Keystone Pipeline Endgame: Three Scenarios

The White House is going to piss somebody off. The question is: who?

keystone xl pipeline
Andrew Harrer/Bloomberg via Getty Images
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The fight over the Keystone XL pipeline may not be the most important environmental or energy story of 2011. But it is certainly one of the most dramatic, with climate scientists hauled off in handcuffs and suggestions of high-level political corruption and $7 billion worth of steel and hardware hanging in the balance.  The story of the pipeline is also remarkable in how it reveals the hidden forces that are shaping America's energy future.  (In case you are late to the story, you can catch up with things here and here).

The latest turn: last night, House Republicans caved to President Obama's demands to extend the payroll tax cut and unemployment insurance, and the bill is destined for the President's desk in the very near future.  Attached to that legislation is a policy rider, cooked up by House Republicans in the pocket of Big Oil, which essentially forces the Obama administration to approve or deny the pipeline within 60 days of the bill's passage.

From here, there are three plausible scenarios:

1.  Obama could veto the payroll-tax legislation because it includes the policy rider fast-tracking the pipeline.  This is the dream scenario of some anti-pipeline activists who believe that Obama should drive a stake through the heart of the project once and for all.  But getting the House to cave on the payroll-tax extension was a big political win for the White House.  Vetoing it now, simply to make a grand statement about the pipeline, is not only unlikely, but not Obama's style.  He'd sign this bill with a stick if he had to.

2.  Obama could sign the legislation, but then the pipeline doesn't get approved because it is essentially impossible to meet the legal requirements for an environmental review in 60 days.  As White House Communications Director Dan Pfieffer put it in a tweet the other day: "The House bill simply shortens the review process in a way that virtually guarantees that the pipeline will NOT be approved." (National Wildllife Federation's Jeremy Symons has a smart blog post describing all this in more detail.) In this scenario, the White House can just play it straight, insist on a tough and fair review of the safety and environmental risks of the pipeline, and revisit the case again in 2013.

3. Obama could sign the legislation and then find a way to allow the pipeline to get built, perhaps along a slightly different route.  This scenario, which would require some fancy footwork from the White House, was laid out for me last night in an off-the-record conversation with a top environmentalist. It goes something like this: Everything that happens in Washington right now is about the upcoming election. To win, Obama needs to keep his base happy; two key constituents are environmentalists and labor.  Obama gave enviros a big win with the initial decision to delay the pipeline last month.  But he gave them an even bigger win this week when he issued the first-ever rules to control toxic air pollution, including mercury from coal plants. This was a huge deal, a move that will save tens of thousands of lives every year and likely lead to the shut-down of dozens of old coal plants. By virtually any measure (including reduced carbon pollution), the impacts of this rule far outweigh those of denying the pipeline.

Politically, this puts Obama (and his political team) in a sweet spot. He can now go to enviros and say: I gave you mercury regulations, now I'm going to OK the pipeline in order to make my friends in the labor unions happy and get Big Oil off my back. In this scenario, he wins with enviros, he wins with labor, and he gets to point to the pipeline as a big infrastructure project that is creating jobs and keeping Americans working (although the number of jobs the pipeline will actually create has been wildly inflated). He keeps Big Oil from hammering him in the election, and – best of all – he doesn't look captive to enviros. The risk, of course, is that he will have to back-track on the administration's much-praised decision to stall the pipeline.  And hard-core anti-pipeline activists are likely to kick up a shitstorm.  But most enviros will buy the argument that the mercury regulations were a much bigger deal than the pipeline, and thus criticism of the president will likely be muted.  All in all, it could be a smart political play. That is, if your goal is to win re-election, rather than to actually break America's addiction to oil.

Which scenario will win out? Stay tuned.

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