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Keystone XL to cast chill over Three Amigos meeting

Keystone XL to cast chill over Three Amigos meeting

Posted by Juan Gavasa on February 18, 2014

Canadian Prime Minister Stephen Harper’s frustration with U.S. President Barack Obama’s failure to approve the Keystone XL pipeline may make this installment of the North America summit, known as the “Three Amigos,” the frostiest since the annual meetings began almost a decade ago. At the one-day meeting Wednesday in Toluca, Mexico, with Mexican President Enrique Pena Nieto and Harper, Obama is bringing an agenda focused on trade, education, border security and stopping drug trafficking. Yet 20 years after the North American Free Trade Agreement took effect, the U.S. and Canada are at loggerheads over a $5.4 billion collaboration that would carry oil south from the thick sands of Alberta to American refineries along the Gulf Coast of Texas and Louisiana.

“People always call these things the ‘Three Amigos,’ but I would say at this point in time it’s difficult to use that term,” said Duncan Wood, director of the Mexico Institute at the Woodrow Wilson International Center for Scholars in Washington. “From the Canadian point of view, Keystone is an extremely big issue, and they’ve staked a lot of the relationship with the United States on it. From the U.S. side, you have complex internal politics that need to be resolved.”

Keystone supporters say TransCanada Corp.’s project will create thousands of construction jobs. Environmentalists who oppose it say it will exacerbate greenhouse-gas emissions by speeding oil-sands development. Obama rejected the initial application for the pipeline in 2012, citing risks with its path through ecologically sensitive lands in Nebraska, and has yet to rule on the rerouted plan.

‘Inevitable Victory’

Harper, 54, said last month that if necessary he’ll wait out Obama’s term, which ends in 2017, to get the project built. “It is, in my judgment, a necessary and inevitable victory,” Harper said in a Jan. 16 interview. “I absolutely believe that. I can’t see how it will be otherwise.”

In its final environmental review, the U.S. State Department on Jan. 31 found the pipeline wouldn’t greatly increase carbon emissions because the oil sands in Alberta will be developed anyway. The approval process now moves into a second stage focused on whether the project is in the U.S. national interest.

Obama, 52, has said the Keystone project will be in U.S. interests only if it doesn’t significantly add to carbon pollution. He’s repeatedly declined to publicly take a position until final reviews are completed.

“What is happening, and what has been happening, is a process that has been conducted according to the rulebook,” White House press secretary Jay Carney said Feb. 5.

Obama’s Message

Obama plans to deliver that same message to Harper, an administration official said, asking for anonymity to brief reporters on the summit plans last week.

“It’s clearly something that is an aggravation to the Canadians and something they want to see resolved quickly,” said Eric Farnsworth, head of the Washington office of the Council of the Americas. “In their minds they’ve been looking for an answer for a long time.”

For his part, President Pena Nieto wants to use the summit to show off the capital of Mexico State, a powerhouse of manufacturing for foreign companies from Chrysler Group LLC to Nestle SA, Wood said. Pena Nieto, 47, grew up in Toluca and served six years as governor of Mexico’s most populous state, and his public infrastructure accomplishments helped catapult him to the presidency.

Mexico’s Economy

Since Pena Nieto took office in December 2012, returning his Institutional Revolutionary Party to power after a 12-year hiatus, Mexico has undergone its own energy revolution, at least on paper. In December, the nation passed a constitutional amendment to end state-owned Petroleos Mexicanos’s oil monopoly, which had been in place since the nation seized fields from U.S. and British oil companies in 1938.

That will attract as much as $20 billion annually in additional foreign investment, according to Bank of America Corp., doubling the total of recent years, and allow companies such as Exxon Mobil Corp. and Chevron Corp. to develop the largest unexplored crude area after the Arctic Circle.

Latin America’s second-largest economy is also allowing more competition in the phone and broadcast industries, where billionaire Carlos Slim’s America Movil SAB has about 70% of Mexico’s mobile-phone customers and Grupo Televisa SAB gets about 70% of Mexico’s broadcast-television audience.

The overhauls, aimed at spurring competition and growth in a nation where major industries are dominated by monopolies and duopolies, earned Mexico a credit upgrade this month from Moody’s Investors Service to A3, the nation’s highest rating ever. “This is a showcase for the Mexican government to talk about what they can do,” Wood said.

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