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Keystone pipeline a tough decision for Obama

By Tom Cohen, CNN
updated 8:00 PM EST, Tue December 13, 2011
Demonstrators stage a White House sit-in protest in August calling on the president to block construction of an oil pipeline.
Demonstrators stage a White House sit-in protest in August calling on the president to block construction of an oil pipeline.
STORY HIGHLIGHTS
  • The issue divides unions and environmentalists -- both traditional Democratic supporters
  • Changing the pipeline route through Nebraska brings further environmental review
  • Supporters cite increased oil supplies from an ally and jobs created
  • Critics oppose the environmental risks and continued fossil fuel dependency

Washington (CNN) -- From the beginning, the Keystone XL oil pipeline project presented President Barack Obama with a choice certain to anger part of his political base.

Now at the center of a political showdown over extending the payroll tax cut, the pipeline that would run from northern Alberta in Canada to the Gulf Coast of Texas is supported by unions eager to get their members working on construction jobs under the project.

However, environmentalists oppose how the pipeline bolsters U.S. reliance on oil -- in this case a kind that results in more greenhouse gas emissions during production -- as well as the potential impact on natural resources.

Facing strong pressure from both traditionally Democratic groups, Obama indicated in early November he might play a personal role in the decision, which is to be made by the State Department because it involves a cross-border project.

A few days later, though, it was the State Department that announced on November 10 it would delay the decision until 2013 -- well after next year's presidential election.

The announcement prompted angry accusations by Republicans that Obama was putting off the politically troublesome issue until after his re-election bid.

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As strong proponents of the oil industry, Republican leaders have now written a provision requiring a decision on the pipeline within 60 days and attached it to a bill that also would extend the payroll tax cut set to expire at the end of the year.

The House approved the proposal Tuesday on a vote largely on party lines, but the Democratic-controlled Senate is expected to reject the measure.

Obama threatened Tuesday to veto the GOP bill if it reaches his desk, and the State Department warned that forcing such a hasty decision would doom the project's chances for approval.

One reason is a required environmental review under a Nebraska law signed last month that altered the pipeline's route through the state to avoid the Sand Hills region and Ogallala Aquifer, which environmentalists feared would come under threat.

The assessment by the Nebraska Department of Environmental Quality will take an estimated six to nine months to complete, spokesman Brian McManus told CNN on Tuesday.

While the review, being handled by HDR Engineering of Omaha, will focus on the altered pipeline route in Nebraska, McManus was unable to say if construction work on the project could begin before its completion.

Pipeline supporters, including many in the business community, the construction trades and nearly everyone in the oil industry, argue the United States could use the 700,000 barrels a day the pipeline would carry.

They also point to new jobs, but figures vary on how many would be created and for how long. House Speaker John Boehner said delaying the project could cost more than 20,000 new jobs, while the State Department puts the number of jobs created by the project at 6,000.

One study from Cornell said the pipeline could actually cost jobs by hurting the development of alternative energy and allowing for the export of oil from the Midwest, driving up the cost of gasoline in that region.

TransCanada, the company that wants to build the $7 billion pipeline, has already bought $1.7 billion worth of steel pipe for the 1,700-mile pipeline from Canada's oil sands region to refineries on the U.S. Gulf Coast.

Many of the world's biggest oil companies, including ExxonMobil, Royal Dutch Shell and BP, have been ramping up production from the oil sands and need a way to get it out.

Environmentalists opposed both the risk of spills and the resulting U.S. dependency on oil sands, a particularly dirty form of oil mixed with tar sand that requires from 5% to 30% more greenhouse gas emissions to produce than conventional crude.

There are also concerns that oil sands developments -- many of which look like giant open-pit strip mines -- decimate forests and pollute rivers and streams.

An inspired public protest campaign last month preceded the Obama administration's decision to delay its decision. On November 6, thousands of demonstrators surrounded the White House to call for Obama to reject the project.

After the State Department announcement four days later that it would delay its decision, actor/director and environmental activist Robert Redford publicly thanked Obama for withstanding pressure from "big oil" to approve the pipeline.

"President Obama didn't cave to the pressure," Redford said. "He weighed the facts and he looked at the kind of future he promised when he ran for president."

CNNMoney's Steve Hargreaves and CNN's Deirdre Walsh contributed to this report.

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