Obama may be able to avoid environmental debate, Keystone pipeline decision

After five years of delays, it has become increasingly clear that President Obama doesn’t want to make a decision on the massive Keystone XL oil sands pipeline.

It turns out he may not have to.

House Democrats and other critics of the proposed project — which has put traditional White House allies such as labor unions and environmental activists on opposite sides of a heated debate — are hinting that the State Department may have to restart its environmental review of Keystone from scratch. Such a move, which would be motivated by suspected conflicts of interest surrounding a company hired by the State Department to work on the analysis, could push a decision on the pipeline down the road for another few years, possibly until Mr. Obama leaves office in 2017.

That scenario once seemed impossible. But now, analysts say, it could be emerging as the administration’s ultimate out, one that allows the president to satisfy the environmental community without being blamed for killing the project.

“I’ve been of the mind that there’s no way it makes any kind of sense [for the president to avoid a decision on Keystone]. But it’s been well over five years and yet he keeps proving me wrong,” said Dan Kish, senior vice president for policy at the conservative Institute for Energy Research. “In my experience, a lot of times what happens is the way that the environmental community works, and the political community aligned with them, they will put all kinds of speed bumps in the way [of a project] and when the car falls apart because it takes one more speed bump they say, ’Look at that. The car couldn’t make it.’”

The latest “speed bump” for Keystone, which would transport Canadian oil sands south from Alberta through the U.S. heartland to refineries on the Gulf Coast, centers on what some have called conflicts of interest involving the State Department’s lengthy review of the project.

State must conduct analyses of the $7 billion pipeline because it crosses an international boundary.

To do that, the department contracted with leading environmental consulting firm Environmental Resources Management. A draft environmental study of Keystone largely was favorable, finding no significant uptick in greenhouse gas emissions as a result of the project while determining that the pipeline would create tens of thousands of jobs.

But since that draft was released in March, Environmental Resources Management and the State Department’s overall process have come under fire. Critics — led by environmental groups and key House Democrats such as Rep. Raul M. Grijalva of Arizona — point to the fact that Environmental Resources Management is a member company of groups, such as the American Petroleum Institute, that have publicly and aggressively lobbied for Keystone to be built.

The company also is a member of other trade groups and organizations that support the project. Environmental Resources Management did not respond to requests for comment, though it previously denied any conflicts of interest with respect to its work on Keystone.

An earlier investigation by the State Department found no conflicts, but the ordeal now is getting a second look.

A report from the department’s inspector general is due early next year, said Douglas Welty, congressional and public affairs officer at State’s Office of the Inspector General.

He added that the primary objective of the review is to determine whether State “was effective in assessing potential organizational conflicts of interest” when it chose Environmental Resources Management to perform the environmental review.

Until that investigation plays out, Mr. Grijalva and others want State to delay the release of its final environmental study. That report is a prerequisite for a decision by Mr. Obama, and until it is released the White House continues to defer all questions on Keystone to the State Department.

“It would be unwise and premature for State to release a study prepared by Environmental Resources Management while it remains under investigation for lying to federal officials about its business connections and practices,” Mr. Grijalva said in a letter to the president this month. The letter was co-signed by two dozen other House Democrats.

The company proposing the pipeline, TransCanada, largely has been tight-lipped about the investigation.

“Quite frankly, there is nothing new here and this is a matter for the U.S. Department of State and ERM to address,” TransCanada spokesman Shawn Howard said.

TransCanada — along with many in the Canadian government — has been frustrated by the Obama administration’s seemingly endless delays.

Environmental reviews of Keystone have dragged on for years. Indeed, supporters of the project, including a bipartisan coalition in Congress, have dubbed it “the most studied pipeline in history.”

If the inspector general’s review determines that the whole State Department process was marred by conflicts of interest, it likely would necessitate another round of studies and, potentially, years of further delay.

Meanwhile, Canada has begun looking for alternatives to get its valuable fuel to market.

On Dec. 19, a three-member review panel recommended that the Canadian government approve a pipeline west to the Pacific Coast, allowing oil to be shipped to burgeoning markets in Asia.

That development, among others, could make Keystone a less-attractive project from an economic perspective, Mr. Kish said.

For Mr. Obama, it also would carry clear political benefits.

“He could say, ’Hey, I didn’t do that. It was a failure of the market system,’” Mr. Kish said. “I’ve seen this over several decades with these environmental battles. First they say you need to study it, to do this and to do that. It delays it, delays it, delays it. And all of a sudden the project becomes uneconomic or they have sent a political signal to the market that they ought to back out.”