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Republicans May Tie Pipeline Approval to Payroll-Tax Cut Talks

Republicans Look for Alternatives after Keystone XL Rejected
Alex Pourbaix, TransCanada’s president of energy and oil pipelines, said the company was considering an all-U.S. route that would start in Montana’s Bakken Shale, which wouldn’t require federal approval. Photo: Karen Bleier/AFP/Getty Images

Congressional Republicans say they may try again to tie the Keystone XL pipeline to an extension of the U.S. payroll-tax cut, as they prolong a debate with the Obama administration over jobs and the environment.

“We are going to do everything we can to move this issue forward,” said Oregon Representative Greg Walden, at a Republican party retreat in Baltimore today. “America needs the jobs” that would be created by the pipeline project, he said.

Lawmakers are set to begin discussions next week on extending the payroll-tax cut through year’s end. A measure Congress passed last month to avert an increase in payroll-tax withholding until March 1 required President Barack Obama to decide the issue in 60 days.

On Jan. 18, Obama rejected Calgary-based TransCanada Corp.’s proposed $7 billion pipeline from Alberta’s oil sands to the refineries on the U.S. Gulf Coast, saying the congressionally imposed deadline didn’t allow sufficient time to weigh the risks.

The company said it would accept the administration’s invitation to reapply with a route that avoids the environmentally sensitive Sand Hills region in Nebraska.

Transfer to FERC

One option under consideration by Republicans is to try to attach a bill introduced by Representative Lee Terry, a Nebraska Republican, that would transfer authority to the Federal Energy Regulatory Commission, which regulates electric and natural gas markets, said Michigan Representative Fred Upton, who is the chairman of the House Energy and Commerce Committee. The bill would require FERC to approve the pipeline within 30 days as long as the project was deemed safe.

The committee’s energy and power subcommittee has scheduled a hearing on Terry’s bill for Jan. 25.

“We’re seeing jobs flee, we’re seeing refiners being shut down because of the lack of crude that’s coming to our ports,” Upton said. “This is a win-win for just about everybody.”

The issue has gained political momentum now that the public is aware of the pipeline dispute and will continue to grow in importance as gasoline prices rise later this year, Upton said.

In the Senate, Republicans led by John Hoeven of North Dakota are drafting a bill giving Congress the power to approve the pipeline, overriding the president’s authority over cross-border projects.

Passage Unlikely

The Republicans’ efforts on Keystone are unlikely to clear Congress, said Christine Tezak, senior policy analyst with Robert W. Baird & Co., in a note to clients.

She said the firm was “skeptical a big legislative change would pass.”

Even if Congress did pass such legislation, Obama could simply ignore the directive, citing his authority over international projects, Pat Parenteau, a professor at Vermont Law School, said in an interview.

“The president gets an edge in these kinds of foreign relations issues,” he said. “I don’t know that Congress has any Constitutional authority” to circumvent that power, he said.

Ryan Bernstein, an aide to Hoeven, said the senator’s bill relies on Congress’s authority under the Constitution to regulate commerce with foreign countries.

‘Keep Issue Alive’

The New York-based NRDC and other environmental groups hailed Obama’s move to reject the Keystone pipeline. Opponents argued that producing oil from tar sands in Canada would result in more greenhouse gas emissions than would conventional oil drilling.

Transporting the oil along the proposed Keystone route through Nebraska’s permeable Sand Hills risked polluting the Ogallala aquifer, a drinking water source for 1.5 million people, environmentalists said.

The Republican effort to expedite the pipeline’s approval “appears to be to keep this issue alive as a point of politics,” said Anthony Swift, an energy analyst at the NRDC.

Some labor groups backed the pipeline as a job creator. The State Department, in a report to Congress, said the project would create between 5,000 to 6,000 construction jobs during the two years needed to build the pipeline.

The House energy committee’s energy and power subcommittee plans to hold a hearing on the pipeline Jan. 25. Kerri-Ann Jones, assistant secretary of State for oceans and international environment and scientific affairs, will testify on behalf of the State Department, Baker said.

FERC Approval Sought

Jones will appear in place of Secretary of State Hillary Clinton, who was invited to testify. Upton said that governors of states along the pipeline route will also be invited.

Jon Wellinghoff, FERC’s chairman, declined to comment on the legislation.

Bernstein said Hoeven’s bill would allow construction to start immediately on the project except in Nebraska. Work there could begin after the governor approved that section of the pipeline that would cross over the state.

“We need jobs and we need a secure, stable supply of energy,” he said in an interview. Bernstein said senators were considering other legislation to push Keystone forward, including a version of Terry’s House bill.

TransCanada also is seeking to advance the project. Alex Pourbaix, TransCanada’s president of energy and oil pipelines, said the company is considering an all-U.S. route that would start in Montana, which wouldn’t require State Department approval. The company would then apply later for permission to connect the pipe to the Canadian oil sands.

Approval Seen

John Stephenson, who helps manage $2.7 billion for First Asset Management Inc. in Toronto, said he thought the pipeline would be approved after the November election.

Even if their bills don’t reach the president’s desk, Republicans can benefit if gasoline prices rise this summer by pointing out the president’s opposition to a project that would carry as much as 700,000 barrels of crude a day, said Mike McKenna, an oil industry lobbyist and president of MWR Strategies Inc. in Washington.

“The one thing about which everyone agrees is that we need to keep talking about KXL and educating people about KXL,” McKenna said in an e-mail, referring to Keystone XL.

Terry’s bill is H.R. 3548.

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