Obama Keystone Decision Caught in Undertow of Canadian Election

Canada’s election in October has become yet another event shaping the seven-year saga of the Keystone XL pipeline, one that may lead the Obama administration to delay announcing a decision to approve or reject the $8 billion project.

Putting a decision on hold would give the U.S. and Canada a chance to reset a strained relationship, said David Wilkins, a former U.S. ambassador to Canada. On the other hand, a decision in the midst of Canada’s 11-week election campaign could be seen as political interference.

“If the decision is made now, one would have to wonder why it would come during a declared election campaign for prime minister,” Wilkins said. As it is, the delayed decision “has had a negative effect on the relationship,” said Wilkins. “Canadians think they deserve to be treated better.”

“Canadians think they deserve to be treated better.”

TransCanada Corp.’s pipeline linking Alberta’s oil fields to U.S. refineries in the Gulf of Mexico has become a potent symbol in environmentalists’ fight against fossil fuels. It also has become a proxy for a U.S.-Canada relationship that’s grown tense.

Prime Minister Stephen Harper of the Conservative Party has championed the pipeline proposed by TransCanada of Alberta, where Harper began his political career. But views in Canada are hardly monolithic.

Harper’s main challenger in the Oct. 19 election, New Democratic Party leader Thomas Mulcair, has spoken out against Keystone XL. Justin Trudeau of the Liberal Party supports the pipeline but criticizes Harper for letting the issue damage relations with President Barack Obama. The U.S. president has dismissed the benefits to U.S. consumers cited by pipeline advocates.

‘Big Reverberations’

Senator John Hoeven, a North Dakota Republican, has said he’s heard from credible sources he didn’t identify that Obama will reject Keystone XL during this month’s congressional recess. Doing so, however, would raise a divisive issue just as Obama is focusing on trying to win congressional support for the nuclear deal with Iran.

In Canadian politics, Keystone XL is “something that all of our political candidates are talking about; it’s something that has really been dramatized for the last number of years, and so a decision from the U.S. at a key moment in the election would have very big reverberations,” said Erin Flanagan, an analyst at the Toronto branch of the Pembina Institute, a national energy policy group.

Trade Issues

In addition to considering its political impact, some U.S. officials acknowledge, Obama’s decision could affect the tenor of discussions on issues from Canada’s position on the Trans-Pacific Partnership trade agreement to the Canadian role in the fights against Islamic State and Russian-backed Ukrainian separatists.

Canada is the U.S.’s largest trading partner, sharing $2 billion a day in trade, and the two neighbors cooperate so closely in so many areas that government bureaucrats deal directly with one another.

“Very few issues are elevated to the level of foreign policy or become an issue that rises to public attention,” said Laura Dawson, director of the Canada Institute at the Wilson Center, a policy group in Washington.

Keystone XL, though, has become, “the big gorilla” in the relationship, said Wilkins, a lawyer who has represented the Alberta government and the Canadian Association of Petroleum Producers. Tensions over it have been compounded by recent disagreements about country of origin food labeling, funding for a bridge connecting Windsor, Ontario, and Detroit, and a nine-month delay posting a new U.S. ambassador in Ottawa.

‘Bigger Issue’

Keystone XL “became a much bigger issue than one expected,” driven in part by “pronouncements by the prime minister himself about the importance of the pipeline,” said Deanna Horton, a visiting senior fellow at the University of Toronto and a former Canadian diplomat.

TransCanada applied for a presidential permit in 2008 to build the 1,700-mile (2,700-kilometer) crude oil pipeline. It was rejected in February 2012, and the Calgary-based company applied again in May of that year. The State Department reviews the applications because the pipeline would cross an international border. The secretary of state makes a recommendation to the president, whose final decision rests on whether the project is in the national interest.

U.S. Ambassador Bruce Heyman has gotten the cold shoulder from Harper’s government, with Conservative Party ministers refusing to see him, the Globe and Mail has reported. Stephen Posivak, a spokesman at the U.S. embassy in Ottawa, declined to comment on the report.

Repair Relations

Now the Canadian election may offer an opportunity to repair relations, regardless of whether Harper’s Conservatives or the opposition, divided between Mulcair’s front-running New Democratic Party and the Liberal Party, wins the most seats in Parliament.

“Whoever wins, this will help set the reset button,” Dawson of the Wilson Center said. “If it’s Harper, this will give him an opportunity to step back from some of the rhetoric,” and it would give the NDP and Liberal parties “a clean slate on which to draw.”

An NDP win would give Obama a chance to negotiate with Mulcair for a more ambitious Canadian environmental policy, which would fit with both the NDP platform and Obama’s agenda.

Climate Change

Canada has no federal regulations on greenhouse gas emissions from the Alberta tar sands where Keystone XL would start. Fuels derived from tar sands produce more greenhouse gas than conventional forms of gasoline and heating oil.

According to the Pembina Institute, Alberta emits more greenhouse gases than Ontario and Quebec combined, which house 60 percent of Canada’s population.

“Allowing the Keystone pipeline to be built requires a finding that doing so would be in our nation’s interest,” Obama said at Georgetown University in 2013. “And our national interest will be served only if this project does not significantly exacerbate the problem of carbon pollution.”

Obama declared this month that climate change is “one of the key challenges of our lifetimes,” one that “no single country” can tackle.

The State Department, though, concluded in an environmental report last year that Keystone XL was unlikely to contribute to greenhouse-gas emissions in part because the oil sands would be developed and the oil transported even without it.