Pressure builds on Obama with looming Keystone deadline

WASHINGTON – A looming deadline for a decision on the Keystone XL pipeline is ratcheting up political pressure on President Barack Obama, who will anger key supporters regardless of his decision.

Calgary-based TransCanada Corp.’s proposed 1,700-mile pipeline would carry tar-sands crude from Alberta to Texas refineries in Port Arthur and Houston.

It appeared late last year that the administration had found a way to delay the permitting decision past this year’s election. But the pipeline’s Republican supporters raised the stakes by negotiating inclusion of a 60-day decision deadline as part of the two-month payroll tax cut extension enacted Dec. 23.

The Feb. 21 deadline forces Obama to choose between the wishes of two key constituencies – environmentalists and some Democratic fundraisers who oppose the pipeline, and some labor unions that support it as a job-maker.

The decision on a permit technically rests with the State Department because the pipeline would cross the U.S.-Canada border, although Obama said last year that he might make the final decision himself. A decision had been expected by the end of 2011.

In November, the State Department said it would delay the pipeline decision until after the 2012 election, citing the need to study alternative routes that avoid a drinking- water aquifer in Nebraska.

Republican move

Republicans trumped that move by tying the Keystone deadline to the payroll tax cut extension and including a provision allowing Nebraska and TransCanada time to find an alternative route in the state if Keystone XL is approved.

TransCanada spokesman Terry Cunha said that if the pipeline is approved, the company could start building other portions of it during the selection and evaluation of its route through Nebraska.

But Anthony Swift, staff lawyer with the Natural Resources Defense Council, which opposes Keystone XL, said it would be illegal for the U.S. to approve the pipeline without knowing and studying the final Nebraska route.

State Department spokeswoman Victoria Nuland said last week that the department “will make an appropriate decision consistent with relevant law.”

TransCanada options

Cunha declined to say what TransCanada will do if the administration rejects the pipeline.

It could reapply, making changes to address the basis of the rejection, but the revised application would have to go through the same lengthy review process, said William Bumpers, a lawyer with Washington-based Baker Botts who has represented energy companies.

Republicans say construction of the pipeline would create 20,000 jobs and make America more energy secure.

The American Petroleum Institute, an oil-industry group leading an election-year campaign to push Americans to vote on the basis of energy issues, warned of major consequences for Obama if Keystone XL is rejected.

Pipeline opponents are running their own campaigns, contending the project would create at most 6,000 temporary jobs, promote an especially dirty form of oil and possibly pollute groundwater.

Swift, of the Natural Resources Defense Council, said pipeline opponents are spotlighting information that they believe is not getting enough attention – rejecting, for example, proponents’ contention that the pipeline would reduce reliance on foreign oil from the Middle East.

Effect on imports?

They point to a government study that found Keystone wouldn’t affect U.S. oil imports from Canada through 2030.

Swift also said Gulf refiners, such as San Antonio-based Valero, could export their refined products and enjoy tax benefits.

Valero spokesman Bill Day said, however, that crude from Keystone XL would be mixed with oil from other sources at Valero’s Port Arthur refinery, and that most of that refinery’s production goes to domestic uses.

“It’s unfortunate that it’s become a political issue rather than an economic issue,” Day said.

Simone Sebastian contributed to this story.

puneet.kollipara@chron.com

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About The Author

Puneet Kollipara covers politics and the energy business from the Washington, D.C., bureau of the Houston Chronicle and Hearst. He holds a bachelor's degree in economics and physics from Washington University in St. Louis. Follow him on Twitter: @pkollipara