Canadian Election Caught Up in Obama’s Pipeline Decision

WASHINGTON (Bloomberg News/TNS) -

Canada’s election in October has become yet another event shaping the seven-year saga of the Keystone XL pipeline, one that may lead the Obama administration to delay announcing a decision to approve or reject the $8 billion project.

Putting a decision on hold would give the United States and Canada a chance to reset a strained relationship, said David Wilkins, a former U.S. ambassador to Canada. On the other hand, a decision in the midst of Canada’s 11-week election campaign could be seen as political interference.

“If the decision is made now, one would have to wonder why it would come during a declared election campaign for prime minister,” Wilkins said. As it is, the delayed decision “has had a negative effect on the relationship,” he said. “Canadians think they deserve to be treated better.”

TransCanada Corp.’s pipeline to link Alberta’s oil fields to U.S. refineries in the Gulf of Mexico has become a potent symbol in environmentalists’ fight against fossil fuels. It also has become a proxy for a U.S.-Canada relationship that has become tense.

Prime Minister Stephen Harper of the Conservative Party has championed the pipeline proposed by TransCanada, based in Alberta, where Harper began his political career. But views in Canada are hardly monolithic.

Harper’s main challenger in the Oct. 19 election, New Democratic Party leader Thomas Mulcair, has spoken out against Keystone XL. Justin Trudeau of the Liberal Party supports the pipeline but criticizes Harper for letting the issue damage relations with President Obama, who has dismissed its benefits to U.S. consumers.

In addition to its potential political implications, some U.S. officials acknowledge that Obama’s decision could affect the tenor of discussions on such issues as the Trans- Pacific Partnership trade agreement and the Canadian role in the fights against Islamic State and Russian-backed Ukrainian separatists.

Canada is the United States’s largest trading partner, sharing $2 billion a day in trade, and the nations cooperate so closely in so many areas that government bureaucrats deal directly with one another.

“Very few issues are elevated to the level of foreign policy or become an issue that rises to public attention,” said Laura Dawson, director of the Canada Institute at the Wilson Center, a policy group in Washington.

Keystone XL, though, has become, “the big gorilla” in the relationship, said Wilkins, a lawyer who has represented the Alberta government and the Canadian Association of Petroleum Producers. Tensions over it have been compounded by recent disagreements about country of origin food labeling, funding for a bridge connecting Windsor, Ontario, and Detroit, and a nine-month delay posting a new United States ambassador in Ottawa.

TransCanada applied for a U.S. permit in 2008 to build the 1,700-mile pipeline. It was rejected in February 2012, and the company applied again in May of that year. The State Department reviews the applications because the pipeline would cross an international border. The secretary of state makes a recommendation to the president, whose decision rests on whether the project is in the national interest.

The Canadian election may offer an opportunity to repair relations, regardless of whether Harper’s Conservatives or the opposition, divided between Mulcair’s front-running New Democratic Party and the Liberal Party, wins the most seats in Parliament.

“Whoever wins, this will help set the reset button,” Dawson of the Wilson Center said. “If it’s Harper, this will give him an opportunity to step back from some of the rhetoric,” and it would give the NDP and Liberal parties “a clean slate on which to draw.”

An NDP win would give Obama a chance to negotiate with Mulcair for a more ambitious Canadian environmental policy, which would fit with both the NDP platform and Obama’s agenda.