Congress strikes deal on Keystone XL

Source: Christa Marshall • E&E  • Posted: Friday, December 23, 2011

Congressional leaders struck a deal yesterday that could force President Obama to make a speedy decision about an oil pipeline that has divided his party and sparked environmental protests at the White House.

The agreement throws TransCanada’s Keystone XL back into the president’s lap weeks after he seemed to have pushed it aside until after the presidential election. The political pact also could make or break the project, considering that existing oil shipping agreements call for oil to flow through the $7 billion pipeline — which would run from Canada to Texas — within a certain timeframe.

After a week of standoff, House Republican leaders agreed to vote on a two-month payroll tax cut extension that is expected to include an unrelated provision requiring the president to make a decision on Keystone XL within 60 days. Previously, the president was on schedule to make a decision in 2013, pending further review of an alternate route around an environmentally sensitive part of Nebraska.

The House and Senate are expected to clear the measure today.

“This jobs project has bipartisan support,” said House Speaker John Boehner (R-Ohio) about Keystone XL in announcing the tax deal. “I hope the president will approve this pipeline.”

Obama congratulated leaders for ending a bipartisan stalemate on the tax issue, even as the bill could put him in a tough political spot on energy in an election year.

Pipeline was a payroll tax deal sweetener for GOP

Under the measure expected to be approved, Obama can deny a cross-border permit within 60 days for the pipeline because it’s not in the “national interest.” But that option would open him to Republican attacks that he was cutting off an oil supply from a friendly Canadian neighbor. The pipeline would run from Alberta, Canada, to Texas refineries if built, and roughly double Canadian oil imports into the United States.

Otherwise, Obama can approve the 1,700-mile conduit, and risk widespread anger from environmentalists who have said they are willing to engage in further civil disobedience to block the project. In their view, Keystone XL is a climate change disaster, since the oil sands in Canada release more greenhouse gas emissions in the production process than other forms of oil.

“Clearly big oil is trying to back him up against a wall, and sometimes that’s when you find out what people are made of,” said Bill McKibben, founder of, and the leader of anti-pipeline protests this summer.

Obama also risks anger from union supporters who are counting on pipeline construction jobs if he denies a permit.

Pipeline supporters have said the greenhouse-gas concerns are overblown, considering that Canada produces about 2 percent of global emissions.

The payroll tax deal culminated a week-long game of chicken. Boehner faced criticism from White House adviser Karl Rove, the Wall Street Journal editorial page and members of his own party for pressing for a full-year extension of the tax cut, rather than the two-month plan passed by the Senate. In the process, Keystone XL supporters invoked the pipeline to get Boehner to back down.

“The House should pass an extension that locks in the thousands of Keystone XL pipeline jobs,” Senate Minority Leader Mitch McConnell (R-Ky.) said yesterday before the deal.

Tweets point to “no” but some analysts predict a finesse

The insertion of the Canada-U.S. line into the congressional tax debate signals the degree to which Republicans plan to pressure Obama on the issue. GOP presidential contenders have accused the Obama administration of basing national security policy on politics by postponing a permit decision until after the November election.

The rhetoric also signals a fierce lobbying battle in the next two months. Environmentalists have made it clear they expect Obama to reject the pipeline, considering recent comments from the administration.

In mid-December, the State Department said a 60-day deadline would make it “unable” to make a determination about a permit, considering the ongoing environmental review process in Nebraska. Those thoughts were echoed by White House Communications Director Dan Pfeiffer, who tweeted the congressional language shortens the process “in a way that virtually guarantees that the pipeline will NOT be approved.”

In Nebraska, the state Department of Environmental Quality is awaiting a proposal from TransCanada to reroute the project around the state’s Sand Hills and avoid the Ogallala Aquifer, a drinking-water reservoir. The state plans to do its own environmental analysis of that reroute once it’s proposed.

Even so, some analysts said there’s a chance Obama could surprise environmentalists, or find a way to finesse the situation legally.

“We are in the silly season of politics,” said Kenneth Green, an analyst at the American Enterprise Institute, a conservative think tank. “Things change day by day.”

With Republican GOP contenders attacking Obama, it’s not an easy decision, he said. At the same time, jobs are likely to be a much bigger focal point in 2012 elections than the pipeline, so Obama had little choice but to accept the Keystone XL language to get a tax deal, he said.

Some enviros predict legal challenge

Meanwhile, the payroll measure also blocks further environmental reviews by the State Department of any Nebraska reroute under the National Environmental Policy Act (NEPA). That prompted some environmentalists to raise the prospect of lawsuits if Obama grants a permit under an expedited review, especially if a reroute forced a change in the pipeline’s pathway in other states (ClimateWire, Dec. 19).

The Keystone XL language would allow construction of the pipeline to begin in five states, but not Nebraska until the rerouting process is resolved.

But Patrick Parenteau, an environmental law professor at the Vermont Law School, said there is little environmentalists could do to challenge the congressional text over NEPA, since the constitution clearly gives Congress the power to adjust its own laws. There is a question whether the text violates constitutional law by forcing the president to make a decision that he says he doesn’t have sufficient information to do, Parenteau said.

The president could still finesse the situation, he said, by denying a permit and allowing TransCanada to provide additional paperwork after the fact.

In a research note this week, Baird Equity Research made a similar point, questioning whether the administration might “wrest the upper hand” politically by issuing a negative finding in 60 days but allowing TransCanada to immediately re-submit an application.

“I think the president will find a way to sidestep this once again,” said Parenteau.