Obama Dodges Keystone Battle After Lobbying Democrats

President Barack Obama headed off an election-year showdown over energy policy when the Senate defeated a Republican measure that would have authorized the building of TransCanada Corp. (TRP)’s Keystone XL oil pipeline.

Obama lobbied wavering Senate Democrats before yesterday’s vote. He urged them to reject an amendment to legislation funding transportation projects that would have overturned his administration’s decision to deny a permit for the pipeline until an alternative route was proposed to bypass an environmentally sensitive area in Nebraska.

The measure failed to pass on a 56-42 vote. Sixty votes were required to advance the amendment.

“The Senate voted down another misleading effort by Republicans to play politics with a pipeline project whose route has yet to be proposed,” said Clark Stevens, a White House spokesman. “We will ensure any projects receives the important assessment it deserves.”

Republicans have sought to link rising gasoline prices with the administration’s rejection of a permit for the northern section of the pipeline. Rising prices at the pump threaten to stunt the recovery by crimping consumer spending, which accounts for 70 percent of the economy, and signs at service stations remind voters daily of higher energy costs.

As the Senate prepared to vote, Republicans criticized Obama and sought to raise money on the issue.

“By personally lobbying against the Keystone pipeline, it means the president of the United States is lobbying for sending North American energy to China and lobbying against American jobs,” House Speaker John Boehner, an Ohio Republican, told reporters.

Fundraising Pitch

The National Republican Congressional Committee used the issue to make a fundraising pitch. In an e-mail from the political arm of House Republicans, Texas Republican Representative Pete Sessions appealed for “an immediate $12 donation to the Keystone Fund” to expose Obama’s “anti-energy and anti-job agenda.”

White House press secretary Jay Carney called the Republican amendment “ineffectual, sham legislation that has no impact on the price of gas.”

He said passage would be “irresponsible” because TransCanada hasn’t formally approved an alternative route.

In a demonstration of White House concerns that energy may give Republicans a political issue in November, Obama over the past two weeks has made the subject the focus of public speeches and appearances. In each, he has delivered the same message: Little can be done short-term to bring down gasoline prices.

No Quick Fixes

“You and I both know there are no quick fixes to this problem,” Obama told an audience this week at a Daimler Trucks North America plant in Mount Holly, North Carolina. “As much as we’re doing to increase oil production, we’re not going to be able to just drill our way out of the problem of high gas prices.”

The average retail price for a gallon of regular gasoline is $3.75, compared with $3.52 a year ago, according to a survey by the American Automobile Association. Prices are higher than average in the electoral swing states of Florida, Michigan, West Virginia and Nevada, according to AAA figures.

Crude oil has risen 25 percent over the past five months, in part because of increasing concern about a confrontation with Iran and higher demand as the global economy picks up steam. Crude oil for April delivery rose 42 cents to settle at $106.58 a barrel on the New York Mercantile Exchange.

The Republican presidential candidates and the party’s leaders in Congress argue that Obama has hindered U.S. energy supplies by imposing tougher environmental regulations on exploration and blocking the $7.6 billion Keystone project.

Romney on Attack

Mitt Romney, the former Massachusetts governor who is the leading contender for the Republican nomination, said last week while campaigning in North Dakota that Obama “has tried to slow the growth of oil and gas production in this country, and coal production in this country.”

The administration last November postponed a decision on Calgary-based TransCanada’s 1,661-mile (2,673-kilometer) pipeline to study an alternative route for the project away from an aquifer in Nebraska that supplies drinking water for 1.5 million people. That would have put off the matter until after the 2012 election.

In December, Republicans in Congress, joined by some Democrats, set a 60-day deadline for the administration to decide whether to issue a permit, a step that forced Obama to reject the plan on Jan. 18.

The issue has split Obama’s political supporters. Environmental advocacy groups oppose the pipeline, while some unions support it. TransCanada has estimated the project would create about 20,000 temporary construction jobs.

Sierra Club Comment

Lena Moffitt, federal policy representative for the San Francisco-based Sierra Club, said the group has been in touch with the White House and has been doing its own lobbying of senators. “We see this as a really unprecedented effort to get Congress into the business of permitting big oil’s pet projects,” she said before the Senate vote.

In recent weeks, Obama has been seeking to promote his energy program, while trying to soften political criticism from the Jan. 18 pipeline rejection. He has made energy the chief topic of at least five events since Feb. 23.

TransCanada said Feb. 27 it would reapply for a permit to build Keystone and proceed separately with a $2.3 billion segment of the pipeline to carry crude from the storage hub at Cushing, Oklahoma, to the Texas coast.

Visit to North Carolina

In the election swing state of North Carolina, the president said this week he would “do whatever we can to speed up construction of a pipeline in Oklahoma that’s going to relieve a bottleneck and get more oil to the Gulf -- to the refineries down there -- and that’s going to help create jobs, encourage more production.”

The Republican amendment was sponsored by Senator John Hoeven of North Dakota and attached to the $109 billion transportation bill. It would have allowed the pipeline to run along a modified route in Nebraska that would dodge the ecologically sensitive region.

The Senate defeated another amendment, from Ron Wyden, an Oregon Democrat, that would have expedited the review process for the pipeline and prohibited export of oil that it carries.

To contact the reporters on this story: Kate Andersen Brower in Washington at kandersen7@bloomberg.net; Roger Runningen in Washington at rrunningen@bloomberg.net

To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net

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