc.ca/news/business/24m-ad-campaign-for-keystone-pipeline-had-little-impact-survey-1.2742079" target="_blank">promoting</a> the country’s energy industry, including placing ads in Metro stations near the White House.Meanwhile, TransCanada tried to stay above the political fray. That appeared to backfire as its fortunes were inextricably linked with Republicans’ machinations.“We lost a few of the senators we would have preferred not to lose” in the early days of the fight, said Tiernan Sittenfeld, senior vice president of the League of Conservation Voters. But after 17 Democrats joined Sen. John Hoeven (R-N.D.) and the rest of the GOP on a symbolic pro-Keystone vote during a budget debate in March 2013, there “wasn’t a whole lot of ground to take” from the anti-pipeline side, she added.Those 62 pro-Keystone senators, too little to force their will on Obama through a veto override, proved a high-water mark for bipartisan support in the Senate, as red-state Democrats who supported the pipeline lost their races and opposition hardened among more liberal Democrats. Not until after the GOP picked up six seats in the 2014 midterm election would the pipeline claim the same level of support.About a week before that symbolic budget vote, GOP senators left a meeting with Obama convinced that he had committed to making a decision on the project by the end of 2013. But Hoeven, one of the pipeline’s biggest backers, was already convinced the answer would be no.“When he didn’t make that decision” in 2013, Hoeven said in an interview, supporters concluded that Obama planned “to defeat it instead with endless delays.”Still, the tune from the State Department’s environmental reviews remained the same: Keystone would have no significant impact on the warming planet, the department declared in its second “final” study of the project in January 2014.That review was a “sham,” fumed Democratic Rep. Raul Grijalva of Arizona, as greens began poking holes in the department’s reasoning. But to Keystone and its supporters, the message Obama needed to hear was that the facts were on Keystone’s side.“No matter how much noise they make or how much misinformation they spread, the science does support this project,” TransCanada CEO Russ Girling said.Then, deliverance for the greens arrived once again from Nebraska. THE GOOD FRIDAY SURPRISEGirling was vacationing abroad with his family that April 2014 when he got a call from the State Department. Once again, the department was indefinitely delaying its decision because of events in Nebraska, this time in response to a state Supreme Court case brought by Kleeb and her allies.“There weren’t any thank-yous, I can tell you that,” Girling recalled in an interview soon after that. “And there wasn’t much discussion. It was a straightforward, one-way dialogue.”Keystone’s supporters won the Nebraska case nine months later, but another crucial U.S. election had come and gone. Pipeline supporters like Landrieu were swept away. Obama had even less political motivation to approve the pipeline.By the time 2015 dawned, veterans of the Keystone wars inside TransCanada were growing mentally prepared for the pipeline’s rejection. In the spring, the company’s home-province champions in the Conservative Party fell to a stunning defeat in Alberta’s election. October brought Harper’s ouster at the hands of young Liberal leader Justin Trudeau.The company tried one final gambit this week, asking the State Department for a delay that would have left the decision in the hands of the next president. Keystone’s only hope was that that president would be a Republican.But this time, Obama was in no mood to wait. Kerry’s signature on the official recommendation to nix Keystone came Tuesday, hours after TransCanada’s last-ditch salvage attempt. And on Friday, the president delivered the final blow.Millar, the pipeline company’s veteran spokesman, warned greens that Keystone’s defeat will prove a “Pyrrhic victory” — the world’s appetite for oil isn’t going away, no matter the markets’ current doldrums.“People have made Keystone into, ‘If we just stop it, we’ll be fine and our future will be sunshine and roses,'” Millar said. “Well, that’s not realistic.”But foes like McKibben took exactly that message from their victory. The climate activist, who became the unofficial godfather of the anti-Keystone movement, credited its David-and-Goliath spirit with invigorating his personal belief that greens can topple Big Oil.“It’s taught me not to be as defeatist in the face of the richest industry on Earth as I think I was,” he said.Andrew Restuccia, Darren Goode and Nick Juliano contributed to this report.