It seems every time I setup a new machine I hit the same snag installing psycopg2 into a virtualenv via pip. It's not well documented online. After a bunch of failed searching with my Google foo I found a solution. In short, you can get around the issues using build-dep. Thanks Eliot!

>> sudo apt-get build-dep python-psycopg2
>> virtualenv --no-site-packages myenv
>> source myenv/bin/activate
>> pip install psycopg2

Seems pretty obvious, I don't know why I always forget.