Bloomberg News

Obama’s Rejection of Keystone Pipeline Sets Up Campaign Battle

January 25, 2012

Jan. 19 (Bloomberg) -- President Barack Obama’s rejection of TransCanada Corp.’s Keystone XL pipeline permit exposed a split in a core Democratic constituency and handed Republicans a new line of election-year attack.

Unions representing construction workers condemned the move while labor groups including the United Steel Workers, the United Auto Workers and the Service Employees International Union joined with environmental advocates in saying they support Obama’s decision. It also triggered swift criticism from congressional Republicans and the party’s presidential candidates.

“The Republicans’ argument that he’s trying to run a populist campaign firing up the liberal base and that this is all politics at the expense of jobs is going to be an important continuing issue through much of the campaign,” said David Gergen, director of Harvard University’s Center for Public Leadership in Cambridge, Massachusetts, and an adviser to presidents of both parties.

Obama is heading into his re-election campaign with the U.S. still rebounding from the worst recession since the Great Depression and an unemployment rate that has been stuck above 8 percent for almost three years. The economy will be a prime focus of Obama’s State of the Union address on Jan. 24.

The jobs promised by the building of the Keystone pipeline were central to union support for the project originally and the focal point of Republican criticism of Obama. TransCanada said the 1,661-mile (2,673-kilometer) project would carry 700,000 barrels of crude a day from Alberta’s oil sands to refineries on the U.S. Gulf coast, crossing six U.S. states and requiring as many as 20,000 workers to build.

Big Decline

TransCanada fell 33 cents to $41.41 at 4:15 p.m. in New York, and earlier today fell 4.8 percent, the biggest intraday decline since June 2009.

Republicans joined in criticism by the oil and gas industry and the U.S. Chamber of Commerce, saying the president is sacrificing the nation’s energy independence and the creation of U.S. jobs to win the election.

Senate Minority Leader Mitch McConnell of Kentucky said in a statement yesterday the president’s “decision shows a fundamental disconnect with job creation in this country, and sadly, that his focus is on appealing to his liberal environmental base rather than taking steps that can lead to thousands of jobs and energy security for our nation.”

‘Lack of Seriousness’

Former Massachusetts Governor Mitt Romney, the front-runner for the Republican nomination, released a statement saying Obama’s decision shows “a lack of seriousness” about unemployment, economic growth and U.S. energy independence.

“He seems to have confused the national interest with his own interest in pleasing the environmentalists in his political base,” Romney said.

Another Republican contender, former House Speaker Newt Gingrich, called it “a stunningly stupid thing to do.”

“Maybe when they’re unemployed in November, they’ll figure out that jobs matter,” he said while campaigning in Warrenville, South Carolina.

Gergen said the Republican presidential candidates will “pounce” on the issue at their debate in South Carolina tonight, two days before the state’s Jan. 21 primary.

Obama blamed Republicans for forcing the action by setting a deadline as part of legislation that temporarily extended a payroll tax cut. Obama in November had postponed the pipeline decision until after the election while the State Department reviewed a revised route that avoided a Nebraska aquifer that is the drinking-water source for 1.5 million people.

‘Arbitrary Deadline’

“The rushed and arbitrary deadline insisted on by congressional Republicans prevented a full assessment of the pipeline’s impact, especially the health and safety of the American people, as well as our environment,” Obama said in a statement after the rejection was announced.

The issue had pitted unions and environmentalists, two groups Democrats rely on for campaign cash and volunteers, against each other. The White House reached out to labor groups, as well as the business community, to try to smooth over tensions, according to an administration official who spoke on condition of anonymity to discuss internal deliberations.

The effort was partially successful as the steel and autoworkers and the SEIU joined with two other unions to express support.

“President Obama has acted wisely,” they said in a statement. “Addressing global climate change, establishing sustainable and secure energy sources and creating and retaining safe and family-supportive jobs are keys to a positive future.”

Environmental Groups

Environmental groups also hailed the decision. Michael Brune, the Sierra Club’s executive director, called the announcement “a huge victory” and said it will energize the Democratic base.

“We’re confident that the Sierra Club volunteers who were working and volunteering countless hours in 2008 will feel the same way,” he said in an interview.

Wendy Abrams, who raised $50,000 to $100,000 for Obama in 2008, according to the Center for Responsive Politics in Washington, said rallying her friends around the president would have been hard if he had approved the pipeline. She said Obama’s decision shows that he’s not “in the pocket of big oil.”

The support wasn’t universal among Democratic supporters.

The administration should “hug a jobless, construction worker” instead of “hugging a tree,” Terry O’Sullivan, president of the Laborers Union International, said in an e- mailed statement. “Blue collar construction workers across the U.S. will not forget this.”

Money Commitment

Susie Tompkins Buell, a co-founder of clothing maker Esprit Holdings Ltd., said she won’t be raising money for Obama until she hears more about his commitment to environmental concerns in the State of the Union.

“I put my money where my mouth is,” Buell, who has raised at least $20 million for Democratic candidates and causes over the last decade, said in an interview. “I want to support people that I believe in and are doing the right things and I come from a very concerned environmental perspective; for me it’s much bigger than the economy.”

Jared Bernstein, former chief economist for Vice President Joe Biden, said the timing of the announcement yesterday suggests Obama “doesn’t want to fight about Keystone for the next month.”

Gergen said he thinks the White House wanted the decision made before the president’s address next week “so they can counter the idea that they are against jobs by having a strong State of the Union on jobs.”

--With assistance from Katarzyna Klimasinska, Holly Rosenkrantz, Kristin Jensen and Roger Runningen in Washington and Lisa Lerer in Warrenville, South Carolina. Editors: Joe Sobczyk, Jim Rubin.

To contact the reporters on this story: Kate Andersen Brower in Washington at kandersen7@bloomberg.net

To contact the editor responsible for this story: Steve Komarow at skomarow1@bloomberg.net


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