Keystone: Not So Smooth for Obama

If you are from a certain demographic you may have already been introduced to Keith Stone. Mustachioed and bearded to 70s perfection, the spokesman for Keystone Light  beer has a knack for saving a damsel in distress.

And after  being rescued the women invariably declare: “Keith Stone, why, you are so smooth.”

Keith Stone is comic relief for football watching, beer drinking American guys on a Sunday afternoon. President Barack Obama has of late also been thinking of similar sounding product, the Keystone XL pipeline.

But it’s a whole different kind of swill and Obama has decided to punt on whether America will be drinking from this particular energy source anytime soon.

In this case the “XL” must stand for “extra large” as the line would stretch some 1,700 miles, cost billions of dollars and will carry a decidedly un-smooth bitumen from Alberta’s Athabasca oil fields to feed the refineries on the U.S. Gulf Coast.

Obama was between a rock and hard place — or more accurately between a well organized green lobby and the well financed hydrocarbon hegemony.  It is Big Oil and against Little Green and it is impossible to say who is going to win this David and Goliath like struggle.

Round one definitely went to the greens. The State Department was expected to make the decision on the pipeline by the end of this year. But after some creative protests by environmentalists led  by Bill McKibbon and mounting concerns from Nebraskans over the security of their drinking water, the department announced it would seek a new route, meaning the decision on the pipeline was effectively put off until after the 2012 election.

It was abundantly clear to everyone that Obama escaped making a tough decision and it likely helped him shore up his base. He’s in for tough battle next November and a decision for the pipeline would have pleased more of the folks who were unlikely to vote for him in the first place.

As an aside there were two memorable, juxtaposing quotes in the whole, messy debate. The Canadian Prime Minister, Stephen Harper, called the decision on the pipeline a “no brainer.” Jim Hansen, the NASA scientist well known for his concerns over climate change, said approval of the pipeline was essentially “game over” for the planet.

Essentially the green movement does not like the pipeline because it would speed development of the Canadian tar sands that are energy intensive to produce and will only add to the carbon woes in the atmosphere. The oil industry says the pipeline is needed to mop up a surplus of oil in Oklahoma and note that sooner of later more Canadian oil will be needed to make up for the declining production from Mexico and Venezuela.

So will the line ever get built? If a Republican is in the White House next November, it would seem like a “no brainer” for that president as the party has long favored the oil sector. If Congress, however, skews more to the Democrats next year, that could embolden a Congressional challenge, especially as the green movement is resurgent after the initial win on the pipeline.

Should Obama hang on, he will be able to make the call without having to worry about the election calendar, though he could face pressure from his left wing ahead of the mid-term elections to continue to stall on the line.

There could also be some mitigating factors. Oil demand is expected to moderate in the United States, even if the economic recovery grows. Automobiles are becoming more fuel efficient thanks to tougher standards of the current administration. Electric-powered cars could be on the verge of taking off and natural gas could play a larger role in vehicular transportation,  due to its ever growing abundance in the United States.

Natural gas reserves are on the rise because of innovations from hydraulic fracturing drilling technology and this is also driving the first expansion in years in America’s oil reserves. The Bakken play in North Dakota will obviously further reduce America’s dependence on foreign oil.

Does this mean that falling oil demand and rising domestic production will also cut dependence on Canadian oil? Will the pipeline still be needed? Right now that’s unclear but whatever the future energy mix for America will be in the next decade, you can bet the decisions will be anything but smooth.

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