The TransCanada Corporation’s Keystone XL pipeline presents an illuminating example of the Obama Administration’s efforts to show that it is actively endeavoring to address the nation’s ongoing economic malaise while also attempting to appease the politically potent environmental community. How to address both concerns is fraught not only with electoral danger for the Administration, but also is frustrating for Obama’s supporters on Capitol Hill, who are generally aligned with groups who oppose the pipeline.

Much of the controversy began in late August when the State Department, charged with approving the pipeline since it crosses the international border between Canada and the United States, issued its Environmental Impact Statement (EIS). In its EIS, State found that there would be “no significant environmental” harm from the pipeline. While the final go-ahead will be granted only when State issues its national interest determination, expected sometime around January 1, 2012, the EIS signaled that the Administration certainly was disposed favorably toward the project. Subsequent field hearings have highlighted the difficult situation in which the Administration finds itself only 12 months before it must stand for re-election.

Supporters of the 1,700 mile long pipeline point to the benefits that will accrue to the economy if the pipeline moves forward. These include the creation of up to 20,000 direct jobs, thousands of other indirect jobs, and billions of dollars of new property taxes paid to state and local governments at a time when many localities are experiencing budgetary shortfalls. Supporters of the pipeline include several labor unions.

Proponents also point to the political benefits of acquiring energy from a friendly, democratic neighbor. Opponents predict environmental disasters if the pipeline is built, including spills as well as a significant increase in greenhouse gas emissions resulting from the processing of the oil sands expected to make up much of the throughput that will be carried by the pipeline.

If environmental groups that oppose the pipeline are finding little sympathy from the Administration, they also are finding little support from their friends in Congress. Perhaps due to a desire to avoid criticizing a President who is struggling to maintain his popularity, Members of Congress who were reliable allies of environmentalists are relatively muted in their opposition to the Administration’s growing signals of support for the pipeline.

In contrast, Republican Members of Congress are eager to challenge the Administration’s energy policies, including actions in connection with the DOE’s loan guarantees to solar panel producer, Solyndra. Here, however, Democrats in Congress have been vocal in defending the Administration and its strategy to support innovation in the renewable energy industry.

Pipeline opponents want a similar investigative approach to be taken and have called upon Congress to investigate the processes and practices used to lobby the pipeline project within the Administration. Documents obtained by pipeline opponents under the Freedom of Information Act highlight a very close and supportive relationship between State Department officials and a former staffer for Secretary Clinton’s 2008 Presidential campaign. At the very least, they claim, this presents a conflict of interest which could have resulted in political and personal biases undermining an objective analysis of the project.

More recently, opponents have focused on a State Department contract with Cardno ENTRIX, an environmental consultant, to assist it with the EIS. While federal agencies often contract with outside groups, pipeline opponents claim that in this instance, Cardno ENTRIX should not have been selected since it also works for TransCanada. Neither of these disclosures appears to have traction with Congress, the Administration, or the media at this time.

It may be that in the end, the Administration will find that the economic benefits of the pipeline outweigh its environmental risks and that its approval is in the national interest. Politically, the Administration will be able to take credit for being sensitive to the economic benefits of the project and also its independence from traditional democratic interest groups such as environmentalists. Democrats in Congress, anxious to see their President get re-elected, may have no other choice but to do no more than respectfully and quietly object.