Obama's each-way bet on energy

President Barack Obama's convoluted policy on the proposed Keystone XL pipeline from Canada to the US Gulf is less an exercise in smart politics and more an increasingly incomprehensible demonstration of everything wrong with the administration's energy policy.

White House policy on energy might (charitably) be described as consisting of two strands: (1) focus on the long-term transformational potential of clean energy technologies like wind and solar power while acknowledging the need to develop more domestic gas and oil sources in the short-term and keeping quiet about coal; (2) get re-elected by taking the symbolic question of Keystone off the agenda until after November.

The president needs to secure support from environmentalists keen on clean tech while convincing his working-class supporters in the industrial heartlands and the middle class he will not do anything that will push up energy prices. The result has been a bewildering series of policy shifts that look exceptionally cynical.

On January 18, Obama personally announced he would not grant Keystone a presidential permit to cross the US-Canadian border because there was not time to complete full assessment of its impact on health and the environment. The president blamed the accelerated timetable legislated by Congress – something which he himself had signed into law less than three weeks before.

The president's decision delighted environmental groups. Natural Resources Defense Council (NRDC) President Frances Beinecke hailed Obama's "commitment to combating the threats of climate change, air pollution and oil addition.” NRDC organised a write in campaign to thank the president for his leadership on the issue.

But the rejection drew furious protests from the American Petroleum Institute and other parts of the oil and gas industry, as well as most of the congressional Republican Party and the party's candidates for president, who threatened to turn Keystone and high gasoline prices into a campaign issue.

So the president's advisers twinned his commitment to clean tech with a hymn in praise of shale gas in the State of the Union address, and again in a long speech in Florida last week.

This inclusive policy, characterised by the phrase ‘all of the above', was meant to offer something for everyone. Well all except coal, about which the president was conspicuously silent, since coal is too dirty for the administration to embrace openly.

The administration has a hierarchy. Coal is (unspeakably) bad. Oil is better. Gas is good. Wind and solar are best. Nuclear is just confusing.

In tackling criticism of the administration's energy policy head-on, the president's advisers seem to have calculated they could chart a middle course – taking heat out of the issue ahead of presidential and congressional elections in November, when the president's record on jobs, competitiveness and the cost of gasoline will be on the ballot along with his support for clean energy.

In another piece of Clinton-like triangulation, the White House issued a statement on February 27 welcoming news that TransCanada plans to build the southern section of Keystone from Cushing to the Gulf of Mexico.

"We look forward to working with TransCanada to ensure that it is built in a safe, responsible and timely manner, and we commit to take every step possible to expedite the necessary federal permits," according to the statement.

Because the southern section of the pipeline is entirely within the United States, it does not actually need a permit from the president.

The ones it does need will come from the independent Federal Energy Regulatory Commission (FERC) and the Pipeline and Hazardous Materials Safety Administration (PHMSA), neither of which are likely to pose an obstacle that needs White House input. The promise to help expedite the necessary permits was therefore meaningless.

The one permit the pipeline does need from the president is the presidential authorisation to cross the US-Canadian border, which is the one Obama would not issue, and still won't promise in future, so the northern section of the pipeline remains in limbo.

But to take the farce to a whole new level, the White House press statement announced TransCanada has given "notice of its intention to submit a new application" for that section once a route through Nebraska has been identified.

"The president's decision in January in no way prejudged future applications. We will ensure any project receives the important assessment it deserves, and will base a decision to provide a permit on the completion of that review."

The president decided not to deliver the bad news to his environmental supporters personally. Instead the announcement was attributed to the White House press secretary.

Quite what NRDC and Obama's other enthusiastic supporters are meant to make of this is not clear. Having hailed the president's leadership a month ago, they now have to explain why the president is supporting the southern section of the pipeline but not the northern one. They must hope once the president is safely re-elected, he will block the northern section of the line, leaving TransCanada with a pipeline with a gap in the middle.

Meanwhile, the pipeline's advocates in the energy industry are being told another application will be made (though it is still at the rather vague "notice of intention to submit a new application" stage).

When it is eventually submitted they must hope it will somehow win presidential approval in the teeth of continuing opposition from environmental groups who will lobby the president furiously to deny the permit.

NRDC is unequivocal: "Texans, Nebraskans, and folks all across the country are saying that whether in a hundred pieces or one piece, the Keystone XL tar sands pipeline is not in the national interest.”

But the White House is making no promises about what will happen if TransCanada can ever agree on a route and submit an application.

The White House can't even make up its mind if the paperwork and environmental impact assessments for the parts of the line that remain unchanged from the original plans will be accepted second time around, or whether the pipeline promoters will be made to redo them from scratch.

Someone is going to be mightily disappointed after November.

Politics is the art of the possible. There is some merit in trying to split differences and leaving no one completely satisfied. It is the art of political survival.

But it is a terrible way to make energy policy. Whether the future belongs to clean technology, as NRDC advocates, or fossil fuels, as API claims, or ‘all of the above', as the White House believes, no industry that must invest tens of billions of dollars in assets that last 30, 40 years or more, can operate successfully with this level of regulatory uncertainty and political opportunism.

This story was originally published by Reuters. Reproduced with permission.