Keystone Pipeline Divide Shows U.S. Highway Deal Elusive

Congressional negotiators are clashing over TransCanada Corp. (TRP)’s Keystone XL oil pipeline, underscoring the U.S. political challenge in reaching a multiyear surface transportation plan for the first time since 2005.

House Republicans made expedited approval of the pipeline, which would transport Canadian oil through Nebraska to the Gulf Coast, a priority yesterday at a conference committee meeting as they linked energy security to transportation.

“This is a jobs and infrastructure bill,” said Representative Fred Upton, a Michigan Republican who’s chairman of the House Energy and Commerce Committee. “Keystone is the ultimate jobs and infrastructure project.”

The meeting provided the first public display of attempts by House and Senate lawmakers to agree on a bill the construction industry and state highway officials say is vital to planning and financing U.S. road, bridge and transit projects. The Republican-controlled House and Democrat-led Senate passed in March an extension of transportation programs through June 30, the ninth short-term bill since the last multiyear policy legislation expired in 2009.

A new transportation agreement is important because the roads portion of the U.S. Highway Trust Fund, which pays for highway and bridge projects, will become insolvent in the fiscal year that begins in October, according to the Congressional Budget Office. U.S. Transportation Secretary Ray LaHood has said he doesn’t expect lawmakers to reach a deal before the U.S. presidential election in November.

‘No Lines’

Senator Barbara Boxer, who was elected chairman of the conference, said members would have to work through six sets of issues including financing, highway safety, the Keystone pipeline and regulation of coal ash.

The Senate bill is a good working document as it’s paid for, does away with projects sponsored by individual lawmakers and streamlines environmental reviews for projects, the California Democrat said.

“I heard no lines in the sand,” Boxer said, after each of the 47 conference-committee members spoke.

The key elements for House approval will be reforms to ensure U.S. highway money is spent more efficiently, no new taxes, no lawmaker-designated projects, and reduced regulation to get initiatives approved faster, said John Mica, chairman of the House Transportation and Infrastructure Committee.

Keystone Support

On Keystone, Richard Durbin of Illinois, a member of the Senate’s Democratic leadership, told conferees there was already a smaller Keystone pipeline in his home state approved under the federal process. Nebraska still needs six months to nine months to complete permitting, he said.

“The suggestion is if you pass the bill today, gas prices go down tomorrow,” Durbin said. “Not true.”

Mica, the Florida Republican who was elected co-chairman of the conference, said in an interview he was pleased with the number of senators who supported the Keystone project.

“I didn’t realize they had 58 votes in the Senate,” Mica said. “There were 67 Democrats and 293 votes on our side. It was a cornerstone of our legislation. There’s very strong support.”

The Senate passed a two-year, $109 billion plan in March with bipartisan support. The House failed several times to round up the Republican votes needed to pass a five-year, $260 billion proposal and has refused to consider the Senate bill.

The House passed on April 18 another extension, through Sept. 30, that added language to force the Federal Energy Regulatory Commission to approve the Keystone pipeline and throw regulation of coal ash back to the states.

Environmental Reviews

The conference committee includes eight House Republican freshmen, a bow to the influence first-term lawmakers hold in that chamber. Representative Steve Southerland, a Florida Republican, invoked the European debt crisis to urge lawmakers to not fund transportation projects on credit.

“The American people have an expectation that this will be paid for,” Southerland said.

Both chambers agree on shortening the time it takes for government to complete environmental reviews and to reduce the number of transportation programs.

The House’s language puts a 270-day time limit for reviews that now can take years. It also would enable transportation planners to waive reviews at times, limit consideration of more environmentally friendly alternatives and issue default approvals when regulators take too long to complete their work, said Deron Lovaas, federal transportation director with the Natural Resources Defense Fund.

Permit Application

The pipeline project would create about 20,000 temporary construction jobs, according to TransCanada. The number of employees needed to operate and maintain the pipeline may be as few as 20, according to the U.S. State Department, or as many as a few hundred, according to TransCanada.

TransCanada submitted a new State Department permit application on May 7. The Business Roundtable, a group representing chief executive officers of the largest U.S. corporations including Procter & Gamble Co. (PG) and Boeing Co. (BA), backed the pipeline in a letter to conferees May 7.

The White House said in a statement that it opposes the House bill for Keystone language that it said circumvents an established process for determining whether crossborder pipelines are in the national interest.

The House advocates a provision to stop the Environmental Protection Agency from regulating coal ash, a toxic residue that results from coal production.

A 2008 spill of more than 5 million cubic yards of coal ash slurry in Kingston, Tennessee, prompted the EPA to propose regulating the byproducts of burning coal as hazardous material.

The bills are S. 1813, H.R. 7 and H.R. 4348.

To contact the reporter on this story: Jeff Plungis in Washington at jplungis@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net

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