All systems go for Keystone XL, with or without the president’s approval.
That’s what House Republicans are aiming for with a new bill. On Wednesday, the House Energy and Commerce Subcommittee on Energy and Power held a hearing for a bill that would grant TransCanada Corp. (NYSE: TRP) permission to begin construction of the Keystone XL project without the approval of the President.
The pipeline will ship tar sands from western Canada to refineries near the Gulf Coast. The measure is gaining steam in the House and could be voted upon as early as next week.
Canadian officials have yet to comment on the new measure, but head of TransCanada’s pipeline division Alex Pourbaix has noted to the House that he understands the motive behind the bill, according to Bloomberg.
The Democratic majority-led Senate has failed to take up the bill, and it will most likely never reach the floor for a vote. However, the Senate did vote in favor of a non-binding resolution that favored construction—a vote of 62 to 37.
Representative Lee Terry (R-Nebraska) introduced the bill, and proponents argue that it is merely building upon the momentum of the Senate resolution.
The bill stands a high chance of passing the House but little chance of getting through the Senate. And the bill would most likely never survive a presidential veto.
More than anything, the measure is a sign of House Republican impatience regarding President Obama’s delayed decision in approving the pipeline. The president is expected to make a final decision in the summer, according to the Huffington Post, but conservatives in the House and members of the Canadian government are itching to get the project started.
Keystone would be the boost that Canada and the United States need as both countries are undergoing high volumes of petroleum production.
Keystone XL
Notice the strategic locale of Keystone XL, running through the prosperous Bakken Shale area of North Dakota and Montana.
Source: Washington Post
Keystone XL is an extension from the currently existing Keystone pipeline, covering 1,179 miles.
Construction would begin in the Canadian city of Hardisty, ending in Steele City, Nebraska. TransCanada has already begun construction on the federally approved Gulf Coast Project, a 485 mile southern pipeline that will start from Steele City and end in Port Arthur, Texas.
Republican governor of Nebraska Dave Heineman recently sent a letter to Obama and Secretary of State Hillary Clinton giving his approval of Keystone XL. Heineman initially had reservations about the project, since it could disrupt the state’s preservation efforts in the Sandhills region. Instead, the proposed pipeline will be diverted to another area.
The State Department is involved because of the cross-border connection to Canada. Clinton’s department is expected to release a report on Keystone in September, according to Bloomberg.
Governor Dennis Daugaard of South Dakota and Governor Steve Bullock of Montana also support the project, and North Dakota Governor Jack Dalrymple has called on Congress to pass XL without the President’s permission. Politics are running high on this project, and there is no telling which way the wind will blow regarding XL’s fate.
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Political Fallout
Canada’s conservative Prime Minister Stephen Harper’s government has long lobbied for Obama to get on board with the project, but the President is caught between two opposing sides.
He faces mounting pressure from the oil industry and labor unions to approve the project for the sake of providing a crucial lifeline to the oil sector and producing thousands of jobs.
But environmental groups are a core constituency of the President, and his initiative in fostering a green economy may be top priority. Opponents of the bill argue that the pipeline would disrupt wildlife, contribute to climate change, and would spawn a higher likelihood of accidental spills.
And whether or not Obama approves the project, there may be years of litigation to follow from either side. Susan Casey-Lefowtiz, director of the National Resources Defense Council, has already vowed a challenge in court if Congress managed to get the project passed without executive authorization, according to the Washington Post. Other environmental groups have also proclaimed court action if Keystone XL passes.
Keystone may seem like a political wedge issue on the surface, but there is some bipartisan backing. Representative Eliot Engel, who serves on the Foreign Affairs Committee and is a serving member on the Energy Panel, would get on board with Keystone XL with some assurance from Alberta environmental Minister Diana McQueen that the oil would not be shipped abroad.
Engel also shares concerns with other opponents of the pipeline regarding environmental impact. However, Engel has said he would rather buy oil from Alberta rather than Saudi Arabia or Venezuela, as reported by Bloomberg.
Engel’s sentiments are shared by many House and Senate Democrats, and if Obama declines the project, the House may be able to pass the bill if they can convince Democrats to join them.
But the Congress and Senate may not have the votes to override a presidential veto, and even if Congress managed to surpass a veto, there would still be court battles to follow.
And Obama could decline the project if he felt himself backed into a corner by Congress.
Congress tried to constrain the President by imposing a February 2012 deadline, which caused the president to reject the project, citing that Congress “did not provide his deputies with enough time to do a full review of the project,” according to the Washington Post.
Congress may have learned a lesson from the previous XL showdown with the White House, but House Republicans stand a risk of isolating the President and giving him a reason to pass on the project if more aggressive measures are taken.
Benefits of Keystone XL
Politics aside, what are the real benefits of Keystone?
It will mean a more extensive network of pipeline infrastructure—something that oil companies need to keep up with production upswings.
Keystone will mostly transport oil sands from western Canada, but a large portion will also come from the Bakken Shale region. The Bakken is one of the most important spots of the American oil boom, and it would provide relief to oil companies, since they would be able to transport excess oil with haste.
Having a strong national pipeline would prevent companies from having backlogs of oil in Canada and the United States—something that would force sellers to market oil at a discount price.
Shipping oil by pipeline as opposed to train is also more cost-effective. It takes an average of $8 per barrel to ship via pipeline versus approximately $14 per barrel through railway.
And while there are environmental advocates who maintain that Keystone XL would affect the environment, there is an argument to be made regarding the pipeline’s contribution in reducing emissions. With no pipeline in place, companies will have to rely more heavily on trucks and trains, which can contribute to more pollution when compared to XL.
The pipeline will also foster closer ties with America’s neighbor to the north, and it will play a role in reducing foreign imports from OPEC nations.
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