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Conservative policies could impact 'net effects' in Keystone pipeline debate

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(Globalpost/GlobalPost)

OTTAWA - The Harper government's long-delayed environmental regulations for the oil and gas sector could be a key card in the high-stakes poker game surrounding President Barack Obama's decision on the Keystone XL pipeline.

Or not.

Like everything else surrounding the pipeline approval, Obama's latest public pronouncement is shrouded in ambiguity and is being read different ways, depending who you ask.

Analysts on both side of the border appear to agree on one thing: Strong Canadian government policy may not be able to guarantee U.S. approval of the pipeline, but a lacklustre environmental approach doesn't help.

Obama framed the debate over Keystone XL, a pipeline that would carry Alberta's oilsands bitumen to refineries on the Gulf Coast, as a matter of U.S. "national interest" defined by climate change.

"And our national interest will be served only if this project does not significantly exacerbate the problem of carbon pollution," the president said.

"The net effects of the pipeline's impact on our climate will be absolutely critical to determining whether this project is allowed to go forward."

Obama didn't define whether those "net effects" were national, continental or global.

But coupled with comments in February by David Jacobson — the departing U.S. ambassador to Canada — that Obama's environmental challenge extends to policy-makers north of the 49th parallel, the speech could be seen as another prod for Canada to get its ducks in a row.

Fen Hampson, director of the global security program at the Centre for International Governance Innovation in Waterloo, Ont., said Keystone approval will require "more than one move and a lot of political precision in this increasingly complicated game."

"I think it fair to say Canada may to have to move on its long-promised oil and gas regulations, which has been long on promise and short on delivery, to help seal the deal and give the president some cover should he decide to approve it," Hampson said in an email.

Paul Frazer, a former Canadian diplomat who was seconded briefly to the office of Conservative prime minister Kim Campbell and now is a consultant on energy and resource policy in Washington, framed Canadian policy in a more defensive posture.

"The administration didn't want the president to be in a situation where he had to defend Canada or things Canadian in any way," Frazer said in an interview.

Ottawa got the message and has responded with a series of policy announcements, said Frazer, including this week's new rules on increased pipeline liability and stiffer penalties for infractions.

He says the oil and gas regulations won't be a deal-maker or breaker.

"Certainly I'm confident that any conclusions reached by the State Department don't hinge on that particular aspect of what's going on in Canada," said Frazer, who puts American public opinion and debate atop the critical criteria.

Chris Sands, a senior fellow at the Hudson Institute in Washington, has a similar take.

"I agree that President Obama has been looking for a formula that would allow him to approve the Keystone pipeline and placate his environmentalist supporters," said Sands.

"That said, I think that at the moment this is a trial balloon, and the White House is looking to see how its key environmental allies react. If they object strongly, Keystone approval will be delayed indefinitely (perhaps for the rest of this presidency); if they complain more or less perfunctorily, approval will be forthcoming."

It is in the grey area of American public opinion that Canadian environmental policy may play a role.

A number of factors could weigh in Obama's "net effects" deliberations, said Charles Doran, an expert in U.S.-Canada relations at Johns Hopkins University.

Doran cited everything from technology advances in dealing with oilsands tailings, to greenhouse gas "venting" issues in U.S. shale gas extraction and the environmental impact of pipeline alternatives, such as rail.

"If Canada came up with some new environmental legislation that acted as an implicit offset, this would be enough," Doran said in an email.

"President Obama wants some environmental offset to hang the Keystone project on."

Environment Minister Peter Kent said in January that oil and gas regulations would be made public by the middle of the year. The government now says they'll be out "in the coming months."

Negotiations between the province of Alberta, federal officials and the oil and gas industry continue. There doesn't even appear to be consensus that Canada must publish its regulations before Obama makes his call on Keystone.

Like a poker game, everyone is holding unseen cards.

"There's no magic number in terms of what the Americans are looking for" from Canada's regulations, said Alex Wood of Sustainable Progress, a think-tank at the University of Ottawa.

"But context matters clearly in terms of the decision-making around this. And the context right now is not one that the Americans would look at with a great deal of confidence, in my view."

Most observers say too many people are reading into Obama's speech this week whatever they'd like to see — a sort of pipeline Rorschach test.

"A disinterested interpretation would suggest that the president has still not made up his mind," said Hampson.

http://www.globalpost.com/dispatch/news/the-canadian-press/130627/conservative-policies-could-impact-net-effects-keystone-pipe