Like former University of North Carolina Head Basketball Coach Dean Smith, another famous on-the-sly smoker, President Barack Obama is trying to run out the clock on an important game.

Coach Smith devised the “four corners” offense as a way to maintain possession of the ball late in a game his team led. By stationing players at each of the four corners that define the offensive side of the court and quickly passing the ball around the perimeter, Smith hoped to draw out a desperate defense, exposing gaps that could be penetrated for easy layups or forcing the opposition to commit fouls, sending Tar Heels to the free throw line to add to their lead.

President Obama’s current situation can hardly be described as a “lead,” though “incumbency” is probably worth much more than any snapshot poll this far out in the 2012 game. But his “players”–left-leaning interest groups critical to get-out-the-vote efforts–aren’t of the same mind on Keystone XL, and he can’t afford to offend either environmentalists opposed to anything that encourages the use of fossil fuels or unions focused solely on the jobs-creating potential of this particular infrastructure project.

So this USD7 billion, 1,700-mile pipeline project won’t be settled on matters of policy. It will be settled according to politics, and President Obama wants Keystone XL to go away until Nov. 7, 2012, the day after his reelection campaign climaxes.

One way this could be accomplished, as he intimated may be the case during an early November interview with a local Nebraska TV station, would be to decide himself whether to grant TransCanada Corp (TSX: TRP, NYSE: TRP) the permit it needs to start work on the extension to the existing, 2,500-mile Keystone Pipeline System.

Because the pipeline crosses the US-Canada border standard procedure is designed to culminate with a final decision by the US State Dept. But in Foggy Bottom, too, are new impediments lurking that serve the president’s electoral interest, as unnamed sources have leaked word that State may force TransCanada to re-route Keystone XL.

Here’s the obfuscating stew that will provide enough distraction for President Obama to sit on it until Nov. 7, 2012, when it may not matter, after all, what he thinks about anything.

Spurious allegations of conflict of interest by the consulting firm that prepared an environmental impact study for the State Department prompted a group of US Senators to write a letter.

TransCanada, acting as instructed by State and in accordance with Federal Energy Regulatory Commission (FERC) third-party contractor practice, upon which the Dept of State practice is modeled, issued a request for proposal in late 2008 for the Dept of State that led to the hiring of Cardno ENTRIX, a unit of Australia-based Cardno Ltd (ASX: CDD, OTC: COLDF). This is the same third-party selection process that has been used on a regular basis for many years by FERC, which processes certificate applications for interstate natural gas pipelines.

TransCanada screened the contractors who responded to the request for proposal for technical ability, experience and appropriate personnel, and recommended a number of qualified candidates to State–standard practice for selecting a third-party contractor to carry out a review under the US National Environmental Policy Act (NEPA)

There are a limited number of firms that specialize in this type of work, Cardno ENTRIX among them. As the permit applicant, TransCanada is handed the bill for the work that State directs Cardno ENTRIX to carry out for this part of its review. The work is done at the sole direction of the State Dept; TransCanada has no say in directing that work.

It is not in Cardno’s interest to submit compromised work. To believe Cardno Entrix is in the tank for TransCanada is to believe it, its managers and its shareholders don’t care about its business. “Conflict of interest” is a red herring.

As for the fact that a former lesser light in Hillary Clinton’s 2008 presidential campaign now lobbies for TransCanada, undoing a massive infrastructure project that will employ many on this side of the border because of the well-known revolving door between public and private in Washington, DC, is the equivalent of selective prosecution.

At any rate, Paul Elliott did not have the kind of role in the Clinton campaign that would even afford him access–forget influence–on any kind of decision made at the State Dept. The e-mails he exchanged with an equally diligent but unknown official at the US embassy in Ottawa are irrelevant, too.

Let’s concede that TransCanada’s forecast of the number of jobs that will be created by construction and operation of Keystone XL is rosy. Nevertheless, if not 20,000 direct jobs then certainly more than one will be created. For a president leading a party that a little more than two years ago spoke of the importance of “shovel-ready” infrastructure projects to jump-starting the economy shutting down a privately funded USD7 billion project should be political suicide. It’s this reality, as well as the pain of 9 percent-plus unemployment, that has American unions lined up in favor of the pipeline.

Opposition at the local level is overstated. This is not a monolithic coalition out to stop all manner of oil exploration and development. Nebraskans, Democrats and Republicans, are only interested in protecting the Ogallala Aquifer. Had the original footprint of XL followed the existing path of the Keystone Pipeline System I wouldn’t be writing (and you wouldn’t be reading) this.

And then there are those who fear and oppose any exploitation of fossil fuels. They are right to point out risks of environmental damage from a potential leak in the pipeline and warn of resulting cleanup costs. As much greens want the era of fossil fuels to end, we seem to still be way short of alternatives capable of providing, for example, reliable baseload electricity or constant access to transportation fuel.

Any attempt to speed up the day when we finally transition from petroleum-based fuels will bring extra costs that will have disproportionately large impacts as you move down the socioeconomic scale. Keystone XL would help reconcile the price disparity between US-focused, cheaper West Texas Intermediate crude oil and global-oriented, more expensive lately Brent crude and theoretically result in incrementally higher gas prices. This is a short-term concern. Over the long term facilitating the development of a local resource under friendly political control is in the best interests of consumers and the US.

The long-term, big-picture concern also includes the fact that the oil sands will be produced, regardless of what happens with Keystone XL. And crude from the play will undoubtedly end up traversing the US-Canada border and making its way to Midwest and Gulf Coast refineries.

Source: Bloomberg

XL’s 700,000 barrel-per-day capacity would relieve the build-up of crude in the Midwest, which doesn’t have enough pipelines to ship Canadian output to Gulf Coast refineries. But any forced re-routing, for example, would add another two to three years on a pipeline scheduled to start operating in 2013, when it will help relieve a crunch US Gulf Coast refineries will face when Venezuelan crude supply contracts expire in 2014.

If it’s to be a happy ending on Nov. 7 Mr. Obama will need the support of unions and greens, two groups on opposite sides of the Keystone XL divide. But TransCanada CEO Russ Girling warned recently that another extended delay in the regulatory process would lead oil shippers and refiners to abandon support for the project, rendering it uneconomic to build. And the threat to Keystone XL is a threat to TransCanada’s stock, because perception continues to smother it.

Timing for TransCanada–which is the orange line in the chart above–may not work. But whether or not Keystone XL is built, interest will continue to grow in exporting Canadian energy to Asia. The company pushing this forward is Enbridge Inc (TSX: ENB, NYSE: ENB)–the white line–with the backing of Chinese investors. Its key project is a proposed USD5.5 billion pipeline to bring 525,000 barrels of oil from the oil sands to the Pacific Coast for shipment to refineries in California and Asia. The roughly 730-mile proposed Northern Gateway pipeline enjoys strong support from Canadian provincial and federal leaders.

There are still opponents, largely on environmental grounds. And it’s far from a sure thing Northern Gateway will be built. But the process will be far less complicated. By announcing himself “present” on this issue President Obama may have doomed Keystone XL. Although the pipeline–and the president–may not survive the game defined by Nov. 6, 2012, demand for crude from Canada’s oil sands will continue.