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Keystone XL pipeline delayed: Does that help Obama?

The Obama administration announced Thursday that it is delaying the Keystone XL pipeline, a Canadian-backed project that promised to create thousands of American jobs, generate billions in annual state tax revenues, and increase Canadian crude oi

The Obama administration announced Thursday that it is delaying the Keystone XL pipeline, a Canadian-backed project that promised to create thousands of American jobs, generate billions in annual state tax revenues, and increase Canadian crude oil imports to America by as much as a quarter billion barrels per year.

Critics said the pipeline’s planned route from Canada to the Gulf of Mexico threatened the massive Ogallala aquifer, a vital underground source of drinking and irrigation water that stretches from South Dakota to Texas. They also questioned the State Department’s vetting process.

While the project’s promised benefits seem to make its eventual go-ahead virtually certain, delaying it would rescue President Obama from having to make a politically difficult decision a year before he stands for reelection.

He faced the unenviable choice of alienating environmentalists or giving ammunition to critics who say he is not doing enough to create US jobs. The State Department will now look for an alternative route for the pipeline across a sensitive portion of Nebraska – a process that is expected to carry beyond the November 2012 elections.

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In a statement Thursday, Obama stressed the importance of “strengthening our nation’s energy security” while addressing both the environmental and procedural concerns raised by critics.

“Because this permit decision could affect the health and safety of the American people as well as the environment, and because a number of concerns have been raised through a public process, we should take the time to ensure that all questions are properly addressed and all the potential impacts are properly understood,” Obama said. “The final decision should be guided by an open, transparent process that is informed by the best available science.”

The Keystone XL project is essentially a 1,900-mile extension of an existing Canadian-operated pipeline. The current Keystone pipeline stretches 1,850 miles from Alberta to Illinois and went into operation in 2010. The $7 billion project would create of the largest oil pipeline in North America and was to be completed by 2013.

According to the pipeline operator, TransCanada, the pipeline extension is designed to bring an additional 700,000 barrels per day of crude oil from the tar sands of Alberta, the largest crude reserves in North America, across America’s heartland to refineries in Houston and Port Arthur, Texas.

The pipeline project would have created tens of thousands of construction and related jobs, TransCanada estimated. The completed pipeline would have injected $5 billion in tax revenues each year for the six states it traverses.

But Nebraska Gov. Dave Heineman (R), citing the risk to the Ogallala aquifer, had asked Obama to block the pipeline. He said he would support the project if the pipeline is rerouted to avoid the aquifer.

In a recent visit to Nebraska, Obama hinted at his ultimate decision to delay the project and search for a new route, saying that polluted water would be an unacceptable price for added jobs.

“We need to make sure that we have energy security and aren’t just relying on Middle East sources,” Obama said in an interview with an Omaha TV station. “But there’s a way of doing that and still making sure that the health and safety of the American people and folks in Nebraska are protected.”

The project is backed by labor unions and businesses and opposed by a bipartisan coalition of farmers, ranchers, and environmentalists. Those project’s critics pointed to TransCanada’s accident history and concerns that the process of removing crude oil from the Alberta tar sands would release much higher amounts of climate-changing carbon into the atmosphere than would other methods of pumping crude.

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The delay “is a huge victory, and it would probably be the biggest environmental gift that President Barack Obama has given us,” Reuters quoted Tony Iallonardo, a spokesman at the National Wildlife Federation, as saying Thursday.

Further clouding the Keystone XL project were allegations of conflicts of interest and other improprieties surrounding the permitting process, which was quarterbacked by the State Department, since the pipeline originates beyond the US border.

Responding to several media reports of alleged improprieties, the State Department inspector general said last week he was ordering an investigation into the process, The New York Times reported. One allegation is that TransCanada significantly influenced the choice of Cardno Enrix to conduct the environmental impact assessment used by the State Department. Cardno Enrix lists TransCanada as a “major client” on other projects.