Washington's pipeline war

The proposed Keystone XL pipeline has become a crucial front in the election-year battle

Washington’s pipeline war

Fernando Salazar/Wichita Eagle/Getty Images

President Barack Obama’s denial of a permit for TransCanada’s Keystone XL pipeline has not stopped a shadow battle from unfolding on Capitol Hill over the proposed link from Alberta’s oil sands to the Gulf Coast. Congress is teeming with proposed legislation for and against the pipeline, which has been transformed from a mere infrastructure project into a political litmus test on American energy policy. And while Obama’s decision may have led to some hand-wringing over the state of Canada-U.S. relations, it’s hard to recall another time that a Canadian government cause has garnered as much support and attention in Congress—usually a more challenging arena for Canadian interests given the parochial concerns of lawmakers.

For Republicans who control the House of Representatives, the pipeline has become Exhibit A in their case against Obama’s energy policy—while for Democrats it has become a way to make common cause with environmentalists. And both pro-pipeline Republicans and anti-pipeline Democrats are littering Congress with bills aimed at keeping the pipeline issue alive for their supporters. It is a phantom fight, because in this bitterly polarized election year there are few bills of any sort that can pass both the Republican-controlled House and the Democratic-controlled Senate, and garner the required signature of the President to become law. But that hasn’t stopped either side from using the legislative process to keep the spotlight on the pipeline and the oil sands.

Indeed, the once-obscure Keystone XL issue has become a staple on the Republican campaign trail and in the press. The loudest salvo from the pro-pipeline forces came on Feb. 16. The House of Representatives passed a transportation funding bill that included a provision that would remove the decision-making power over the pipeline from the State Department and President, and give it to Congress. Currently, the review process for the pipeline is led by State because the pipeline crosses an international border. The White House issued a warning, saying the President would veto the transportation package for a variety of reasons, including the pipeline provision.

“This bill seeks to circumvent a long-standing process for determining whether cross-border pipelines are in the national interest,” the statement said, “by mandating the permitting of the Keystone XL pipeline project despite the fact that the pipeline route has yet to be identified and there is no complete assessment of its potential impacts, including impacts on health and safety, the economy, foreign policy, energy security, and the environment.” A similar bill introduced in the 100-seat Senate in January garnered support from 44 senators. Now Senate leaders must decide whether to include the provision as they negotiate the details of their own transportation funding bill.

Meanwhile, a State Department official told a congressional committee in January that such legislation raises “serious legal questions” over existing government authority over the pipeline, and “overrides foreign policy and national security considerations.” But those who support stripping the President of the power to make these decisions got a boost from the non-partisan Congressional Research Service. It issued a report in January that concluded Congress does have the constitutional power to make decisions about pipeline permits as part of its authority to “regulate foreign commerce.” Nonetheless, environmental groups have signalled that they would challenge the legislation in court if it were ever passed.

Meanwhile, the House is considering another bill to strip the State Department of control over the permit. Nebraska Republican congressman Lee Terry has proposed legislation that would give approval of the project to an independent energy regulator, the Federal Energy Regulatory Commission, whose members are nominated by the President and confirmed by the Senate. The FERC, which already regulates interstate pipelines, is part of the Energy Department, but its decisions are reviewable only by federal courts, not by the White House or Congress.

How such power-stripping provisions will fare in the Democrat-controlled Senate remains to be seen; Senate leaders must negotiate over what provisions to include in their own version of the highway funding legislation. But Senate Republicans have kept the Keystone issue alive by other means, introducing a bill that would prevent the Obama administration from using oil from the Strategic Petroleum Reserve until the Keystone XL pipeline is approved. The reserve has been used in the past to supplement petroleum supply in the U.S. when there have been disruptions in the oil markets—including in the wake of the Libyan civil war, after hurricane Katrina, and after the first Gulf War. Democrats accused them of hijacking the reserve, but sponsors of the bill said they are trying to force a “common sense” energy policy. “It’s as if this administration had never heard of the economics of supply and demand, unless it becomes politically expedient to release from our strategic reserves to influence gas prices when there is a looming election,” said Rep. David Vitter of Louisiana, a sponsor of the legislation.

Opponents of the pipeline have also been busy crafting legislation—although with less luck in passing it through the Republican-controlled House. The House rejected, among others, an amendment to the highway funding bill that would have made the Keystone XL permit conditional on the project being built out of 75 per cent North-American-produced iron and steel. (TransCanada said on Friday that it does not purchase raw steel directly, but that 75 per cent of the fabricated pipe would be made in North American mills, including half made by workers in Arkansas.) In addition, pipeline critic Ed Markey, a Massachusetts Democrat, introduced legislation to ban any export of the refined products made from the crude oil carried by the Keystone XL. He also took aim at Prime Minister Stephen Harper’s claim that the pipeline is critical for North American energy security. “This appears to be a complete fiction, because under this bill, there is no guarantee that even a drop of the tar sands oil and fuels will stay in this country,” he said.

TransCanada denies that the refined products are aimed at foreign markets. “This oil is not for export,” company spokesman Shawn Howard told Maclean’s. The amendment was voted down. Meanwhile, last week environmental groups organized a campaign to flood the Senate with 500,000 anti-Keystone online petition signatures in a day. They reached their goal in eight hours.

While the political posturing unfolds in Congress, however, there have been positive signs for pipeline supporters. The Democratic chairman of the Senate energy committee, Jeff Bingaman, signalled on Feb. 11 that he’d like to see the pipeline approved. “They shouldn’t be forced to issue a permit until they are satisfied on the environmental effects involved,” Bingaman told C-SPAN in an interview. But, he added: “The American public would like to see us go ahead with the project to the extent they know what the project entails. It sounds meritorious. I think most members of Congress probably would like to go ahead to get the issue resolved.”

For its part, TransCanada has said it will reapply for a permit once an alternative route around an ecologically sensitive area in Nebraska is settled upon with the state’s authorities. The company expects that a presidential permit will be approved in the first quarter of 2013 and the pipeline will start operations in 2015. The company is also in discussions with its shippers on the possibility of embarking on the construction of a portion of the pipeline that would carry oil from the U.S. Midwest to the Gulf Coast, while awaiting a permit decision on the cross-border portion. “Nothing has been decided,” said Howard. And while Nebraska makes its decisions, Congress will continue to make noise.

Looking for more?

Get the Best of Maclean's sent straight to your inbox. Sign up for news, commentary and analysis.